pttch : annual report 2008

Annual Report 2008 PTT Chemical Public Company Limited 1

- PTT flagship in olefins business- Diversified and integrated chemical company- Superior benefits to stakeholders- Market back and innovation driven company- Knowledge based organization- Trustworthy company to stakeholders with safety responsibility and environmental care

Leader and innovative chemical company

MISSION

VISION

Net Profit

2006 2007 2008

Total Assets Total Revenues

111,531

133,514

152,318

2006 2007 2008

73,81977,112

85,152

2006 2007 2008

18,282 19,16711,739

Unit : Million Baht

Total Assets 111,531 133,514 152,318

Total Liabilities 29,712 39,117 56,121

Total Shareholder’s Equity 81,819 94,397 96,197

Total Revenues 73,819 77,112 85,152

EBITDA 23,789 25,343 20,258

Net Profit 18,282 19,167 11,739

Earnings Per Share (Baht) 15.75 12.85 7.84

FINANCIAL RATIOSCurrent Ratio (times) 4.00 2.39 2.96

EBITDA to Revenues (%) 32.23 32.87 23.79

Net profit on Revenues (%) 24.77 24.86 13.79

Return on Total Assets (%) 15.58 15.64 8.21

Return on Equity (%) 21.26 21.75 12.32

Debt to Equity (times) 0.36 0.41 0.58

Year 2006 2007 2008

FINANCIAL KEY FIGURES

2

Return on Environment AwardConferred by the US-based GE Group, this award reflected selected clients’ outstanding environmental preservation through effective water and energy consumption.

CSR-DIW AwardThis award was conferred by the Ministry of Industry in support of industrial works with outstanding social responsibility.

Plaudits for a Corporate Citizen National Outstanding Business Operator in Safety, Occupational Health, and Work Environment Award for 2008 Conferred by the Ministry of Labour, this award has gone to PTT Chemical Plc for the 10th consecutive year.

Top Corporate Governance Report Award Conferred by the Stock Exchange of Thailand and Finance & Banking Magazine at the SET Awards 2008 function, this award recognized outstanding listed companies’ reports on compliance with good corporate governance principles.

Excellent CG Scoring This achievement was earned in the wake of the Thai Institute of Directors’s (IOD) assessment of the Company’s corporate governance report against OECD international principles.

Most Convincing and Coherent StrategyPTT Chemical Plc was ranked by Euromoney Magazine among Asian petrochemical companies with outstanding strategic plans.

EIA Monitoring Award 2008This award was presented to the I-1 Plant under the HDPE Project.

ACHIEVEMENTS OF THE YEAR 2008


MESSAGE TO SHAREHOLDERS

Mr. Pornchai RujiprapaChairman, Board of Directors

Asia’s Major Producer of Olefins

Thailand’s Foremost Producer of HDPE

Thailand’s Pioneer of EO-Based and Oleochemicals Producer

Dear ShareholdersPTT Chemical stepped into its third year of operation in 2008 in the wake of the NPC-TOCmerger in late 2005. This year happened to see changes in our management in the midst ofthe global economic downturn, which has wielded its impacts throughout the world. To copewith this difficulty, the Company has leveraged its potential in adjusting its managementstrategy to maintain the stability of its business.

Restructuring to growOn 1 February 2008, the Company underwent restructuring for flexibility and efficiency, as itwas prepared to grow into a world player. A value-based organization was instituted formaximized business benefit; each value chain’s proactive business operation and meetingcustomers’ expectation while efficiently addressing business changes; promoting the use ofresources for maximum value creation, from upstream to downstream, which meanspriming PTT Chemical for growth into a world-class business force with global network andsustainable growth. Furthermore, the Board of Directors has concurred with the proposalmade by the Nominating Committee to appoint Mr. Veerasak Kositpaisal as the newPresident & CEO, with effect from 1 October 2008, replacing Mr. Aditheb Bisalbutr, the firstpresident, who retired.

Mr. Veerasak KositpaisalPresident & CEO

6

Addressing customers’ need in a diverse wayThe Company has taken steps to address customers’ needs while growing with theirsuccess. That is to say, besides investing to expand its product lines to meet the needs ofthe market and customers, PTT Chemical has focused on working with customers todevelop products that meet their specialized needs - a solution provider for products andservices. To this end, it has improved its services and delivery to ease customers’ contactwith PTT Chemical through more channels and easy access. To be sure, cost saving is alsotaken into consideration.

Succeeding togetherWhile it was true that the Company faced economic volatility around the fourth quarter of lastyear, it has kept forging ahead in every business group while preparing itself for futuregrowth opportunities through greater capacity-building and expansion of production basesto diversify responses to customers and moving business bases overseas; notably, thepolymers business has expanded its marketing branches and product channels to servegrowth in Asia market and access to more customers.

The oleochemicals business group has expanded its product lines and sales in anintegrated value chain, covering markets in Asia, Europe, and the US, for which a newcompany PTT Chemical International Pte. Ltd. (PTTCH Inter) has been set up. An agreementwas made to buy common shares in COM from Cognis B.V. to expand the business base ofoleochemicals, meaning bio-based chemicals that meet more demand of environmentalconcerns and have a growing market. The investment was seen as a way to expand ourinvestment for greater value to both the Company and society.

The Company’s growth and progress are based on participation and cooperation with itscustomers and business partners, selective combination of strengths and expertise to jointlyfoster value for superior business benefits.

Personnel development for success, today and futureThe business strength of PTT Chemical results mainly from quality personnel withcontinuously improved competency. To supplement their potential for performing theirmissions in the midst of such dynamic circumstances as at the present, the Company haspromoted innovative personnel development and internationally accepted assessment ofpotential that suits the development of its business to prime its personnel for future needsand growth in line with its goal of becoming a regional and global chemical leader.

Toward sustainable developmentPTT Chemical values environmental stewardship, which produces sound health andhappiness for communities and society, together with better living through the expansion ofknowledge and contribution of business values with communities and society. Continuouslyimplemented projects include the HDPE plastic flapped sacks to help farmers preventlandslides, the Plastic for the Planet project to support campaigns for efficient use of plasticcontainers.

PTT Chemical’s committed responsibility for communities, society, and all stakeholders hasearned several major awards that the Company takes great pride in as a practitioner ofcorporate social responsibility (CSR):


• The CSR-DIW, conferred by the Department of Industrial Works, Ministry of Industry, andthe Management System Certification Institute (Thailand)

• The Return on Environment Award, conferred by the GE Group• The National Outstanding Business Operator in Safety, Occupational Health, and Work

Environment Award for 2008, conferred to the Company for the 10th successive year bythe Ministry of Labour

• The SET Awards 2008, Top Corporate Governance Report, conferred by the StockExchange of Thailand to outstanding listed-company reports on compliance with goodcorporate governance principles

• The “Excellent CG Scoring”, conferred by the Thai Institute of Directors Association (IOD)in recognition of its corporate governance report against OECD principles.

Robust and sustainable growthToday’s economic volatility - with steep drops in demand and consumption of commodities- which affected business operators in the last quarter of 2008, is a most formidablechallenge. Recognizing the responsibility of the Board and the management to allshareholders and stakeholders, PTT Chemical has focused on prudent management,constantly taking into consideration cost reduction and efficiency improvement, togetherwith production capacities. At the same time, the Company still values cooperation withcustomers, business partners, and joint-venture partners to continually develop and createvalue to its products and services.

Our success and overcoming of obstacles have been made possible by the cooperationand support from the management, staff, and all parties related - the shareholders,customers, business partners, joint-venture partners, financial institutions, and communities.The Board is most thankful to all and pledges to do our best for the benefit of shareholderswhile strengthening the Company for long-term growth and sustainability.

(Mr. Pornchai Rujiprapa) (Mr. Veerasak Kositpaisal)Chairman, Board of Directors President & CEO

8

While petrochemical experts had assessed the down cycle of the petrochemical industry asa whole a few years before, such prediction was largely based on capacity rises, particularlyin the Middle East. Little were they aware of the economic troubles that would deprive themarket of petrochemical demand. So when the worldwide economic crisis hit in the latterhalf of 2008, the petrochemical industry was hit by both the supply side with big risesin capacities, and the demand side with much lower demand. Add to this the impact ofplunging crude oil prices by more than 60% within a few months.

Also, during the latter half of 2008, together with people’s lower purchasing power anddemand for goods, this indicated entry into the first phase of the down cycle, causingsliding prices of petrochemicals. Meanwhile, lower crude oil prices also quickly madepetrochemical operators suffer from heavy losses due to depreciated inventories, especiallyduring the last two quarters of the year.

The factors affecting world market prices and capacity utilization for each region consistedof:• Petrochemical demand, which varied with short-term business expectations• The price of naphtha, one of the two core feedstock for the industry, which varied with the

world oil price• Inventory changes on the part of downstream petrochemical producers, distributors, and

users worldwide• Timing and purchasing patterns of Chinese importers in this biggest petrochemical

importer in the world.

As regards the medium-term outlook for the industry, this varies with projected demandfigures, which in turn varies with the medium-term economic outlook. This last variabledictates investment plans - both capacity expansion and new investments.

Short-term economic outlook (2009)Much uncertainty rules the economies of the world in 2009, notably the efficiency of passingon the effect of the downward adjustment in the policy interest rates of Central banksworldwide and that of the support measures given to US and European financial institutionsover the past year. Still, the very low policy interest rates in countries like the US and Japanhave imposed limitations to future interest reduction worldwide. Therefore, the speedand efficiency of the implementation of treasury measures to stimulate the spending byconsumers and public investment, notably in the US, Europe, Japan, and China, will becomeincreasingly crucial to the world economic outlook in 2009.

The world economy, which has been projected to shrink by 0.6% in 2009, a vastly differentpicture than the 2.2% expansion in 2008, has prompted the IMF to project that the global

WORLD ECONOMIC REVIEW AND OUTLOOK


trade would shrink by 2.8% against the 6.2% expansion registered in 2007. As a result, theexport revenue of each country is looking downward, which means the world economies,particularly Asian ones, cannot rely on exports to drive their economies as in severalprevious years.

The world economy’s expected recession in 2009 stems from the fact that the economiesof the US, Europe, and Japan are all in a recession at the same time, while the Asianeconomies are expected to register healthy growth rates, but the 5.5% for overall growthis a far cry from 7.8% of 2008. Apart from the severity of the recession in industrializedcountries, what will dictate things is the expansion of the Chinese economy. If it is lowerthan the 6.7% projection by the IMF, the Asian economy would expand at a lower rate thanexpected. If this were to happen, it would hurt the export sector and the overall economyof each industrialized country. And this would imply greater shrinking of the world economyin 2009.

Medium-term economic outlook (2010-2013)While the Central banks in much of the world has implemented relaxed monetary policies in2008 with the tendency of continuing on in 2009, countries in certain regions could still godown further in policy interest rates, notably Europe and Asia. And while governmentsaround the world have resorted to more relaxed treasury policies, particularly as monetarypolicies were running out of steam, with more limitations because the policy interest rateswere approaching zero, the world economy of 2009 remained largely uncertain - slippingbetween instability and recovery. This is due to the magnitude and complexity of problemsand repercussions of the worst economic crisis since the end of World War II. As a result,the world economy in the next stage would continue to be highly uncertain in the timing andmagnitude of recovery, especially in 2010.

At any rate, if monetary and treasury measures around the world were to successfully raisethe purchasing power and confidence of consumers, it is expected that the world economywould start picking up around 2010, led by the US, Japanese, and European economies. Onthe other hand, Asian economies, particularly the Chinese economy, would expand more.On the whole, the world economy would gradually improve (see table below):

2008 2009 2010 2011 2012 2013World Economic Growth (%)* 2.2 -0.6 2.1 2.8 3.5 3.8

*Based on fixed market - prices exchange ratesSources: IMF, PTT Chemical Plc

World economic recovery risksAlthough the world economy has been projected to significantly recover from around 2010onward, the risks are there to pull it down in 2009 beyond expectations, meaning that therecovery would be delayed beyond 2010. Most notorious of these risks are delays,inadequacy, and inefficiency of the public sector’s investment push and of stimuluspackages of each country around the world, particularly the US, Europe, Japan, and China.Should such risks become real, new purchasing power will not build up adequately toreplace what was lost. As a result, capacity utilization in the real sector would dip below itspotential or capability; this would in turn prevent adequate employment to bolster theconfidence and add to the purchasing power of labor workers, who are also consumers.This causes further sapping of the economies around each region and the world, thusdelaying any recovery.

OLEFINS & SHARED FACILITIES

BUSINESS REVIEW 2008

This value centre consistently improved its processing efficiency for competitivecosts and laying down a secure foundation for future business development andopportunities. The highlights are as follows.

Improving process efficiency:This began with process efficiency improvement through the so-called Advanced ProcessControl (APC) in the I-1 plant, with the work on I-4 already completed in the previous year,and the Operation Training Simulator, in use between April 2008 and September 2009.

The value centre has a process to monitor its performance against worldwide producers,thus ensuring our competitive advantage. With Solomon Associates, it instituted benchmarkingfor both I-1 and I-4 Olefins plants.

Developing competitiveness and marketing advantage:• Creation of synergistic value for profit optimization for both Olefins and its by-products• Supply chain optimization management, ranging from production planning, procurement,

to distribution, with an aim for low-cost business operation• Improvement of reliability through utility alignment of process support between olefins

plants under the Company• Installation of additional equipment at the jetty and buffer tank farm to sustain new

services arising from business expansion.

12

The Polymers value centre focused on marketing and process efficiency to constantlyraise competitiveness and product development through innovation and qualityservices in keeping with customers’ demand. The highlights are as follows.

Improving process efficiency:• Installation of APC in the HDPE I-1 and the HDPE plant under BPE, the continuation of a

2008 project to be completed in stages by the end of 2009.• Development of personnel operation skills under the Operation Training Simulator Project

(OTS)• Synergy between HDPE I-1 and HDPE-BPE for optimum processing benefit, including

joint process formulation and planning and inventory reduction• Efficiency improvement through the application of ORMS (Operation Reliability

Management System) and MERIT (Manufacturing Enhance Reliability Improvement Team)in inspection and reduction of equipment-damaging problems.

As regards performance assessment, with Phillip Townsend Associates Inc. (PTAI), bothplants underwent benchmarking.

Developing competitiveness and marketing advantage:• Merging of the NPCX (under PTT Chemical) and Thai-zex (under BPE) trademarks and

marketing of the unified polymer products as “Innoplus” since 20 March 2008, winningwarm response from customers

• The Supply Chain Management Project, a cooperation among four companies - namelyHDPE I-1, HDPE-BPE, PTTPM, and PTTPL - and their supply chains for greater efficiency,low cost, and readiness to support PTTPE’s polymers business, due to begin in late 2009.

• The HDPE-BPE plant has achieved the ISO 9001:2000 quality management systemcertification, ISO 14001:2004 environmental management system certification, TIS 18001:1999occupational health and safety management system certification, OHSAS 18001:2007certification for the scope of design, development, and production of HDPE and HDPEcompounds by the Management System Certification Institute (Thailand).

