EN TH

To all shareholders and stakeholders,

In framing its businesses through the years, Ratchaburi Electricity Generation Holding PCL. (RATCH) has relentlessly remained committed to sustainable development. This year’s emphasis was on economic issue management to maintain and foster corporate growth for long-term security. Provided by the management and key stakeholders, these significant issues appear as materiality aspects in this report.

It was in early 2016 that RATCH began reviewing and modifying its long-term strategic plans in keeping up with change and prevailing circumstances so as to steer corporate directions; define clear short-term, medium-term, and long-term goals; and raise the efficiency of internal business processes to foster RATCH’s domestic and overseas competitiveness. The revised strategic plans have made significant implementation progress this year, which is captured below.

Successful investment in electric transit trains strengthens business base
An unprecedented success was scored this year, signifying RATCH’s business venture into non-power and non-energy businesses, when it took part in bids for electric train concessions. Two Bangkok mass rapid transport routes were involved: the Pink Line (Khae Rai-Minburi) and the Yellow Line (Lat Phrao-Samrong). The bids carried the consortium names of BSR, consisting of BTS Group Holdings PCL. (consortium leader) along with RATCH and Sino-Thai Engineering & Construction PCL. Yet, this success remained in the field of infrastructure, in which RATCH could leverage its operating competency and which yields suitable, long-term returns. More important, this move represented diversification of business risks and a supplementary source of backup income if RATCH’s PPAs expire, so that corporate growth may proceed on a stronger and more secure business base. The selected bids are now under negotiation, due to be concluded by the second quarter of 2017.

Greater capacities for renewable energy production in pursuit of economic and environmental goals
The revised strategic plan’s goal of 2,000-MW capacity from renewable energy (20% of the total goal of 10,000 MW) by 2023 is going to generate income and cut greenhouse gas emissions. This year, RATCH-Australia Corporation (a 80%-owned subsidiary) posted clear progress on the development of renewable energy projects, including the Mount Emerald wind farm project with 144-MW equity capacity (under construction, due for completion in 2018) and the Collinsville solar farm project with 42-MW equity capacity and 9.5-million Australian dollar support fund from Australian Renewable Energy Agency (ARENA), which lowered project investment by about 10% from 100 million Australian dollar (construction due to begin in the second quarter of 2017). Environmentally, these two projects will be accounting for 549,000 tCO2e of GHG reduction.

Improved efficiency in asset management
At the heart of RATCH’s economic security, as well as its business supply chain, is asset management. Today, RATCH operates 33 large, small, and very small power plants with a total equity capacity of 6,866 MW (excluded EDL-Gen) and a variety of categories and plant ages-which will rise even more with future investment. Therefore, asset management is becoming increasingly critical. RATCH is going to apply the ISO 55001 standard to frame its efforts to raise the profitability of power plant assets and keep costs manageable. The past year was spent investigating details, and implementation looks set to proceed in 2017.

RATCH has done its best to raise the generation efficiency of the Hongsa Power Plant and ensure that its availability are up to meet contractual requirement. Our efforts paid off when its availability rose to 63.46% in 2016, and expected better in 2017 resulting of its proactive maintenance plant. The plant’s capacity is 1,878 MW (40% owned by RATCH), and its commercial operation began in 2015. Hongsa is regarded as a significant source of RATCH’s income, which explains why its efficiency improvement will continue in 2017.

A step toward future business development
In RATCH’s view, competition and dynamic technological changes pose challenges that potentially affect its sustainability, prompting the company to ensure that its new strategic plan extends its businesses to non-energy industries and that new businesses are developed over the next 10-15 years so that RATCH may remain relevant as a business entity over the long term. This past year it began investigating data and trends for new business models that may be promising and commercially viable so as to lay down its future investment plans. To this end, Corporate Planning and Systems Development Division is in charge of such exercise.

The surroundings, communities, and safety matter at all times
This year, RATCH successfully managed its carbon dioxide emission reduction from its office buildings, power generation processes, to development of renewable energy, totaling 476,884 tCO2e. Meanwhile, its stewardship of communities and society continued to make headway with communication of news and data to forge mutual understanding, together with RATCH’s quality-of-life improvement programs and community support in looking after and reviving natural resources and the environment. This year, RATCH’s community investment support amounted to 68.67 million baht. Finally, it arranged training to cultivate awareness of human rights among middle management upward so that they may take into account risk and its impact prevention.

Through these years, RATCH has stressed its prime principle of work safety, particularly during maintenance turnarounds, during which accidents are prone to happen. Officers have been reminded to take discipline very seriously and conform to work safety rules for employees and contractors. Accident-free operation is our key goal.

Business Direction for 2017
The coming year will still see RATCH continue to drive corporate change for a sustainable future through investment diversification to strengthen its business base, manage the efficiency of power plants for higher productivity (in particular the Hongsa Power Plant), and upgrade its risk management standard and prevention of risks arising from internal and external factors. At the same time, it needs to keep in mind the benefit, engagement, and safety of stakeholders, communities, and society as a whole-not to mention environmental stewardship everywhere it operates. Certainly, these approaches will enable RATCH to survive in business amid formidable challenges. On behalf of the management and the Board, I wish to express sincere thanks to the shareholders and stakeholders for their solid support through the years, together with their useful comments and recommendations for the development and improvement of RATCH’s operations to better address the needs of all parties. These will help RATCH make great strides.