POLYMER PRODUCTS


This group focused on developing its process efficiency for internationalcompetitiveness while expanding their processing potential to sustain domesticmarket growth. The highlights are as follows.

Improving process efficiency:Putting priority on safety and the environment, it was poised to introduce an internal controlprogram in the control of hazardous materials, with benchmarking of TOCGC against otherproducers.

Developing competitiveness and marketing advantage:• TOCGC developed its management practices under the ISO 9000 quality management

system, the ISO 14000 environmental management system, the ISO 18000 occupationalhealth and safety management system to achieve certification in April 2008. It alsoimproved the plant real-time information system to be on par with the PTT ChemicalGroup and get ready for the expansion of management potential

• TEX achieved ISO 9000 quality management certification in September 2008• TEA is in position for developing the ISO 9000, ISO 14000, and TIS 18000, with the goal of

achieving certification within two years from the date of commercial production. Itdeveloped a business work flow to control work under different stages for efficientcommercial production.

EO-BASED PERFORMANCE PRODUCTS

14

The oleochemicals pioneer in Thailand, this group tried to establish its internationalcompetitive advantage by forging international business alliances and standardizingits processes and products to bolster the confidence of its food product customers.The highlights are as follows.

Improving process efficiency:As this was a new business in Thailand for the first year of operation, it was very much adevelopment and information-gathering year for efficiency improvement. Aspects ofimprovement included modification for feedstock flexibility, modification for multiple methylester products, and cost reduction. As well as information was gathered for benchmarking.

Developing competitiveness and marketing advantage:• Development of operating quality systems under HACCP/GMP and ISO 9000, scheduled

for completion by 2009• Setting of a target to achieve the top market share in Thailand for methyl ester• Building of a marketing and international distribution network for fatty alcohol• Preparation of supply chain optimization.

OLEOCHEMICAL PRODUCTS


• The Company invested about Baht 32,388 million, which was less than the planned amountof Baht 35,416 million, because of delayed disbursement to contractors. Yet, constructionand operation progress went according to plan.

• The Company secured loans under the investment plan approved by the extraordinaryshareholders’ meeting No. 1/2006 for a total of Baht 27,400 million out of the approved loanceiling of Baht 32,000 million (Baht 22,500 million in 2008 and Baht 4,900 million in 2007).PTT Chemical retained credibility ranking from Standard & Poor’s Rating Service,Moody’s Investor Services Ltd., and Fitch Ratings (Thailand) Ltd. at BBB (stable), Baa3(stable) and A+ (stable) respectively.

• Employees exercised warrants issued in 2006 amounting to 258,000 shares priced at Baht66.50 each, giving the Company Baht 17,157,000 million.

FINANCIAL REVIEW

GOVERNANCE AND SHARED SERVICES

• Implemented a Value-Based Organization (VBO) in organizational management, with thegovernance/shared services mode of process supervision and development. VBOwas designed for uniform business processes among the Group. Also, instituted aperformance monitoring and assessment process.

• Planned to develop the potential of its people through a revision and development ofpeople competency to nurture outstanding competencies, apart from evolving a careerdevelopment model to prime its people for their career paths. To institute a standard forefficiency-based performance monitoring, it has devised a pay for performance system tosupport team-based performance.

16

• Launched a procurement process transformation project to develop its businessprocesses and procurement efficiency by leveraging strategic sourcing of advancedtechnology.

• Prepared an IT value framework and installed the Single SAP ERP 6.0 system to supportfuture business growth.

• Systematized supply chain management, a project jointly undertaken with PTT PolymerMarketing Co., Ltd., Bangkok Polyethylene Plc, and PTT Polymer Logistics Co., Ltd., fromNovember 2007 to December 2008 as planned.

• Appointed a pricing committee for all operation and business groups to decide atransparent, fair, and timely price framework and continuously deliberated marketing plansand other performance aspects for each product on an ongoing basis. Initiatedsystematic customers’ activities and sales promotion, including key accountmanagement, customer satisfaction for various groups, and registration of chemicals forthose to be sold in the European Union under REACH (The Registration, Evaluation,Authorisation and Restriction of Chemical Substances).

• Appointed an operational excellence working group, consisting of senior executives andheads of operating units, to implement assorted, technologies, policies, and tools, apartfrom defining knowledge lists for staff in each production unit to reach operationalexcellence.

• Formalized operating standards for safety, health, environmental, and quality (SHEQ)processes and standard stock codes for PTT Chemical Group once the VBO wasimplemented to unify management for the whole Group. The standard stock code systemis due to be completed in 2009.

• Prepared environmental impact assessment (EIA) reports for all projects under the PTTChemical Group for compliance with laws, regulations, and Company policies.

• Developed chemical laboratory services into a shared service unit of the Group forsubsequent development into a business unit.

• Formulated a strategic plan incorporating the group management process under VBOand strived to identify business growth opportunities through business development,internationalizing business, and mergers and acquisitions to build and expand valueunder diverse portfolio management and product research and development in support ofmarketing activities and satisfying customers’ needs.


20

OperationPTT Chemical produces and sells olefins, a collective term forethylene and propylene, to downstream petrochemical plantslocated in the same industrial estate, including an HDPE plantbelonging to the Company, Bangkok Polyethylene Plc (BPE), and theethylene oxide/ethylene glycol (EO/EG) plant run by TOC Glycol(TOCGC). The Company holds all the shares in BPE and TOCGC.The olefins surplus from domestic consumption are sold oninternational spot markets, mainly in Northeast Asia and SoutheastAsia.

In 2008, the olefins & shared facilities successfully debottleneckedthe I4-2 plant, thus adding 150,000 tons per year in capacityand raising its equipment efficiency as well as preserving itscompetitiveness.

A new olefins plant with a capacity of 1,025,000 tons per year is ontrack for completion in late 2009, which would move the Companyup to the second largest in Asia.

PTT Chemical’s olefins nameplate capacity is 1,863,000 tons peryear - 1,376,000 for ethylene and 487,000 for propylene - from threeplants:

• I1, with gaseous feedstock (461,000 tons per year of ethylene and127,000 tons per year of propylene)

• I4-1, with gaseous and naphtha feedstock (515,000 tons per year ofethylene and 310,000 tons per year of propylene)

• I4-2, with gaseous feedstock (400,000 tons per year of ethyleneand 50,000 tons per year of propylene).

With both gas and naphtha as feedstock, PTT Chemical was able toadjust its feedstock for its maximum benefit. The Company alsoproduces and sells olefins by-products, namely mixed C4, pyrolysisgasoline, tail gas, cracker bottom, and hydrogen, to domesticcustomers.

As regards the production and sale of utilities for its ownconsumption in the olefins plant and for sale to downstreampetrochemical plants in authorized concessions as well as othercompanies in Map Ta Phut Industrial Estate, operation was efficient.In 2008, the Company commanded 210 megawatts (MW) in powergeneration capacity, 340 tons per hour in steam capacity, 1,500 cubicmeters per hour of industrial water, and 1,000 cubic meters per hourof sea water reverse osmosis (SWRO).

PTT Chemical manages its jetty and buffer tank farm forpetrochemicals to support production security and serve thelogistics of plants run by Group companies alike, not to mention theservices for downstream petrochemical plants.


2008 Asian olefins market overviewCompared with 2007, it was a highly volatile year for olefins prices. Both ethylene andpropylene prices hit all-time highs in July at $1,618 per ton of ethylene and $1,784 per ton ofpropylene, only to drop sharply toward year-end. On average, ethylene commanded $1,133per ton (4% lower than the previous year) and propylene commanded $1,253 per ton (9%higher than the previous year)1.

The first major reason for the steady push in ethylene prices during the first half of the year,peaking in July, was the peaking prices of crude oil and naphtha - thanks to concerns aboutthe tight supplies of the oil market and the weak US dollar. This happened with the spiralingdemand for crude oil worldwide, which in turn raised production costs for ethyleneproducers. Besides, the ethylene market was tight - with about 229,000 tons vanishing - dueto the maintenance shutdowns and capacity reduction as a result of the rising costs ofnaphtha2.

Still, during the latter half of the year, with the reeling economies of Europe and the US, thedemand for crude oil and derivatives took substantial drops, thus causing a rapid reductionin both crude oil and naphtha prices. This in turn causes ethylene prices to suffer sharplosses until year-end 2008. In fact, even after most producers in the region had cut theiroutputs, it did little to raise the prices of the commodity. As a result, the profitability ofnaphtha-based ethylene producers eroded due to the price gap between ethylene andnaphtha in 2008 ($287 per ton) and 2007 ($216 per ton)3. But thanks to its feedstock flexibility,the Company commanded greater profitability than its competitors.

In the meantime, propylene prices in Asian markets saw bigger adjustments than ethyleneprices. In the first half of the year, the rising prices of oil and naphtha contributed to that.The tighter market was also produced by three new propylene units - with a combinedcapacity of 620,000 tons per year - which deferred their commissioning. Combined with thecracker shutdown and lower utilization rate, about 680,000 tons of propylene disappearedfrom the market, causing a very tight market4. And while during the latter half of the year, theglobal economic crisis likewise affected propylene, its markets remained tighter than thoseof ethylene, thus its higher prices.

As regards competition in the olefins market in 2008, the first half of the year was relativelymild as a result of tight supply in the Asian and domestic markets while the prices hoveredat high levels. During the latter half of the year, however, with the economic crisis expandingthroughout the world, both the market demand and olefins prices plummeted, thusproducing extensive price cuts. PTT Chemical strived to maintain satisfactory businessreturns through various actions, including the management of inventories, assorted costreduction measures, and cash flow management.

In addition, the Company’s strengths contributed to its ability to compete. The fact that it hadintermediate and downstream units, namely the MEG and HDPE units, enabled it to adjustoutput levels for maximum profits under a given market condition. Olefins production basedon more than 80% gaseous feedstock kept the Company’s production costs more competi-tive than its domestic and regional competitors, as gas prices were more stable than thoseof naphtha; competitiveness also benefited intermediate and downstream businesses, whichsaw correspondingly lower production costs.

Note : 1, 3 : ICIS2, 4 : CMAI

24

OperationThe main derivatives of olefins, polymer products are processedinto assorted consumer commodities, needed merchandise inindustries and agriculture, and merchandise that eases modernlifestyles, closely related to everyday life, thus PTT Chemical’s focuson this business group.

In 2008, the Company’s HDPE capacity equaled 250,000 tons peryear and, under its subsidiary Bangkok Polyethylene Plc (BPE),another 250,000 tons per year. The products were distributed underthe tradename Innoplus, with customers in more than 100 countriesaround the world.

PTT Chemical’s plan is to expand its HDPE capacity by 50,000 tonsper year and the capacity of BPE by 250,000 tons per year, and itplans to expand the polymer group to LDPE and LLDPE under itswholly owned subsidiary PTT Polyethylene Co., Ltd. (PTTPE). A400,000-ton-per-year LLDPE plant is under construction, due forcommercial production in September 2009, and a 300,000-ton-per-year LDPE plant is due for commercial production in the secondquarter of 2010. In short, our customers will be receiving a widerange of products from us, thus making PTT Chemical Asia’sforemost producer of polyethylene.

In March, PTTPE acquired the assets of HMT Polystyrene Co., Ltd.,and set up a new company called Thai Styrenics Co., Ltd. (TSCL),wholly owned by PTTPE. The Company’s presence in the market isdefinitely boosted by the sale of PS with a capacity of 90,000 tonsper year , further diversifying our polymer products.

PTT Chemical also joined hands with PTT Polymer Marketing Co.,Ltd. (PTTPM) in improving its product quality, diversity, distributionchannels, and modern and efficient service through the B2Be-ordering and e-payment for customers’ greater convenience andadvantages.

Polymer market overviewPolyethylene prices steadily rose during the second half of 2008,peaking in July at $1,830 per ton before losing steam towardyear-end. The average price of HDPE for the second half was $1,312per ton, roughly 3% down from the average of the previous year, and20% down from the first half of the year.*

The rapid drop of the commodity prices stems from the US subprimecrisis, which notoriously brought about a financial crisis in the USand Europe, which triggered a worldwide downturn. Many business

Note : * Source : ICIS


sectors found themselves trimming their output and hiring, which led to drops in both thedemand and prices of crude oil in the world markets. Still, the profitability of polyethyleneproducers remained because of the spread between polyethylene and ethylene feedstock.

The export sector of Thailand was also exposed to the impact of the US financial crisis, asseen in the lower sales volumes and prices of plastic products throughout the latter half ofthe year. The industries that saw big drops in sales order were the auto-parts industry andthe real-estate sector. It was projected that the Thai plastic industry this year would grossabout 330 billion baht in market value, a 20-30% drop from the previous year.

The market growth of PE in 2008 shrank by 0.6% from the previous year. Polyethylene-basedplastic products include containers, plastic bags, bags for frozen food, and agriculturalfilm - most of them everyday products. For the first three quarters of the year, Thailandcommanded healthy growth rates for most export products, whereas for the last quarter, theimpacts from the worldwide financial crisis scuttled consumers’ confidence, thus loweringthe demand for polyethylene-based goods.

Classified as a downstream petrochemical industry, production of polymers is capital-intensive, with volatile price levels that reflect the oil price and supply-demand ofcommodities, just like other petrochemical products. Therefore, in a down cycle, productioncost control and a secure customer base become essential for long-term survival. PTTChemical’s long-standing HDPE production experience, its cordial relationships with andtechnological transfer from technology proprietors assured its efficient production; a securecustomer base enhances the leverage on capacities, with a low cost per unit. In addition,PTT Chemical has joined PTT Plc in setting up PTTPM to undertake marketing anddistribution of polymers and all by-products for the PTT Chemical Group, and assigningPTT Polymer Logistics Co., Ltd. (PTTPL), another PTT Group company, to manage itsinventories and logistics for all Group polymer products.

28

OperationIt was PTT Chemical that foresaw a need for commodities not yetproduced domestically, particularly those with high value added toolefins and a farther reach for industries and consumers, those thatcan replace imported feedstock, and those that enhance the Thaipetrochemical competitive edge. That was why the Company hadembarked on the production of ethylene oxide-based performanceproducts since 2003 through the establishment of TOC Glycol Co.,Ltd. (TOCGC), to construct a required plant and began commercialproduction in the middle of 2006.

The EO and EG plants yielded Mono Ethylene Glycol (MEG), its coreproduct used as a raw material for polyester fiber in the textileindustry and production of clear plastic (PET) bottles.

Toward the end of 2008, TOCGC expanded its capacity for MEGfrom 300,000 to 395,000 tons per year while offtaking ethylene fromthe olefins plant. In addition, PTTCH set up a joint-venture companyand wholly owned subsidiaries to run an EO Derivatives project withthe EO feedstock produced by TOCGC.

• Thai Ethoxylate Co., Ltd. (TEX), a joint venture with Cognis ThaiCo., Ltd., to produce ethoxylate, a raw material for shampoos,dish-washing liquids, and assorted washing liquids; this wasThailand’s first producer of ethoxylate, with a capacity of 50,000tons per year

• Thai Ethanolamine Co., Ltd. (TEA), whose main product isethanolamine, a component of hair conditioners, fabric softeners,cosmetics, and the pharmaceutical industry, with a capacity of50,000 tons per year

• Thai Choline Chloride Co., Ltd. (TCC), whose main product ischoline chloride, an essential blended item for foul and pig feed,with a capacity of 20,000 tons per year. Originally scheduled tobegin production in the second quarter of 2009, this project facedmarket uncertainty along with rising construction costs, thus adecision was made to delay investment and revise the project.

Market review and outlookSince MEG is the main feedstock for the polyester industry, which isin turn closely related to the textile industry and the clear-bottleindustry, its marketing picture mirrors that of the polyester industry,which has been projected to grow by 5.3 - 5.8% from 2009 to 2012.In the meantime, more MEG is expected to come onto the market,with a capacity rise of about 2 million tons per year. As a result, itsmarket competition will become fiercer, particularly in China, whichhas the highest demand for MEG and the highest imported volume,and other Asian countries alike.


As regards the Thai MEG market, the demand in 2009 is expected to track that in 2008, atroughly 400,000 tons due to the economic downturn, caused by domestic political and otherexternal factors, depressing the downstream product demand, in turn depressing the MEGdemand by current polyester producers. However, the polyester plant of the former TuntexPlc, suspended since late 2006 and acquired by the Indorama group, is planned to start upagain in 2009. This would prop up the MEG demand to a level comparable to that seen in2008. While the overall market expansion cannot be termed substantial when compared tothe regional market, Thailand’s MEG market is one to be reckoned with by the world’sleading MEG producers, who value and want to preserve market shares - and even expandthem. In other words, from 2009 to 2012 the MEG scene in Thailand will likely feature greatercompetition.

It is domestic operators that TOCGC pays greater attention to, with the surplus output fromdomestic sales exported. Compared with other domestic producers, TOCGC commandedbusiness strength and marketing advantages, namely the fact that it is a domestic producerthat can deliver products with less contaminant than imported products, shorter orderingand delivering periods than others, and the ability to deliver products continuously from itstank farms at its plant and the jetty. Such strength and advantages enable TOCGC tocompete with other producers domestically.

Besides focusing on maintaining and raising domestic market shares, TOCGC strives topreserve its overseas customer base and continually foster cordial relationships with tradebrokers to sustain rising exports of its products thanks to its future production expansion.

In the meantime, TEX will be focusing on maintaining and raising domestic market shares,displacing imports, and preserving the former international customer base while seekingout new markets. This is because of several production bases for personal care and homecare products in this region, thus TEX’s business opportunities. It also exports products toassorted regions, including Asia and Europe.

Finally, TEA will be focusing on building a firm marketing base - domestic and international- together with selling products to customer groups in each industry and individualcountries with demand for ethanolamine (EOA), which has a promising growth outlook - todiversify risks and build a stable marketing base.

32

OperationBecause of Southeast Asia’s terrain and climate that suitsoil-yielding plants like palm, coconut, and jatropha - which can beprocessed into chemical products called oleochemicals - and thanksto the current demand for environmentally friendly products andthe rising prospect for the consumption of alternative energy, PTTChemical has set up Thai Oleochemicals Co., Ltd. (TOL). Thiscompany produces fatty alcohol (100,000-ton-per-year capacity),methyl ester (200,000-ton-per-year capacity), and glycerine as aby-product (31,000-ton-per-year capacity) for a combined capacityof 331,000 tons per year.

Fatty alcohol is an essential precursor for home, health & personalcare products. Methyl ester finds applications in biodiesel orhigh-quality biodiesel; the Company has signed a supply contract ofmethyl ester with PTT Plc to produce the B100 biodiesel. Glycerinefinds its applications in the chemical, pharmaceutical, and foodindustries.

In 2008, the Company set up PTT Chemical International Pte. Ltd.(PTTCH Inter) to undertake its international business expansion.It also acquired 200 million common shares worth 104 million eurosin Cognis Oleochemicals (COM) from Cognis B.V. through a jointventure with Sime Darby Plantation (Malaysia), the world’s foremostcompany engaged in planting and production of palm trees andpalm oil. The intention is to expand its business base of productionand sale of oleochemicals in an integrated manner, coveringassorted regional markets, including Asia, Europe, and the US.

Market reviewFatty alcoholIn 2008 the world market for fatty alcohol was far from healthybecause of the greater supply than demand. Accounting for this isthe fact that fatty alcohol projects in Malaysia, Indonesia, and thePhilippines have begun commercial production. However, thiscondition is likely to approach a balance in the next 1-2 years, coupledwith positive factors resulting from the rising demand for naturallyderived fatty alcohol to replace synthesized fatty alcohol.

Methyl esterHigh fluctuations mark methyl ester prices in the world market in2008, as palm oil prices tracked the soaring crude oil price; there isalso a looming conflict about the use of oil palm as a raw materialfor alternative energy, which could worsen the food crisis. Raw palmoil during the first half of the year commanded high prices, only toplummet during the last quarter of the year with plummeting crudeoil prices. Such fluctuation bore heavily on the price of methyl ester.It is projected that methyl ester will be costing less in 2009 with thedrop in palm oil prices and the larger completed capacities ofmethyl ester in other countries. Another main factor is that


governments in several countries have made it a policy to use more biodiesel, thus raisingthe demand for methyl ester.

As regards Thailand, the Ministry of Energy’s clear goal is to promote alternative energy,with a plan to implement 5% biodiesel (that is, a blend of 95% diesel and 5% methyl ester)by the end of 2011, or a projected demand for methyl ester of 1.3 million tons per year, orroughly four million liters a day. Note that there are several more domestic biodieselproducers, 10 of whom have secured approval from the Department of Energy Business forthe production and sale of biodiesel; another one is under application. In short, there isbound to be more competition, a point recognized by the Company, which has investigatedprospects of downstream investment.

GlycerineIn 2008, the glycerine market is one of wild fluctuation, tracking methyl ester in the worldmarket, with several negative factors affecting its market, particularly the rising number ofbiodiesel projects around the world. What is more, the policy of mandatory consumption ofbiodiesel has been adopted in several countries, thus steadily hiking glycerine production inthe world market. However, the Company has investigated research on substitutingglycerine for several chemicals in downstream chemical processes.

Business direction :Due to the fluctuation and the cyclicality of returns of the oleochemical industry, PTTChemical is undertaking a project to supplement the value of oleochemicals and theproduction of specialty oleochemicals could alleviate such cyclicality while supplementingvalue and diversifying risks.

As for Cognis Oleochemicals (COM), the Company is poised to complete its managementplan by early 2009 through cooperation with Sime Darby to improve and develop thecompany in alignment with the Company’s strategic plan to foster sustainable growth,expand its growth base, and supplement value to the oleochemical and natural derivativebusinesses, both of which command secure expansion prospects. The new companyis likely to venture into international oleochemical markets with ease and speed throughCOM’s distribution channels. Above all, the joint venture with Sime Darby - the world’sforemost producer of palm oil - fosters the ability to secure raw materials.

36

Social Responsibility PolicyCommitted to nurturing and upgrading the sustained quality of lifeand society, PTT Chemical forged a proper beginning by way ofinnovations, linking the search for mutual values among relevantagencies, allies, communities, society, and company staff. Then weput together the knowledge, skills, expertise, and innovativeprocesses to generate initiatives that ripple in all directions.

From Policy to ActionWe are determined to turn policy into action with a concept of‘shaping an innovative society’.• Forging value through innovations, from concept, learning, to

practice in conjunction with our business and social allies• We are convinced that the co-creation and alliance supplement

greater value to our performance. This is in fact regarded as asustained asset for business and society that leads to manybeneficial projects for society in the long term.

The Company maintained CSR projects of its initiation for the benefitof community and social development in 2008 as follows :

Plastic Flapped Sack EvolvementTurning HDPE polymers into plastic flapped sacks to protectsoil for farmersPTT Chemical applied an initiative of HRH Princess Maha ChakriSirindhorn as bestowed to Chaipattana Foundation to ease people’shardship through a search for ways to prevent the top soil fromcollapsing or sliding in Ban Nam Ta community of Amphoe Tha Plaof Uttaradit province. Together with Chaipattana Foundation, theHydro and Agro Informatics Institute, and the Department of MineralResources, PTT Chemical successfully developed its own HDPEPlastic Flapped Sacks for emergencies. Above all, they can be usedby communities themselves. The Company will be introducing thisroyal initiative to help other areas throughout the Kingdom.

Tripartite Educational DevelopmentApplication of knowledge taught by young-generation teachersbringing development and improving society in a sustainable wayPTT Chemical recognizes the criticality of nurturing values and jointdevelopment of community education. The tripartite project foreducational quality development through our collaboration with theFaculty of Education, Chulalongkorn University, Rayong EducationService Area Office (Zone 1), and Map Ta Phut Municipality. Underthe project, selected teacher interns taught students in Rayongschools to develop the quality of education for communities. Theobjective was to enable community youths to turn into quality adultswho apply knowledge creatively and contribute to sustainablesocial development.

Social Responsibility &Sustainable Development


Water Retention BasinsApplication of the well-known royal initiative to manage Rayong water resourcesTo promote the effectiveness of water resource management in Rayong and to promoteparticipation by the public, industrial works, and government agencies, PTT Chemicaljoined hands with the Hydro and Agro Informatics Institute and the National Science andTechnology Development Agency, Ministry of Science and Technology, in launching aninvestigation project on water retention basins (“Kaem Ling”) of Khlong Thap Ma in Rayong.The project investigated weir conditions and proper development of areas in former lateritepools into retarding basins to raise the efficiency of agricultural water management anddevelopment of relevant branches of knowledge.

In addition, the Company has also taken part in social, community, and environmentalstewardship efforts, including the Plastic for the Planet project; in cooperation withthe Federation of Thai Industries and the Thai Plastic Industries Association, it launched afund-raising project for a campaign on the promotion of efficient use of plastic containers;the “Thai Hearts, Environmental Hearts” TV program, aired on TV Channel 5, promotedinnovative thinking for environmental stewardship by youths and institutions.

The Company contributed to the promotion of culture and cultural heritage preservationapart from lending support to and participating in assorted community activities, includingPTT Chemical Meets Communities, Sharing with Communities to support public healthand medicine, Thailand Innovation Award, Remote Education via Satellite, English Teaching,Computer for Youths, and PTT Chemical Cup Soccer.

It is our great pride to see a happy society as a result of sustained development. Weconstantly recognize that people’s participation leads to infinite, bigger miracles.

Policy on Occupational Health, Safety, and EnvironmentPTT Chemical Public Company Limited, Branch 2, Branch 3, and Branch 4, are committed tothe management policies concerning occupational health, safety, and environment in allaspects of the Company’s operations through:

1. Assessment of the risks in occupational health and safety, and identify conditions likely tocause environmental concerns.

2.Prevention and reduction of adverse impacts in occupational health, safety, and theenvironment to all stakeholders.

3.Strict compliance to laws, regulations, and standard requirements.4.Continual improvement of operational systems will be maintained.

The Company will develop and maintain an occupational health, safety, and environmentmanagement system, and will provide sufficient resources for implementation. TheCompany will establish an implementation framework in accordance with the occupationalhealth, safety, and environment management plan, and will thoroughly inform all staffaccordingly.

This announcement is effective from 15 November 2006, onwards.

38

CSR-DIW AwardSuch was our pride to be named a companywith outstanding corporate social responsibilityand win a CSR-DIW award from the Departmentof Industrial Works, Ministry of Industry, and theManagement System Certification Institute(Thailand).

Environmental, Safety, and Occupational HealthManagementIt is our business mission to use resources cost-effectively andefficiently, exercise due control to minimize environmental impacts,and ensure safety and health in a most strict manner required bylaw.

EnvironmentPTT Chemical commands an environmental management systemof international standards through the control of aspects arising fromits operation, while stressing continual development.

• Integrated management of natural resource consumptionthrough eco-efficiency philosophy in order to improve resourceconsumption and waste reduction, taking into account financialperformance, business opportunities, and markets.

As for economic ecology efficiency indices, our environmentalinformation was compiled and investigated in five aspects,namely water use, energy use, global warming contribution,ozone-depleting substances, and waste.

• The I-1 olefins plant replaced the burner of the Oleflex Unit toa low-NOx burner to cut NOx emission, thus improving plantemissions.

• Continued control of volatile organic compounds (VOCs) throughthe appointment of a dedicated task force, training of staff, andregular inspection of leaks to ensure that our process equipmentdoes not leak.

• An environment display board in front of each plant, withinformation on environmental management, pollution reductionand projects to encourage the awareness of staff along with ourdetermination to save the environment.

• Expansion of green zones around Company compound andMap Ta Phut by tree planting covering 55 rai: 35 rai aroundPTT Chemical and 20 rai under the cooperation of the Office ofMap Ta Phut Industrial Estate and the Company - in an effort toreduce global warming.

SafetyPTT Chemical takes strict safety measures for plant operation whilesupporting activities to encourage the awareness of and regard foroperating safety.

In 2008, notable activities consisted of:• S-H-E Day activities, in which we promoted staff awareness among

those that took part in sharing S-H-E knowledge of each unit,including talks by public recognized speakers


• Behavior-based safety (BBS) application of our safety culture. BBS is one of the processesimplemented to continuously improve the behavior of all employees in line with safetygoals, apart from enabling staff to take care of one another and make the workplace safer.

HealthPTT Chemical supports the following projects designed to regularly promote employees’occupational health.• Annual physical examination, including those of specific workers• Measurement of workplace environment parameters like chemical concentrations,

loudness, light intensity, and heat• E-Health Book project, which is a customized health book program for those working in

a so-called risky environment. A software system records their physical examinationresults conducted by occupational medical doctors. This enables employees to accessup-to-date health and medical records at all times, thus enabling more complete healthmonitoring.

40

BOARD OF DIRECTORS

Mr. Pornchai RujiprapaChairmanAge : 56

Present Important Positions• Permanent Secretary of Energy• Chairman, Electricity Generating Authority

of ThailandEducation / Training• Ph.D. (Urban & Regional Economics)

University of Pennsylvania, U.S.A.• M.Sc. (Regional Economics) University of

Pennsylvania, U.S.A.• M.P.A (Programming Planning Administra-

tion) National Institute of DevelopmentAdministration (NIDA)

• B.Sc. (Agro-Industry) Kasetsart University• Capital Market Academy Leader Program

Class 7• The Joint State - Private Sector Regular

Course, Class 11, the National DefenceCollege

Training on Director Roles andResponsibilities• Director Accreditation Program (DAP),

Class 56/2006, Thai Institute of DirectorsAssociation (IOD)

Experiences• Deputy Secretary General, the National

Economic and Social Development Board(NESDB)

• Deputy Permanent Secretary of Energy• Chairman, Electricity Generating Public

Company Limited• Chairman, PTT Public Company Limited• Chairman, Rayong Refinery Public

Company Limited• Chairman, PTT Aromatics and Refining

Public Company LimitedRelation among family within theCompany :

None


Mr. Prasert BunsumpunVice ChairmanAge : 56

Mr. Manu LeopairoteIndependent Director- Chairman of the Audit

CommitteeAge : 65

Present Important Positions• Chief Executive Officer & President, PTT

Public Company Limited• Chairman, PTT Exploration and Production

Public Company Limited• Vice Chairman, IRPC Public Company

Limited• Director, Thai Oil Public Company Limited• Director, PTT Aromatics and Refining

Public Company LimitedEducation / Training• Honorary Doctorate Degree

in Engineering, Chulalongkorn University• Honorary Doctorate Degree

in Management, National Institute ofDevelopment Administration (NIDA)

• Honorary Doctorate Degreein Management Science, PetchaburiRajabhat University

• M.B.A., Utah State University, U.S.A.• Bachelor of Civil Engineering,

Chulalongkorn University• Certificate in Advanced Management

Program, Harvard Business School, U.S.A.• The Joint State - Private Sector Regular

Course, the National Defence College(Class 10)

• Politics and Governance in DevelopmentSystems for Executive Course, KingPrajadhipok’s Institute (Class 6)



Experiences• Senior Executive Vice President,

Gas Business Group, PTT PublicCompany Limited

• Director, The Aromatics (Thailand) PublicCompany Limited

• Director, Rayong Refinery Public CompanyLimited

Relation among family within theCompany :

None

Present Important Positions• Chairman, Thaioil Power Company LimitedEducation / Training• M.Sc. Economics, University of Kentucky,

U.S.A.• B.Sc. Economics (Honor) Thammasat

University• Certificate, Industrial Development,

Nagoya, Japan• The National Defense College, Class 34Training on Director Roles andResponsibilities• The Role of the Chairman Program, Class

3/2001 and Director Certification Program(DCP), Class 30/2003, Thai Institute ofDirectors Association (IOD)

Experiences• Permanent Secretary, Ministry of Industry• Chairman, PTT Public Company Limited• Chairman, PTT Exploration and Production

Public Company Limited• Chairman, Thai Oil Public Company

Limited• Chairman of the Corporate Governance

Committee PTT Chemical Public CompanyLimited


None

42

Mr. Pala SookaweshIndependent Director- Chairman of the Nominating

Committee- Chairman of the Remuneration

CommitteeAge : 68

Mr. Cherdpong SiriwitIndependent Director- Director to the Audit

Committee- Director to the Nominating

CommitteeAge : 62

Present Important Positions• Chairman, Bangkok Polyethylene Public

Company Limited• Director, PTT Exploration and Production

Public Company Limited• Director, IRPC Public Company Limited• Director, Thaioil Power Company LimitedEducation / Training• Honorary Doctorate Degree in Engineering

from Chulalongkorn University• M.S. Industrial Engineering (Operation

Research), Oregon State University, U.S.A.• Bachelor of Engineering (Honors) in

Electrical Engineering (Power),Chulalongkorn University

• Cert. in System Analysis in WaterResource Planning, U.S. Army. Corps. ofEngineers, U.S.A.

• Diploma, National Defense Course for theJoint State - Private Sector, the NationalDefense College (Class 333)

• Cert. in Advanced Management Program,Harvard Business School, HarvardUniversity, U.S.A.

Training on Director Roles andResponsibilities• The Role of the Chairman Program,

Class 2/2001, Director AccreditationProgram (DAP), Class 14/2004, andThe Role of the CompensationCommittee (RCC), Class 3/2007, ThaiInstitute of Directors Association (IOD)

Experiences• Director, PTT Public Company Limited• Director and Chairman of Audit Commit-

tee, Vinythai Public Company Limited• Director, Thai Oil Public Company Limited• Director, PTT Aromatics and Refining

Public Company Limited• Chairman, Thai Oleochemicals Company

LimitedRelation among family within theCompany :

None

Present Important Positions• Director, Thaioil Power Company LimitedEducation / Training• M.A. Economics, Georgetown University,

U.S.A.• B.A. Economics (Honor), Thammasat

University• The National Defense College, Class 40• King Prajadhipok’s Institute “Politics and

Governance in Democratic Systems forExecutives”, Class 5

• The Civil Service Executive DevelopmentProgram I (Class 13), the Civil ServiceTraining Institute

• Capital Market Academy Leader ProgramClass 5

Training on Director Roles andResponsibilities• Director Certification Program (DCP) Class

104/2008, Director Accreditation Program(DAP) Class 8/2004, The Role of theChairman Program Class 10/2004, andFinance for Non-Finance Director Class13/2004, Thai Institute of DirectorsAssociation (IOD)

Experiences• Permanent Secretary, Ministry of Energy• Chairman, PTT Public Company Limited• Chairman, the Electricity Generation

Authority of Thailand• Chairman, PTT Exploration and Production

Public Company Limited• Chairman, Thai Oil Public Company

LimitedRelation among family within theCompany :

None


Mr. Witoon SimachokedeeIndependent Director- Director to the Corporate

Governance CommitteeAge : 54

Pol.Gen. NopadolSomboonsubIndependent Director- Director to the Remuneration

CommitteeAge : 63

Present Important Positions• Director, Department of Primary Industries

and Mines, Ministry of Industry• Chairman, Thai Oleochemicals Company

Limited• Chairman of the Association of QC

Headquarters of Thailand• Director, the Institute of Industrial

Standards Accreditation• Advisor, MASCI Systems Certification

Sub-Committee• Director, the Electricity Generating

Authority of Thailand• Director, the Industrial Estate Authority of

Thailand• Director, PTT Aromatics and Refining

Public Company LimitedEducation / Training• Ph.D in Public Admimistration (Public and

Private Management), RamkhamhaengUniversity

• M.B.A., Thammasat University• LL.B., Thammasat University• B.Eng (Electrical Engineering), Kasetsart

University• The National Defense College (Class 46)

• Political and Governance Program, KingPrajadhipok’s Institute (Class 11)

• Capital Market Academy LeadershipProgram, Class 7, Capital Market Academy

Training on Director Roles andResponsibilities• Financial Statement for Directors (FSD)

Class 4/2009 Thai Institute of DirectorsAssociation (IOD)

Experiences• Director, the Industrial Estate Authority of

Thailand• Director, Technology Promotion

Association• Director, the Institute of Small and Medium

Enterprises Development• Director, Customers Protection Committee• Director, Electricity Generating Public

Company Limited• Deputy Permanent Secretary, Ministry of

IndustryRelation among family within theCompany :

None

Present Important Positions• Chief Corporate Security Officer, Business

Security Office, Charoen Pokphand Group• Executive Assistant to President/CEO &

Director, Fraud & Cyber Crime, TrueCorporation Public Company Limited

Education / Training• Criminal Justice, M.A., California State

University, U.S.A.• Public Administration (Police), B.A., Police

Cadet Academy• Oversea Command Course, Police Staff

College, United Kingdom• FBI National Academy, Quantico, Virginia,

U.S.A.Training on Director Roles andResponsibilities• Director Accreditation Program (DAP),

Class 25/2004, Audit Committee Program(ACP), Class 11/2006 and Finance forNon-Finance Directors (FND), Class29/2006 Thai Institute of DirectorsAssociation (IOD)

Experiences• Director, Thai Airways International Public

Company Limited• Deputy Commissioner-General, Royal Thai

Police• Director-General, Department of Special

Investigation• Assistant Commissioner-General, Royal

Thai PoliceRelation among family within theCompany :

None

44

Mr. Somchai KuvijitsuwanIndependent Director- Director to the Corporate

Governance CommitteeAge : 57

Mr. Paibulya PunyavuttiIndependent Director- Director to the Audit

CommitteeAge : 66

Present Important Positions• Director General, Department of Policy,

Strategy and Budget Planning, Office ofthe Attorney General

• Commissioner, Securities and ExchangeCommission, Thailand

• Chairman, Krungthai Laws CompanyLimited

• Director, Metropolitan Electricity Authority• Director and Liquidator, Express

Transportation Organization of ThailandEducation / Training• Master of Political Science, National

Institute of Development Administration• Barrister at Law, Institute of Thai Bar

Association• LL.B., Ramkamheang University• Provincial Public Prosecutor Program,

Class 9/2530Training on Director Roles andResponsibilities• Director Certification Program (DCP)

Class 76/2006 and Understanding theFundamental of Financial Statement,Class 3/2006, Thai Institute of DirectorsAssociation (IOD)

Experiences• Deputy Director, Department of Prosecutor

Commission• Representative of the Office of the

Attorney General for Cooperation to theOffice of National Security CommissionSecretary

• Director and Director to the AuditCommittee, Neighboring CountriesEconomic Development CooperationAgency (Public Organization) (NEDA)

• Deputy Director, Department of IntellectualProperty and International Trade Litigation

• Deputy Director, Department of CriminalLitigation


None

Present Important Positions• Chairman, Wang Tong Group Public

Company Limited• Director, Thai Industrial Gas Public

Company Limited• Chairman, Atop Technology Company

LimitedEducation / Training• B.Sc. Chemical Engineering,

Chulalongkorn University• Senior Executive Program, National

Institute of Development Administration(NIDA)

• Senior Executive Program, Sasin GraduateInstitute of Business Administration ofChulalongkorn University (Sasin)

• NPRA International PetrochemicalConference, U.S.A.

• Balanced Scorecard by Learnet Interna-tional (Thailand) Co., Ltd.

Training on Director Roles andResponsibilities• Director Certification Program (DCP), Class

22/2002 and Setting the CEO PerformancePlan and Evaluation, Thai Institute ofDirectors Association (IOD)

Experiences• Senior Executive Vice President, PTT

Public Company Limited• President, The Aromatics (Thailand) Public

Company Limited• Chairman, Rayong Petrochemical

Corporation Limited• Director to the Remuneration CommitteeRelation among family within theCompany :

None


Mr. Pichai ChunhavajiraDirector- Director to the Remuneration

CommitteeAge : 59

Mr. Prajya PhinyawatDirector- Chairman of the Corporate

Governance Committee- Director to the Nominating

CommitteeAge : 57

Present Important Positions• Chief Financial Officer, PTT Public

Company Limited• Director, PTT Exploration and Production

Public Company Limited• Director, PTT Aromatics and Refining

Public Company Limited• Director, Thai Oil Public Company LimitedEducation / Training• Honorary Degree Doctor of Philosophy

(Accounting), Thammasat University• M.B.A. (Finance), Indiana University of

Pennsylvania, U.S.A.• Bachelor of Accounting, Thammasat

University• The Joint State - Private Sector Regular

Course, the National Defense College,Class 13

• Capital Market Academy Leader Program,Class 5



Experiences• Director, EGAT Public Company Limited• Director, the Metropolitan Electricity

Authority• Director, The Aromatics (Thailand) Public

Company Limited• Director to the Corporate Governance

Committee, PTT Chemical PublicCompany Limited


None

Present Important Positions• Chief Operation Officer, Downstream

Petroleum Business Group, and SeniorExecutive Vice President, Oil BusinessUnit, PTT Public Company Limited

• Director, PTT Aromatics and RefiningPublic Company Limtied

• Director, Thai Oil Public Company Limited• Director, IRPC Public Company LimitedEducation / Training• Ph.D. (Civil Eng.), University of Texas at

Austin, U.S.A.• M.S. (Civil Eng.), Stanford University, U.S.A.• B.E. (Civil Eng.), Chulalongkorn University• The National Defense College, Class 15Training on Director Roles andResponsibilities• Director Certification Program (DCP),


Experiences• Senior Executive Vice President, Corporate

Strategy and Development, PTT PublicCompany Limited

• Senior Executive Vice President, CorporateSupport, PTT Public Company Limited

• Director, The Aromatics (Thailand) PublicCompany Limited

• Director, Rayong Refinery Public CompanyLimited


None

46

Present Important Positions• President, SCG Chemicals Company

Limited• Director, Thai Plastic and Chemicals

Public Company Limited• Chairman, Rayong Olefins Company

Limited• Chairman, SCG Polyolefins Company

Limited• Chairman, Thai Polyethylene Company

Limited• Chairman, Thai Polypropylene Company

Limited• Chairman, SCG Plastics Company Limited• Chairman, Map Ta Phut Olefins Company

Limited• Director, Siam Styrene Monomer Company

LimitedEducation / Training• Master of Chemical Engineering, Imperial

College, London, U.K.• Bachelor of Environmental Chemical

Engineering, Salford University,Manchester, U.K.

• Certificate in Advanced ManagementProgram, Harvard Business School, U.S.A.



Experiences• Executive Vice President, Cementhai

Chemicals Company LimitedRelation among family within theCompany :

None

Mr. Cholanat YanaranopDirectorAge : 49

Present Important Positions• Vice President and Chief Financial Officer,

SCG• Director, Rayong Olefins Company Limited• Director, SCG Polyolefins Company

Limited• Director, Thai Polyethylene Company

Limited• Director, Thai Polypropylene Company

Limited• Director, SCG Plastics Company Limited• Director, SCG Chemicals Company Limited• Director, Map Ta Phut Olefins Company

Limited• Director, Siam Styrene Monomer Company

LimitedEducation / Training• M.B.A. (with Distinction), Harvard Business

School, Harvard University, U.S.A.• M.S. Industrial Engineering, University of

Texas (Arlington), U.S.A.• Bachelor of Engineering, Chulalongkorn

University


Class Cementhai, Thai Institute ofDirectors Association (IOD)

Experiences• Corporate Planning Director, the Siam

Cement Public Company LimitedRelation among family within theCompany :

None

Mr. RoongroteRangsiyopashDirectorAge : 45


Present Important Positions• President & CEO, PTT Chemical Public

Company Limited• Executive Vice President Acting for Senior

Executive Vice President, PTT PublicCompany Limited

• Director, Vinythai Public Company Limited• Director, NPC Safety & Environmental

Service Company Limited• Director, PTT Polymer Marketing Company

Limited• Director, PTT Polyethylene Company

Limited• Director, PTT Polymer Logistics Company

Limited• Chairman, the Plastic Industry Club, the

Federation of Thai IndustriesEducation / Training• Master of Science (Mechanical

Engineering), Texas A&I University, U.S.A.• Bachelor of Engineering (Mechanical),

Chulalongkorn University

Present Important Positions• Director, Thoresen Thai Agencies Public

Company Limited• Chairman, Bangkok Industrial Gas

Company Limited• Director, HMC Polymers Company Limited• Director, Rayong Olefins Company Limited• President, Bangkok Synthetics Company

Limited• President, BST Elastomers Company

LimitedEducation / Training• Ph.D. Operation Research, University of

California, Berkeley, U.S.A.• M.S. Industrial Engineer / Operation

Research, University of California,Berkeley, U.S.A.

• M.S. Electrical Engineer and ComputerScience, University of California, Berkeley,U.S.A.

• B.S. Industrial Engineer, University ofCalifornia, Berkeley, U.S.A.

Training on Director Roles andResponsibilities• Finance for Non-Finance Director Program,


Experiences• Vice Chairman, Bangkok Polyethylene

Public Company Limited• Managing Director, Map Ta Phut Industrial

Gases Company LimitedRelation among family within theCompany :

None

Mr. Pichit NithivasinDirectorAge : 62

Training on Director Roles andResponsibilities• Director Certification Program (DCP), Class

82/2006 and Finance for Non-Finance(FN), Class 30/2006 Thai Institute ofDirectors Association (IOD)

Experiences• Director, Secretary to the Board of

Directors, Managing Director, BangkokPolyethylene Public Company Limited

• Director and Managing Director, ThaiStyrenics Company Limited

• Executive Vice President-Polymer ProductsValue Center, PTT Chemical PublicCompany Limited

• Director and Public Affairs Manager, EssoThailand and ExxonMobil Thailand

• Lubes Country Manager, Esso Thailandand ExxonMobil Thailand


NoneMr. Veerasak KositpaisalDirector- Secretary to the Board of

DirectorsAge : 54

48

MANAGEMENT TEAM

Present Important Positions• Executive Vice President Acting for Senior

Executive Vice President, PTT PublicCompany Limited

• Director, Vinythai Public Company Limited• Director, NPC Safety & Environmental

Service Company Limited• Director, PTT Polymer Marketing Company


Limited• Director, PTT Polymer Logistics Company

Limited• Chairman of Plastic Industry Club, the

Federation of Thai IndustriesEducation / Training• Master of Science (Mechanical Engineer-

ing), Texas A&I University, U.S.A.• Bachelor of Engineering (Mechanical),

Chulalongkorn University• Director Certification Program (DCP), Class

82/2006 and Finance for Non-Finance(FN), Class 30/2006, Thai Institute ofDirectors Association (IOD)

Mr. Veerasak KositpaisalPresident & CEOAge : 54

Experiences• Director, Secretary to the Board of

Directors, Managing Director, BangkokPolyethylene Public Company Limited

• Director and Managing Director, ThaiStyrenics Company Limited

• Executive Vice President-Polymer ProductsValue Center, PTT Chemical PublicCompany Limited

• Director and Public Affairs Manager, EssoThailand and ExxonMobil Thailand

• Lubes Country Manager, Esso Thailandand ExxonMobil Thailand

Relation among family withinthe Company

None

Present Important Positions• Director, Thai Oleochemicals Company

Limited• Director, TOC Glycol Company Limited• Director, Thai Choline Chloride Company

Limited• Director, Thai Ethanolamines Company


Limited• Director, PTT Chemical International

(Singapore) Pte., Ltd.• Executive Vice President, Senior Executive

Vice President - Petrochemical Business &Refinery Group, PTT Public CompanyLimited

Education / Training• M.B.A. (Business Administration - Finance

& Banking), North Texas State University,U.S.A.

• Bachelor of Accounting, Faculty ofCommerce & Accountancy, ThammasatUniversity

• Director Accreditation Program (DAP),Class 75/2008 Thai Institute of DirectorsAssociation (IOD)

• Executive Program in Capital MarketAcademy Leadership Program, CapitalMarket Academy

• Executive Program in InternationalManagement, Stanford-National Universityof Singapore

• Building, Leading & Sustaining theInnovative Organization, Sloan School ofManagement, Massachusetts Institute ofTechnology, U.S.A.

Experiences• Executive Vice President - Corporate

Finance, PTT Public Company LimitedRelation among family withinthe Company

None

Ms. Panada KanokwatSenior Executive Vice President,Finance & AccountingAge : 59


Present Important Positions• Director, TOC Glycol Company Limited• Director, Thai Oleochemicals Company

Limited• Director, Vinythai Public Company Limited• Director, PTT Polyethylene Company

Limited• Director, PTT Phenol Company Limited• Director, Thai Tank Terminal Limited• Director, Thai Styrenics Company Limited• Director, PTT Chemical International

(Singapore) Pte., Ltd.• Director, Cognis Oleochemicals (M)

SDN BHDEducation / Training• Master’s Degree in Business Administra-

tion (Commerce & Accountancy),Thammasat University

• Bachelor’s Degree in Chemical Engineer-ing, Prince of Songkla University

• The Advance Management Program(AMP), Harvard Business School, U.S.A.

• Director Certification Program (DCP) Class67/2005, Thai Institute of Directors

Association (IOD) and Australian Instituteof Company Directors

• Chief Finance Officer (CFO) Class 1/2004,The Institute of Certified Accountants andAuditors of Thailand

Experiences• Director, PTT Polymer Marketing Company

Limited• Executive Vice President - Corporate

Strategy & Business Development, PTTChemical Public Company Limited


None

Mrs. Puntip OungpasukExecutive Vice President,Strategy & International AffairsAge : 49

Present Important Positions• Chairman, NPC Safety & Environmental

Service Company Limited• Director, Thai Choline Chloride Company

Limited• Director, Alliance Plant Service Company

LimitedEducation / Training• Master’s Degree in Mechanical

Engineering, Chulalongkorn University• Bachelor’s Degree in Mechanical

Engineering, Chulalongkorn University• Director Certification Program (DCP), Class

92/2007, Thai Institute of DirectorsAssociation (IOD)

Mr. Jiamsak NantananateExecutive Vice President,Operational ExcellenceAge : 56

Experiences• Executive Vice President - Chief

Engineering & Construction, PTTChemical Public Company Limited


None

50

Present Important Positions• Director, TOC Glycol Company Limited• Director, Thai Choline Chloride Company


Limited• Director, Eastern Fluid Transport Company

Limited• Director, PTT Utility Company Limited• Director, PTT ICT Solutions Company

Limited• Director, Alliance Plant Service Company

Limited• Director, PTT Chemical International

(Singapore) Pte., Ltd.Education / Training• Master of Science (Mechanical),

Manhattan College, New York, U.S.A.• Bachelor of Science (Mechanical), New

York Institute of Technology, U.S.A.• Director Accreditation Program (DAP),


• Senior Executive Program 2007, StanfordUniversity, U.S.A.

• Ministry of Finance Executive Program.• Finance for non Finance Manager,

Thammasat University.• Senior Executive Program, Sasin Graduate

Institute of Business Administration ofChulalongkorn University

Experiences• Executive Vice President - Chief Corporate

Development & Support, PTT ChemicalPublic Company Limited

• Acting Managing Director, Thai EthoxylateCompany Limited


None

Mr. Athavudhi HirunburanaExecutive Vice President,Organizational EffectivenessAge : 53

Present Important Positions• Director, Thai Tank Terminal Limited• Director, PTT Utility Company Limited• Director, PTT Polymer Marketing Company

Limited• Director, PTT Utility Company Limited• Director, PTT Phenol Company Limited• Director, Thai Oleochemicals Company

Limited• Director, Alliance Petrochemical

Investment (Singapore) Pte., LtdEducation / Training• Ph.D. (Mechanical Engineering), Illinois

Institute of Technology, U.S.A.• Master of Science (Mechanical Engineer-

ing), Texas A&I University, U.S.A.• Bachelor’s Degree in Mechanical

Engineering, Chulalongkorn University• Advance Management Program, Harvard

Business School, U.S.A• Director Certification Program (DCP),


Experiences• Senior Vice President, PTT Chemical

Public Company Limited• Executive Vice President - Operation, TOC

Glycol Company Limited• EO/EG Project Director, PTT Chemical

Public Company LimitedRelation among family withinthe Company

None

Mr. Dhanes CharoensupayaExecutive Vice President,Marketing, Commercial & SupplyChain GovernanceAge : 54


Present Important Positions• Director, Bangkok Polyethylene Public

Company Limited• Director, NPC Safety and Environmental

Service Company Limited• Chairman, Thai Styrenics Company


LimitedEducation / Training• Master of Public and Private Management,

National Institute of DevelopmentAdministration (NIDA)

• Bachelor’s Degree in ElectricalEngineering, King Mongkut’s Institute ofTechnology (Ladkrabang)

• Director Certification Program (DCP),Class 92/2007, Thai Institute of DirectorsAssociation (IOD)

• Asean Executive Program (AEP),GE Crotonville

Experiences• Executive Vice President - Chief Operating

Unit Plant I-4, PTT Chemical PublicCompany Limited

• Director, TOC Glycol Company Limited• Director, Thai Ethanolamines Company

LimitedRelation among family withinthe Company

None

Mr. Suvit TinnachoteExecutive Vice President,Polymer Products Value CentreAge : 52

Present Important Positions• Director, Thai Tank Terminal Limited• Director, PTT Utility Company Limited• Director, NPC Safety and Environmental

Service Company LimitedEducation / Training• M.B.A., Thammasat University• B.Eng. (Electrical Engineering),

Chulalongkorn University• Director Certification Program (DCP),


• Senior Executive Program, Sasin GraduateInstitute of Business Administration ofChulalongkorn University

• Advanced Management Program, HarvardBusiness School, U.S.A.

Mr. Narong BunditkamolExecutive Vice President,Olefins & Shared FacilitiesAge : 54

Experiences• Executive Vice President (Operation),

National Petrochemical Public CompanyLimited


None

52

Present Important Positions• Director, TOC Glycol Company Limited• Director, Thai Choline Chloride Company


Limited• Director, Thai Fatty Alcohol Company

Limited• Director, Thai Ethoxylate Company Limited• Director, PTT Chemical International

Private Limited• Director, Cognis Oleochemicals (M) SDN

BHDEducation / Training• Ph.D. in Chemical Engineering from the

University of Houston, Texas, U.S.A.• Bachelor of Engineering (2nd Class

Horns), Chulalongkorn University• Annual Meeting 2007/The European

Petrochemical Association-Germany• Asia Petrochemical Industry Conference

2007/APIC-TaiwanMr. Kongkrapan IntarajangSenior Vice President, EO-BasedPerformance Products ValueCenterAge : 41

• 2007 International Petrochemical andRefiners Association/ NPRA-U.S.A.

• 2007 World Petrochemical Conference &Industry Workshops/ CMAI-U.S.A.

• Annual Palm & Lauric Oils Conference &Exhibition Price Outlook 2007/2008-Malaysia

Experiences• Acting President & Board of Director, Thai

Oleochemicals Company Limited• Vice President - Business Development,

PTT Chemical Public Company LimitedRelation among family withinthe Company

None

Mrs. Thasnalak SantikulSenior Vice President,Corporate AffairsAge : 54

Education / Training• Master and Doctorate Degree (D.E.S)

International Laws, UniversiteD’Aix-Marseille, France

• Bachelor Degree in Political Science(International Affairs), ThammasatUniversity

• Director Certification Program (DCP),Class 92/2007, Thai Institute of DirectorsAssociation (IOD)

Experiences• Senior Vice President - Office of the

President, PTT Chemical Public CompanyLimited

• Vice President Corporate GovernanceOffice, PTT Chemical Public CompanyLimited


None


PTTCHûs Managements who appointed as Managementof its Subsidiaries:

1. Mr. Khubbhol SuksuphaSenior Executive Vice President Appointed as Executive Vice President,PTT Public Company Limited and Managing Director, PTT PolyethyleneCompany Limited

2. Mr. Tawatchai ChittavanichSenior Vice President Appointed as Managing Director,Thai Tank Terminal Limited

3. Mr. Prakob PetcharuttanaSenior Vice President Appointed as President,NPC Safety and Environmental Service Company Limited

4. Mr. Somsak KeerativutisestSenior Vice President Appointed as President,Alliance Plant Service Company Limited

54

ORGANIZATION STRUCTURE

Corporate Affairs

Strategy & International Affairs

PRESIDENT & CEO

Operational Service Subsidiaries

Oleochemical Products Value Centre

Olefins & Shared Facilities

Polymer Products Value Centre

EO-Based Performance Products Value Centre

Internal Audit

BOARD OF DIRECTORS

Nominating CommitteeAudit Committee Corporate Governance Committee

Remuneration Committee

Marketing, Commercial & Supply Chain Governance

Finance and Accounting

Operational Excellence

Organizational Effectiveness


Strengthening Value Centres for ExcellencePTT Chemical’s business direction lies in integrated petrochemical and chemical businessto promote sustained growth in the chemical business together with a step toward chemicalindustry and innovation leadership. To strengthen efficiency and flexibility while satisfyingcustomers’ demand, the Company implemented value-based organizational (VBO)effectiveness by structuring itself into five value centers:

1. Olefins & Shared Facilities2. Polymer Products Value Centre3. EO-Based Performance Products Value Centre4. Oleochemical Products Value Centre5. Service & Others.

A Corporate Center defines governance roles in defining strategies and policies for corpo-rate development and provides quality shared services to all internal users at competitivecosts.

Organizational management under VBO calls for planning and management processes forefficiency and effectiveness:• Integrating into one cohesive organization• Re-aligning subsidiary structure and management• Clear strategic directions for the entire PTT Chemical groups to maximize the group’s

profitability• Standardized practices and operational platforms across value center and shared facili-

ties• Cost reduction, best practices and optimized resource utilization caused by networks

from our shared service centers• Unified work culture from “Functional” to “Process” organization• Improve employee’s career growth opportunities• Preparing for long-term value & growth and increase the level of international competitive-

ness• Customer Relationship Management/CRM• Supply Chain Management/SCM• Applies the principles of TQA - Thailand Quality Award to our work process and develop-

ment to ensure alignment and integration• Set up BBS-Behavior Based Safety : to sustain our safety process.

ORGANIZATIONAL AND PERSONNELDEVELOPMENT

56

Personnel DevelopmentTo cultivate competencies for performance resulted by customer oriented, the Companyidentified each value centre’s to meet customers’ demand and defining the ‘LeadershipBrand’, the identity of the Company’s own business conduct. The Leadership Brand reflectspeople’s unique traits in the organization and value centres - apparent and tangible to cus-tomers and the public alike.PTT Chemical’s Leadership Brand-inspired traits were identified and aligned to peoplecompetency. These consisted of desired behavior, professional quality, and functionalcompetency for the personnel of each value centre. Training courses and developmentprocedures were defined and career development models drawn up to ensure people’sreadiness for their career paths.


COMPANY INFORMATION

Name PTT Chemical Public Company LimitedInitial PTTCHWebsite www.pttchem.comRegistered Number 0107548000668

Registered Capital Baht 15,191,153,000 comprising of 1,519,115,300 ordinary shares at par value of Baht 10 each Paid-up Capital Baht 14,968,296,000.00

First Day Trade on the SET 13 December 2005Establishment 7 December 2005

Type of Business Manufacture and sale of petrochemical products, by-products, chemical products, utilities and providing support services.

Business Structure and Value Chain - Olefins & Shared Facilities - Polymer Products Value Centre - EO-Based Performance Products Value Centre - Oleochemical Products Value Centre

Number of Employees 1,544 Persons

Contact Head Office: Tel 66 (0) 2265-8400 Fax 66 (0) 2265-8500 Corporate Governance & Secretarial: Tel 66 (0) 2265-8632-5 Email: [email protected] Investor Relations: Tel 66 (0) 2265-8574 Email: [email protected] Address Head Office: 123 Suntowers Building B, 31-35th Floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak, Bangkok 10900 Tel 66 (0) 2265-8400 Fax 66 (0) 2265-8500 1st Branch: (Suntowers A Branch) 123 Suntowers Building A, 14th, 18th Floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak, Bangkok 10900 Tel 66 (0) 2265-8100 Fax 66 (0) 2265-8111-2 2nd Branch: (I-1 Road Branch) 14 I-1 Road, Tambon Map Ta Phut, Amphoe Mueang Rayong, Rayong 21150 Tel 66 (0) 3892-2100 Fax 66 (0) 3892-2111 3rd Branch: (I-4 Road Branch) 9 I-4 Road, Tambon Map Ta Phut, Amphoe Mueang Rayong, Rayong 21150 Tel 66 (0) 3892-5400 Fax 66 (0) 3892-5600-1 4th Branch: (Jetty and Buffer Tank Farm Branch) 19 Rong - Pui Road, Tambon Map Ta Phut, Amphoe Mueang Rayong, Rayong 21150 Tel 66 (0) 3892-2750 5th Branch: (Rachniyom Road Branch) 59 Rachniyom Road, Tambon Noen-Phra, Amphoe Mueang Rayong, Rayong 21150 Tel 66 (0) 3899-4000 6th Branch: (Suntowers B Branch) 123 Suntowers Building B, 10th Floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak, Bangkok 10900

58

Company Information as of 31 December 2008

References Securities Registrar Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building, 4th, 7th Floor, Rachadapisek Road, Klongtoey, Bangkok 10110 Tel 66 (0) 2229-2800 Fax 66 (0) 2359-1267

Registrar and Debenture Thai Military Bank Public Company LimitedHolders Representative 393 Silom Road, Bangrak, Bangkok 10500

Tel 66 (0) 2230-5575, 66 (0) 2230-5479 Fax 66 (0) 2266-8150, 66 (0) 2266-9779 Registrar Siam Commercial Bank Public Company Limited Markets Operations Division 1060 Phetburi Road, Ratchatawee, Bangkok 10400 Tel 66 (0) 2256-2323-8 Fax 66 (0) 2256-2406 Securities Services Product 9 Rutchadapisek Road, Jatujak, Bangkok 10900 Tel 66 (0) 2544-3930 Fax 66 (0) 2937-7662 Auditor KPMG Phoomchai Audit Ltd. 48th Floor, Empire Tower, 195 South Sathorn Road, Bangkok 10120 Tel 66 (0) 2677-2000 Fax 66 (0) 2677-2222

Legal Advisor Baker & McKenzie Limited 22-25th Floor, Abdulrahim Place, 990 Rama IV Road, Silom, Bangrak, Bangkok 10500 Tel 66 (0) 2636-2000 Fax 66 (0) 2636-2111

Siam Premier International Law Office Limited 26th Floor, The Offices at Central World, 999/9 Rama I Road, Pathumwan, Bangkok 10330 Tel 66 (0) 2646-1888 Fax 66 (0) 2646-1919 Chandler and Thong-Ek Law Offices Limited 7- 9th Floors, Bubhajit Building, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500 Tel 66 (0) 2266-6485 thru 6510 Fax 66 (0) 2266-6483-4 Hunton & Williams (Thailand) Limited 34th Floor, Q.House Lumpini Building, 1-3401-3402 South Sathorn Road, Thungmahamek, Sathorn, Bangkok 10120 Tel 66 (0) 2645-8800 Fax 66 (0) 2645-8880


SHAREHOLDING IN AFFILIATESAND REVENUE STRUCTURE

Note:1. On 1 September 2006, the Company reduced its equity interest in PPCL from 40% to 30%. 2. On 2 October 2006, the Company bought the shares of BPE and PTTPE from PTT Plc, in line with a resolution of the extraordinary shareholders meeting of 28 September 2006, thus enabling it to wholly own BPE and PTTPE.3. On 8 April 2008, NPTC Maintenance & Engineering Services (NPTC) underwent a change in names to Alliance Plant Service Co., Ltd. (APS), while changing shareholders (40%) from Toyo Thai Corporation to PTT Plc, with the Company’s equity interest (60%) intact.4. On 16 July 2008, PTTCH International Co., Ltd. was registered. This company then signed an agreement to buy 50% of the common shares of COM on 23 July 2008.5. On 17 October 2008, Thai Oleochemicals Co., Ltd. (TOL) a wholly-owned subsidiary of the Company, bought shares of Thai Fatty Alcohol Co., Ltd. (TFA), Cognis Thai Co., Ltd. Cognis B.V. thus enabling TOL s shares to rise from 50% to 100% in TFA.

SubsidiariesBPE Bangkok Polyethylene Plc

PTTPE PTT Polyethylene Co., Ltd.

TSCL Thai Styrenics Co., Ltd.

TOCGC TOC Glycol Co., Ltd.

TEA Thai Ethanolamine Co., Ltd.

TCC Thai Choline Chloride Co., Ltd.

TOL Thai Oleochemicals Co., Ltd.

TFA Thai Fatty Alcohol Co., Ltd.

TTT Thai Tank Terminal Co., Ltd.

APS Alliance Plant Service Co., Ltd.

NPC S&E NPC Safety & Environmental

Service Ltd.

PTTCH Inter PTT Chemical International Pte., Ltd.

COM Cognis Oleochemicals (M) Sdn Bhd

Associates TEX Thai Ethoxylate Co., Ltd.

PPCL PTT Phenol Co., Ltd.

PTTUT PTT Utility Co., Ltd.

PTTPM PTT Polymer Marketing Co., Ltd.

PTTICT PTT ICT Solutions Co., Ltd.

VNT Vinythai Plc

API Alliance Petrochemical Investment

(Singapore) Pte., Ltd.

EFT Eastern Fluid Transport Co., Ltd.

PTTCH

BPE TEX

PPCL

PTTUT

PTTPM

PTTICT

API

EFT

VNT

PTTPE

TOCGC

TEA

TCC

TOL

NPC S&E

APS

TTT

PTTCH Inter COM

TFA

TSCL

100%

100%

100%

100%

100%

100%

100%

60%

50%

30%

40%

25%

20%

24.98%

16.67%

15%

51%

100%

100%

100%

50%

60

Products/Services* Carried Company 2006 2007 2008

Out by Shareholding(%) MB % MB % MB %

1 . Olefins & Shared Facilities

1.1 Sales of Ethylene PTTCH 100 28,534 40% 16,154 21% 17,306 21%

1.2 Sales of Propylene PTTCH 100 15,052 21% 12,511 17% 13,187 16%

1.3 Sales of By-Products PTTCH 100 6,353 9% 6,025 8% 6,723 8%

1.4 Sales of Utilities PTTCH 100 3,020 4% 2,929 4% 2,798 3%

1.5 Others PTTCH 100 - 0% - 0% 47 0%

Total 52,959 74% 37,619 50% 40,061 48%

2. Polymer Products

2.1 Sales of Polymers - HDPE PTTCH 100 10,283 14% 11,981 16% 13,092 16%

2.2 Sales of Polymers - HDPE BPE 100 2,789 4% 10,230 14% 10,233 12%

2.3 Sales of Polystyrene TSCL 100 - 0% - 0% 1,225 1%

Total 13,072 18% 22,211 29% 24,550 29%

3. EO-based Performance Products

3.1 Sales of EO/EG, EO Derivatives TOCGC 100 3,633 5% 13,128 17% 10,598 13%

3.2 EO Derivatives TEX 50 147 0% 912 1% 1,183 1%

Total 3,780 5% 14,040 19% 11,781 14%

4. Oleochemical Products

4.1 Sales of ME/FA TOL, TFA 100 - 0% - 0% 4,568 5%

4.2 Sale revenues from PTTCH Inter, COM PTTCH Inter 100 - 0% - 0% 1,000 1%

Total - 0% - 0% 5,568 7%

5. Service/Others

5.1 Storage and Handling of Liquid Chemicals TTT 51 1,225 2% 1,234 2% 1,385 2%

5.2 Related Services Income PTTCH 100 398 1% 159 0% 238 0%

5.3 Maintenance Services APS 60 333 0% 189 0% 378 0%

5.4 Safety & Environmental Services NPC S&E 100 76 0% 132 0% 156 0%

Total 2,032 3% 1,714 2% 2,157 3%

Total 71,843 100% 75,584 100% 84,117 100%

Remark : * The revised businesses is based on value - based organization structure.

REVENUE STRUCTURE OF THE COMPANY AND ITS SUBSIDIARIES


SHAREHOLDING STRUCTURE

List of major shareholders of PTT Chemical Public Company Limited "PTTCH"

Name Number of Shares % of Total Shares

1. PTT Public Company Limited (PTT) 737,917,272 49.30

2. The Siam Cement Public Company Limited (SCG) 302,009,222 20.18

3. HMC Polymers Company Limited (HMC) 42,132,567 2.81

4. State Street Bank and Trust Company 29,340,720 1.96

5. Nortrust Nominees Ltd. 26,824,838 1.79

6. Bangkok Synthetics Company Limited (BST) 21,928,254 1.46

7. Oman Oil Company S.A.O.C 16,595,853 1.11

8. State Street Bank and Trust Company for Australia 12,436,949 0.83

9. Investors Bank & Trust Company 10,775,190 0.72

10. HSBC (Singapore) Nominees PTE LTD 10,615,057 0.71

Total 1,210,575,922 80.88

PTT 49.30

SCG 20.18

HMC 2.81

SSB&T 1.96

NORTRUST 1.79

BST 1.46

OMAN OIL 1.11

SSB&TA 0.83

IBT 0.72

HSBC 0.71

OTHERS 19.12

Note : - PTT Chemical Plc’s top 10 shareholders as of 14 November 2008, at the close of the share register. - With 49.30% shareholding, PTT Plc is in practice the major shareholder with significant influence over the policy formulation of Company management or operation.

62

1. PTT Chemical Public Company LimitedAt Meeting No. 1/2005, held on 7 December 2005, the Board of Directors agreed to pay adividend of no less than 30% of net profits after the deduction of tax and capital reserves.However, dividend payment is subject to investment plans, necessity, and other factors.After deciding on an appropriate dividend payment, the Board must propose the payment toa shareholders’ meeting for approval. If necessary, the Board may approve an interimdividend payment and report to the shareholders at their next meeting.

Dividend Allocation Profile

year 2005 2006 2007 2008(Jan.-Jun.)

Dividend per share (baht) 5.00 5.25 6.00 3.00

Total dividend (million baht) 5,655.70 6,925.67 8,966.52 4,490.49

2. Subsidiaries:Thai Tank Terminal Limited

• The dividend allocation policy is as follows: “If there is no other necessity, theCompany shall allocate a dividend of no less than 40% of the net profits after theyear-end deduction of corporate income tax to maintain the ratio of liabilities to equityof shareholders at no more than 1:1”

TOC Glycol Company Limited• The dividend allocation policy is as follows: “In any dividend allocation, the Company

shall allocate as capital reserves no less than one-twentieth of the net profits earnedfrom its business until such capital reserves equal or exceed one-tenth of the capital ofthe Company.”

Thai Oleochemicals Company Limited• The dividend allocation policy is as follows: “In any dividend allocation, the Company

shall allocate as capital reserves no less than one-twentieth (5%) of the net profitsearned from its business until such capital reserves equal or exceed one-tenth of thecapital of the Company.”

Bangkok Polyethylene Public Company Limited• The dividend allocation policy is as follows: “No dividend allocation is permitted unless

decided by the shareholders’ meetings or the Board of Directors. An interim dividendmay on occasion be paid if it is apparent to the Board that the Company has beenreasonably profitable. Once the dividend allocation has been made, the Board shallreport to the next shareholders’ meeting. In so doing, the Company shall allocate aportion as capital reserves; this amount is to be no less than 5% of the annual netprofits, deducted by the cumulative loss (if applicable). This practice shall continue untilthe provisional capital equals 10% of the registered capital.”

DIVIDEND PAYMENT POLICY


The management structure of PTT Chemical Public Company Limited consists of the Boardof Directors, the Subcommittees, the President, and the management team.

This is the list of the Board of Directors as of 31 December 2008.

Name Position

Mr. Pornchai Rujiprapa ChairmanMr. Prasert Bunsumpun Vice ChairmanMr. Manu Leopairote Independent Director

Chairman, Audit CommitteeMr. Pala Sookawesh Independent Director

Chairman, Nominating CommitteeChairman, Remuneration Committee

Mr. Cherdpong Siriwit Independent DirectorDirector, Audit CommitteeDirector, Nominating Committee

Mr. Witoon Simachokedee Independent DirectorDirector, Corporate Governance Committee

Pol. Gen. Nopadol Somboonsub Independent DirectorDirector, Remuneration Committee

Mr. Somchai Kuvijitsuwan Independent DirectorDirector, Corporate Governance Committee

Mr. Paibulya Punyavutti Independent DirectorDirector, Audit Committee

Mr. Pichai Chunhavajira DirectorDirector, Remuneration Committee

Mr. Prajya Phinyawat DirectorChairman, Corporate Governance CommitteeDirector, Nominating Committee

Mr. Cholanat Yanaranop DirectorMr. Roongrote Rangsiyopash DirectorMr. Pichit Nithivasin DirectorMr. Veerasak Kositpaisal Director

and Secretary to the Board of Directors

(Details on directors’ appointment and retirement during the year 2008 appear on page73)

MANAGEMENT STRUCTURE

64

Board of Directors

1. CompositionAccording to Company regulations, the Board of Directors consists of 5 and up to 15directors, of whom no less than three are independent directors, elected and removedby the shareholders. At least half of the directors must reside in Thailand. All directors,who must be qualified by law, must not be over 70 years old. (Directors’ names appear onpage 40)

2. Appointment and Retirement of DirectorsCompany regulations on the appointment, removal, or retirement of directors aresummarized below:

Appointment• The shareholders elect directors under the following rules:

(1) Each shareholder has one vote per share.(2) If the number of nominees is less than that of directors required in an election, the

shareholders’ meeting simply elects those nominees. Each shareholder exercises allvotes applicable under (1) to elect one or more directors. A shareholder cannotallocate only part of his/her votes to any nominee.

(3) If the number of nominees is greater than that of directors required in the election,a shareholder is to cast his/her vote for the nominees individually. In voting, thenominees are to receive the numbers of votes according to the number of shares eachshareholder holds as under (1). Each shareholder cannot allocate only part of his/hervotes to any nominee. The nominees are to be ranked by the total numbers of votesreceived and those that gather the most votes are elected as directors, but thenumbers can only be equal to that of the directors required. If the nominees receiveequal votes such that their election would result in more directors than required, thechairman of the meeting is to cast a vote to decide which one(s) is appointed.• The directors are to appoint any one among themselves as Chairman, who is to make a final

decision anytime there are an equal number of votes among the directors. The Board is toappoint another director as Vice Chairman, who acts as assigned by the Chairman or on his/her behalf in case he/she is unable to perform the duty, or if the Chairman’s position becomesvacant.

• If vacancies on the Board exist for reasons other than term expiration, the Board is to select aqualified person for consideration at the following Board meeting. If the remaining term ofdirectorship is less than two months, the newly elected director replacing the former is to stayin office for the remaining term of the former. The resolution of the Board on this matter mustconsist of no less than three-quarter votes of the remaining directors.

• If vacancies on the Board are less than the quorum, the current Board is to only call, on behalfof the Board, for a shareholders’ meeting to elect directors to fill the vacancies, to be heldwithin one month. Each newly elected director replacing the former is to stay in office for theremaining term of the former.

Termination of directors• At every Annual General Meeting (AGM), one-third of the directors - or if the number is not

a multiple of three, then the number nearest to one-third - are to retire from office.Nevertheless, a director whose term in the office expires may be re-elected.

• Apart from term expiration, directorship is to be considered terminated for reasons ofdeath, resignation, disqualification, shareholders’ resolutions to remove a director, or acourt order to remove a director.


• Any director may resign by submitting a resignation letter to the Company, and suchresignation will take effect on the date the Company receives the letter. He/she may alsoinform the registrar about the resignation.

• At a shareholders’ meeting, shareholders may vote for the removal of any directorfrom office before his/her term expires, in which case a three-quarter vote of eligibleshareholders present at the meeting is required, provided that the number of sharesrepresented by the three-quarter vote is no less than half of the total number of sharesrepresented by the total number of eligible shareholders present at the meeting.

3. Authority and Duties of the BoardThe Board’s core responsibility is to manage Company business and perform its dutiesunder relevant laws, objectives, and regulations of the Company, in addition to theresolutions of the shareholders’ meeting. The authority, duties, and responsibilities of theBoard are as follows:

Duties required by law• Ensure the availability of balance sheets, statements of income, and financial reports.• Appoint the external auditor to examine financial statements and present for approval to

shareholders at the AGM within four months from the end of the Company’s accountingperiods. The Board is to send copies of the audited balance sheets together with theauditor’s report and the annual report to all shareholders at least seven days ahead ofeach meeting date.

• Identify the authorized directors who will sign on the behalf of the Company withCompany seal affixed.

• Consider interim dividend payment when the Company makes enough profits and reportto shareholders at the next shareholders’ meeting.

Oversight of the Company• Direct and monitor the management’s operation to ensure performance efficiency.• Decide the Company’s internal regulations.• Consider the Company’s annual budget, containing operating and investment budgets.• Assign one director or more to act on behalf of the Board.• Appoint other person(s) to carry out Company business under the Board’s control or

delegate authority to the mentioned person(s) and within a suitable timeframe. The Boardmay revoke, repeal, or amend the authorization at any time.

• Hold Board meetings; organize shareholders’ meetings and notify all shareholders;ensure preparation of minutes of Board meetings and shareholders’ meetings.

• Establish the Company’s structures.• Consider giving permission to directors wishing to buy the Company’s assets or sell his/

hers to the Company or conduct any transactions with it, either on his/her behalf orothers’.

• Offer opinions on various matters proposed to shareholders’ meetings, includingopinions for the approval of the allocation of annual net profits for capital reserves.

• Appoint the Audit Committee, the Nominating Committee, the Remuneration Committee,and the Corporate Governance Committee. Each committee is to consist of directors fromthe Board of Directors under specified criteria.

The following matters, however, require prior approval by the shareholders’ meeting:• Engagement in a connected transaction and acquisition/sale of significant Company

assets as defined by law and announced by the Capital Market Regulators

66

• Sale or transfer of the whole or essential parts of the Company to other entities• Purchase or takeover of other companies• Preparation, amendment, or termination of contracts dealing with the granting of a lease

of the whole or essential parts of any Company business, the assignment to any otherperson to manage the Company, or the merger of the Company with any other entity toshare profits and losses.

• Amendment of the Memorandum of Association or Company regulations• Increase/reduction in registered capital• Issuance of debentures for the public• Company dissolution/merger• Announcement of yearly dividend payment• Other businesses as defined by Company regulations that require prior approval at a

shareholders’ meeting.

4. Authorized DirectorsDirectors’ authority to sign on behalf of the Company as stipulated in Company regulationsare “Two directors co-sign and affixed with the Company seal. The Board may designate thenames of directors authorized to sign and bind the Company and affixed with the Companyseal”.

At its meeting No. 8/2008 on 14 November 2008, the Board designated the following namesand number of directors to sign and bind the Company as follows: “Mr. Cherdpong Siriwit,Mr. Manu Leopairote, Mr. Pala Sookawesh, Mr. Pornchai Rujiprapa, Mr. Paibulya Punyavutti,Mr. Pichai Chunhavajira, Mr. Witoon Simachokedee, Mr. Veerasak Kositpaisal, and PoliceGeneral Nopadol Somboonsub. The signatures of any two of these nine directors, affixedwith the Company seal, are considered valid.”

5. Authority and Responsibilities of the PresidentCompany regulations call for the Board to select and appoint a director as President andsecretary to the Board, to be called President. The President is to conduct the Company’sday-to-day business as well as other businesses under Board resolution at its meetingNo. 1/2005 of 7 December 2005, and to perform core responsibilities under Companyannouncement No. 108/2007 of 1 December 2007, including the authority to manageCompany tasks under Board policy, as summarized below:• Be accountable to the Board and shareholders by generating and supplementing busi-

ness value for stakeholders• Devise objectives for the supervision of the PTT Chemical Group to supplement business

value for stakeholders• Create a broad vision, mission, goals, and targets, as well as ensuring their concrete

implementation and organizational development• Delegate authority and responsibility to senior and lesser management in support of his/

her accountability in creating business value• Be accountable for business performance and integrated business development with

long-term economic returns comparable to those obtained in domestic and overseaspetrochemical businesses

• Develop the Company as a model business operation in compliance with the law,morality, and culture

• Evolve the organization and its personnel to realize their full potential, create a Companyculture, and professional ethics.


Such authority and duties of the President, however, is void whenever there is a conflict ofinterest in any form resulting from the President’s exercising of his power in relation to theCompany or its subsidiaries.

SubcommitteesIn compliance with the Good Corporate Governance principles, at its meeting No. 1/2005 of7 December 2005, the Board appointed four subcommittees (or ‘committees’) to screenparticular critical issues with prudence and efficiency, reporting to the Board. In 2008 allsubcommittees, appointed on 7 December 2005, completed their first three-year terms. TheBoard meeting No. 9/2008 of 12 December 2008 decided to appoint new subcommitteeswith due consideration given to the guidelines of SET. As of 31 December 2008, thestructures of these committees were as follows:

1. Audit CommitteeThe Committee consists of three non-management, independent directors qualified underthe announcement of SEC. All are knowledgeable and experienced enough to review thecredibility of financial statements. (The qualifications and experience of the Audit Committeeappear on page 41)

Name Position

1. Mr. Manu Leopairote Chairman (Independent Director)2. Mr. Cherdpong Siriwit Director (Independent Director)3. Mr. Paibulya Punyavutti Director (Independent Director)

Mr. Adison Vichaikatka, Vice President, Internal Audit Department, served as the secretaryto the Committee.

The Committee’s term is three years or until their retirement or removal from the Board.However, the Committee may be re-appointed by the Board for up to another term unlessthe Board decides otherwise. The Committee has the authority and responsibilities under itslatest charter, approved by the Board at meeting No. 5/2008 of 25 July 2008. The charter wasamended in line with the revised announcement SET and of SEC, which grouped themunder these categories for greater clarity:

Financial reports and external audit• Review the accuracy and adequacy of disclosure of financial reports• Select and table its choice of an external auditor, as well as its fees, for its independence

Internal control• Review the suitability and effectiveness of the internal control system and risk

management• Encourage the Company to conduct its processes, maintenance activities, and other

operation efficiently, effectively, and safely, with due prevention or mitigation ofenvironmental impacts

Internal audit• Ensure that the Internal Audit Department is independent and commands effective audits• Provide recommendations to the management on the appointment, transfer, and

termination of the head of Internal Audit, as well as performance evaluation to decide his/her annual merit award

68

• Approve the charter of the Internal Audit Department• Jointly with the internal auditor, review and examine audit findings• Align the Audit Committee, management, Internal Audit, and auditor to ensure compatible

perspectives about the audit, and consider the scope of the audit and audit plan of theinternal auditor and external auditor to ensure consistency and cooperation

Compliance with relevant laws and regulations• Review the Company’s compliance with securities and exchange laws, regulations of

SEC and SET, and laws relevant to Company business• Scrutinize connected transactions or transactions with potential conflicts of interest for

their compliance with laws and regulations of SEC and SET and to ensure that suchtransactions are logical and in the best interests of the Company

Reporting• Prepare a report on its supervision for disclosure in the annual report, stating items

specified by SET. This report must be signed by its chairman.• Report its performance to the Board• In the course of its performance, if any transaction or act that may significantly affect the

Company’s financial status and performance is found or suspected, the Committee mustreport it to the Board for rectification within a suitable period. These transactions include:• Transactions involving a conflict of interest• Fraud, irregularity, or significant defects in internal control• Violation of the securities and exchange law, regulations of SET, or laws relevant to the

Company’s business• If the Board or the management fails to rectify such transaction or any action that may

significantly affect the Company’s financial status and performance, any member of theCommittee may report it to SEC or SET

Others• Seek advice from an independent outside advisor, at the Company’s expense, where

necessary• Conduct self-assessment of its own performance and accomplishment under the

assigned duties and responsibilities.• Review its charter and propose revisions to the Board for approval• Perform any other duty assigned by the Board within its scope of responsibility• Perform any other duty specified by the Articles of Association.

In addition, the Audit Committee is required to hold at least one meeting with the externalauditor with no management team members involved.

AccountabilityThe Committee is directly accountable to the Board, which is accountable for theCompany’s conduct with regard to third parties.


2. Nominating CommitteeThe Committee consists of three directors, one of whom must be an independent director.

Name Position

1. Mr. Pala Sookawesh Chairman (Independent Director)2. Mr. Cherdpong Siriwit Director (Independent Director)3. Mr. Prajya Phinyawat Director

Appointed to a three-term term, the Committee has the following authority andresponsibilities:1. Recruit and select nominees for directors and President2. Devise transparent criteria and selection procedures for directors and President3. Recruit and select qualified nominees as new directors or President and submit their

names to the Board and/or a shareholders’ meeting.


3. Remuneration CommitteeThis committee consists of three directors, at least one of whom must be an independentdirector. For 2008, it consisted of:

Name Position

1. Mr. Pala Sookawesh Chairman (Independent Director)2. Pol. Gen. Nopadol Somboonsub Director (Independent Director)3. Mr. Pichai Chunhavajira Director

Appointed to a three-term term, the Committee has the following authority andresponsibilities on behalf of the Board:1. Consider criteria for compensation for the directors and the President2. Devise criteria and procedures for fair and reasonable compensation to the Board and

the President, and submit details of the Board’s compensation to a shareholders’ meetingfor approval.


4. Corporate Governance CommitteeThe Committee consists of three directors, one of whom must be an independent director.

Name Position

1. Mr. Prajya Phinyawat Chairman2. Mr. Witoon Simachokedee Director (Independent Director)3. Mr. Somchai Kuvijitsuwan Director (Independent Director)

70

Appointed to a three-term term, the Committee has the following authority andresponsibilities on behalf of the Board :1. Propose PTT Chemical’s good corporate governance guidelines to the Board2. Advise the Board on good corporate governance matters3. Supervise the Board and the management under good corporate governance principles4. Review the Company’s good corporate governance principles and ensure alignment with

generally accepted practices


Independent DirectorsThe Board has required that independent directors account for one-third of the compositionof the Board according to Company regulations and the Good Corporate GovernancePrinciples. As of 31 December 2008, independent directors numbered seven, whichexceeded one-third of the Board.

Name Position

1. Mr. Manu Leopairote Independent DirectorChairman, Audit Committee

2. Mr. Pala Sookawesh Independent DirectorChairman, Nominating CommitteeChairman, Remuneration Committee

3. Mr. Cherdpong Siriwit Independent DirectorDirector, Audit CommitteeDirector, Nominating Committee

4. Mr. Witoon Simachokedee Independent DirectorDirector, Corporate Governance Committee

5. Pol. Gen. Nopadol Somboonsub Independent DirectorDirector, Remuneration Committee

6. Mr. Somchai Kuvijitsuwan Independent DirectorDirector, Corporate Governance Committee

7. Mr. Paibulya Punyavutti Independent DirectorDirector, Audit Committee

In deliberating the qualifications of independent directors, the Board reviewed their past andcurrent positions, including their business relationship with the Company, against the criteriaof the Office of the Capital Market Regulators. It also ensured that the composition ofsubcommittees is largely independent directors and that the Chairmen of these subcommit-tees are independent directors, in keeping with the good corporate governance principles.

Company SecretaryTo comply with the Securities and Exchange Act (No. 4) of 2008, Section 89/15, the Board atmeeting No. 4/2008 of 20 June 2008 appointed Mrs. Walaiporn Puspavesa, Vice President,Corporate Governance and Secretariat, as Company Secretary, in charge of providingregulation advice to the Board and the management for the benefit of the Company. TheCompany Secretary supervises Board activities and coordination to ensure compliance withthe resolutions of the Board, and operate Board meetings and shareholders’ meetings. Sheis also required to observe the law in ensuring proper documentation of major Company


documents, namely directors’ roster, meeting notices, meeting minutes (Board andshareholders alike), and annual reports.

Board of Directors’ Meetings and Compensation1. Board MeetingsIn 2008, the Board and subcommittees held these meetings as summarized below :

Meetings in 2008

Board of Directors Audit Committee Nominating Remuneration Corporate GovernanceCommittee Committee Committee

9 7 5 2 2

2. Compensation for the BoardAccording to the 2008 AGM, held on 10 April 2008, the compensation and bonuses werepaid to directors and subcommittees as follows:

(1)The compensation for directors and subcommittees, in effect from 10 April 2008, appearsbelow:

Compensation Compensation Rate

1. Board’s Compensation• Monthly Compensation • Chairman: Baht 50,000

• Directors: Baht 40,000/person• Meeting Compensation • None

2. Subcommittee Compensation • For each meeting:• Audit Committee - Chairman: Baht 40,000• Nominating Committee - Directors: Baht 30,000/person• Remuneration Committee• Corporate Governance Committee

(2)Directors’ bonuses for 2007 amounted to Baht 57.50 million, or 0.3% of the Company’s netprofits of that year, with the terms of each director taken into account. The Chairmanreceived 25% more than other directors.

In addition, with the approval of the AGM 2006 of 26 April 2006, PTT Chemical awardedESOP warrants for 29,000,000 common shares under an ESOP scheme to directors,executives, consultants, employees, and secondments from PTT Plc and its subsidiarieswho served PTT Chemical.

3. Meeting Attendance and Compensation for the Board and Subcommittee in 2008

Directors as of 31 December 2008Total Meeting Bonus

Name Position First Date Atten- Compensation Paid in 2008

of Term dance (Baht) (Baht)

1. Mr. Pornchai Rujiprapa* Chairman 1 Jul. 2007 9/9 600,000.00 4,279,505.65

2. Mr. Prasert Bunsumpun Vice Chairman 7 Dec. 2005 9/9 480,000.00 3,800,534.20

* Mr. Pornchai Rujiprapa was appointed Chairman, replacing Mr. Cherdpong Siriwit with effect form 1 Jul. 2007.

72

Total Meeting BonusName Position First Date Atten- Compensation Paid in 2008


3. Mr. Manu Leopairote Independent Director 7 Dec. 2005 9/9 480,000.00 3,800,534.20

Chairman, Corporate 7 Dec. 2005 2/2 80,000.00 -

Governance (Resigned on

Committee 12 Dec. 2008)

Audit Committee 7 Dec. 2005 7/7 250,000.00 -

Chairman, 20 Jun. 2008

Audit Committee

4. Mr. Pala Sookawesh Independent Director 7 Dec. 2005 8/9 480,000.00 3,800,534.20

Chairman, 7 Dec. 2005 2/2 80,000.00 -

Remuneration

Committee

Chairman, 7 Dec. 2005 5/5 200,000.00 -

Nominating

Committee

5. Mr. Cherdpong Siriwit Independent Director 1 Jul. 2007 9/9 480,000.00 4,271,696.33

Director, 20 Jun. 2008 4/4 120,000.00 -

Audit Committee

Director, Nominating 20 Jun. 2008 4/4 120,000.00 -

Committee

6. Mr. Witoon Independent Director 10 Apr. 2008 6/6 348,000.00 -

Simachokedee Director, Corporate 12 Dec. 2008 - - -

Governance

Committee

7. Pol. Gen. Nopadol Independent Director 14 Nov. 2008 1/1 62,666.67 -

Somboonsub Director, Remuneration 12 Dec. 2008 - - -

Committee

8. Mr. Somchai Independent Director 14 Nov. 2008 1/1 62,666.67 -

Kuvijitsuwan Director, Corporate 12 Dec. 2008 - - -

Governance

Committee

9. Mr. Paibulya Panyavutti Independent Director 7 Dec. 2005 7/9 480,000.00 3,800,534.20

Director, Audit 7 Dec. 2005 6/7 180,000.00 -

Committee

Director, Remuneration 7 Dec. 2005 1/2 30,000.00 -

Committee (Resigned on

12 Dec. 2008)

10. Mr. Pichai Chunhavajira Director 7 Dec. 2005 7/9 480,000.00 3,800,534.20

Director, Remuneration 7 Dec. 2005 2/2 60,000.00 -

Committee

Director, Corporate 7 Dec. 2005 2/2 60,000.00 -

Governance (Resigned on

Committee 12 Dec. 2008)


Total Meeting BonusName Position First Date Atten- Compensation Paid in 2008


11. Mr. Prajya Phinyawat Director 7 Dec. 2005 9/9 480,000.00 3,800,534.20

Director, Nominating 7 Dec. 2005 5/5 150,000.00 -

Committee

Director, Corporate 7 Dec. 2005 2/2 60,000.00 -

Governance

Committee

Chairman, Corporate 12 Dec. 2008

Governance

Committee

12. Mr. Cholanat Yanaranop Director 7 Dec. 2005 8/9 480,000.00 3,800,534.20

13. Mr. Roongrote Director 7 Dec. 2005 8/9 480,000.00 3,800,534.20

Rangsiyopash

14. Mr. Pichit Director 7 Dec. 2005 9/9 480,000.00 3,800,534.20

Nithivasin

15. Mr. Veerasak Director 1 Oct. 2008 2/2 120,000.00 -

Kositpaisal*

Directors Whose Terms Ended or Resigned in 2008Total Meeting Bonus

Name Position First Date Atten- Compensation Paid in 2008


1. Lt. Gen. Sujin Muakkaew Director 10 Apr. 2008 3/3 133,333.33 3,248,675.82

2. Mr. Tongchat Director 4 Aug. 2008 4/5 282,580.64 3,800,534.20

Hongladaromp

3. Mr. Olarn Chaipravat Independent Director 22 Sep. 2008 5/8 348,000.00 3,800,534.20

Chairman, 23 May 2008 3/3 120,000.00 -

Audit Committee

Director, Nominating 20 Jun. 2008 1/1 30,000.00 -

Committee

4. Mr. Aditheb Bisalbutr* Director, 1 Oct. 2008 8/8 360,000.00 3,800,534.20

Secretary to the Board

of Directors

(* Directors’ compensation excluded compensation for management positions)

4. Changes in Composition of Board and Subcommittees in 20081. Board of Directors

1.1 Lt. Gen. Sujin Muakkaew ended his term, replaced by Mr. Witoon Simachokedee atthe 2008 AGM on 10 April 2008.

1.2 Mr. Tongchat Hongladaromp resigned from the Board on 4 August 2008, replaced byMr. Somchai Kuvijitsuwan from 14 November 2008 onward.

1.3 Mr. Olarn Chaipravat resigned from the Board on 22 September 2008, replaced byPol. Gen. Nopadol Somboonsub from 14 November 2008 onward.

1.4 Mr. Aditheb Bisalbutr resigned from the Board and from the post of Presidentand Secretary to the Board, replaced by Mr. Veerasak Kositpaisal, with effect from1 October 2008.

74

2. Subcommittees2.1 Audit Committee

(1) Mr. Olarn Chaipravat resigned as chairman on 23 May 2008.(2) Mr. Manu Leopairote was then promoted from member to chairman, and

Mr. Cherdpong Siriwit replaced Mr. Olarn Chaipravat from 20 June 2008.2.2 Nominating Committee

(1) Mr. Cherdpong Siriwit replaced Mr. Olarn Chaipravat on 20 June 2008.2.3 Remuneration Committee

(1) Pol. Gen. Nopadol Somboonsub replaced Mr. Paibulya Punyavutti, whose termended on 12 December 2008.

2.4 Corporate Governance Committee(1) Mr. Prajya Phinyawat and Mr. Witoon Simachokedee were appointed as chairman

and member respectively. Mr. Witoon Simachokedee replaced Mr. Manu Leopairote,the former chairman, whose term ended on 12 December 2008.

(2) Mr. Somchai Kuvijitsuwan replaced Mr. Pichai Chunhavajira, whose term ended on12 December 2008.

5. Compensation for Directors who served as Directors of major subsidiaries in 2008The directors serving in subsidiaries’ Boards conducted the businesses under businesspolicies of PTT Chemical Group. Their compensation as board members of majorsubsidiaries in 2007 appears below :

Bangkok Polyethylene Plc (BPE) : PTT Chemical wholly owns BPEUnit : Baht

Name Position Compensation

1. Mr. Pala Sookawesh Chairman 480,0002. Mr. Prajya Phinyawat Director 240,0003. Mr. Veerasak Kositpaisal Director 240,000

Thai Styrenics Co., Ltd. (TSCL) : PTT Chemical wholly owns TSCLUnit : Baht


1. Mr. Veerasak Kositpaisal Director 250,000

Thai Oleochemicals Co., Ltd. (TOL) : PTT Chemical wholly owns TOLUnit : Baht


1. Mr. Witoon Simachokedee Chairman 270,000

NPC Safety and Environmental Service Co., Ltd. (NPC S&E) : PTT Chemical wholly ownsNPC S&E

Unit : BahtName Position Compensation

1. Mr. Veerasak Kositpaisal Director 165,000


6. Shareholding by Directors(as of 31 December 2008)

As of 31 Dec. 2007 As of 31 Dec. 2008 Change

Paid-up Capital: Paid-up Capital: during ESOP

Name Baht 14,965,716,000 Baht 14,968,296,000 the year Warrant

% Shareholding / % Shareholding / (Shares) (Unit)

Shares Shares

1. Mr. Pornchai Rujiprapa - - - -Chairman

2. Mr. Prasert Bunsumpun - - - 75,000Vice Chairman

3. Mr. Manu Leopairote 0.001002% 0.001002% - 75,000Independent Director 15,000 15,000

4. Mr. Pala Sookawesh 0.003523% 0.003523% - 75,000Independent Director 52,734 52,734

5. Mr. Cherdpong Siriwit - - - -Independent Director

6. Mr. Witoon Simachokedee - - - -Independent Director(Appointed 10 Apr. 2008)

7. Pol. Gen. Nopadol Somboonsub - - - -Independent Director(Appointed 14 Nov. 2008)

8. Mr. Somchai Kuvijitsuwan - - - -Independent Director(Appointed 14 Nov. 2008)

9. Mr. Paibulya Punyavutti - - - 75,000Independent Director

10.Mr. Pichai Chunhavajiya 0.001670% - (25,000) 75,000Director 25,000

11. Mr. Prajya Phinyawat 0.001002% 0.001002% - 75,000Director 15,000 15,000

12.Mr. Cholanat Yanaranop - - - 75,000Director

13.Mr. Roongrote Rangsiyopash - - - 75,000Director

14.Mr. Pichit Nithivasin 0.001670% 0.001670% - 75,000Director 25,000 25,000

15.Mr. Veerasak Kositpaisal - 0.001810% 27,100 69,400Director & Secretary 27,100to the Board of Directors

76

7. Shareholding by Company Executives required to report their portfolios(as of 31 December 2008)

As of 31 Dec. 2007 As of 31 Dec. 2008 ChangePaid-up Capital: Paid-up Capital: during ESOP

Name Baht 14,965,716,000 Baht 14,968,296,000 the year Warrant% Shareholding / % Shareholding / (Shares) (Unit)

Shares Shares

1. Mr. Veerasak Kositpaisal - 0.001810% 27,100 69,400President & CEO 27,100

2. Ms. Panada Kanokwat 0.000105 % 0.000105 % - 92,500Senior Executive Vice President - 1,570 1,570Finance & Accounting

3. Mr. Khubbhol Suksupha 0.000868 % 0.000601% (4,000) 69,400Senior Executive Vice President, 13,000 9,000Seconded to PTT Plc

4. Mr. Jiamsak Nantananate 0.005504% 0.005504% - 69,400Executive Vice President - 82,374 82,374Operational Excellence (including (including

59,274 shares 59,274 sharesheld by spouse) held by spouse)

5. Mr. Athavudhi Hirunburana 0.003172% 0.003172% - 69,400Executive Vice President - 47,486 47,486Organizational Effectiveness (including (including


6. Mrs. Puntip Oungpasuk 0.002150% 0.003693% 23,100 69,400Executive Vice President - 32,181 55,281Strategy & International Affairs

7. Mr. Dhanes Charoensupaya - - - 69,400Executive Vice President -Marketing, Commercial &Supply Chain Governance

8. Mr. Narong Bunditkamol 0.002766% 0.003433% 10,000 72,500Executive Vice President - 41,396 51,396Olefins & Shared Facilities (including (including


9. Mr. Suvit Tinnachote 0.001706% 0.001706% - 69,400Executive Vice President - 25,543 25,543Polymers

10.Mr. Thitipong Chulapornsiridee N/A 0.000007% - 28,500Acting Vice President, 100Finance & Accountingand Investor Relations

11. Mr. Theerapol Muenpakdee 0.000668% 0.000200% (7,000) 28,500Vice President - 10,000 3,000Corporate ManagementAccounting

12.Mrs. Varanee Ubonpoonphol 0.000635% 0.000635% - 28,500Vice President, Finance 9,500 9,500Accounting 1 Department


ExecutivesSenior executives, including the President, are appointed by a majority vote of the Board.Mr. Veerasak Kositpaisal, Ms. Panada Kanokwat, and Mr. Khubbhol Suksupha are secondmentsof PTT Plc.

The list of senior executives who are required to report their share portfolios as of 31December 2008 appears below.

No. Name Position

1. Mr. Veerasak Kositpaisal President & CEO2. Ms. Panada Kanokwat Senior Executive Vice President -

Finance & Accounting3. Mr. Khubbhol Suksupha Senior Executive Vice President,

Seconded to PTT Plc4. Mr. Jiamsak Nantananate Executive Vice President -

Operational Excellence5. Mr. Athavudhi Hirunburana Executive Vice President -

Organizational Effectiveness6. Mrs. Puntip Oungpasuk Executive Vice President -

Strategy & International Affairs7. Mr. Dhanes Charoensupaya Executive Vice President - Marketing,

Commercial & Supply Chain Governance8. Mr. Narong Bunditkamol Executive Vice President -

Olefins & Shared Facilities9. Mr. Suvit Tinnachote Executive Vice President -

Polymer Products Value Centre10. Mr. Thitipong Chulapornsiridee Acting Vice President, Finance & Accounting

and Investor Relations11. Mr. Theerapol Muenpakdee Vice President -

Corporate Management Accounting12. Mrs. Varanee Ubonpoonphol Vice President -

Finance Accounting 1 Department

(See management details on page 48)

Management change in 20081) Mr. Veerasak Kositpaisal was appointed President, replacing Mr. Aditheb Bisalbutr, with

effect from 1 October 20082) Mr. Sahaschai Panichaphong, Senior Executive Vice President, Oleochemicals Products

Value Center, retired from 1 October 2008

Executive Compensation in 2008

Compensation in 2008 Total (Persons) Compensation (baht)

Total Salaries 14 54,383,086Fringe Benefits 14 19,019,260Contribution to the Provident Fund 14 4,297,636

Total 14 77,699,982

78

PTT CHEM

TOL

BPE

PTTPE

PTT

VNT

SCG

HMC

TPE

TPP

TPC

BIG

BST

PTTAR

ROC

SSMC

SIAM MITSUI

THAPPLINE

DHIPAYA

PPCL

PTTPM

IRPC

PTTPL

TIG

N

O.

NAM

E SUBS

IDIA

RIES

ASSO

CIA

TES/R

ELATE

D C

OM

PAN

IES

DET

AIL

OF

DIR

ECTO

RS O

F PT

T CH

EMIC

AL

AN

D ITS

SUBS

IDIA

RIES

, ASSO

CIA

TES A

ND

REL

ATE

D C

OM

PAN

IES

Rem

ark

: /

= D

irect

or

// =

Man

agem

ent

X =

Cha

irman

1 M

r. P

ornc

hai R

ujip

rapa

2 M

r. P

rase

rt B

unsu

mpu

n

3 M

r. M

anu

Leop

airo

te

4 M

r. P

ala

Soo

kaw

esh

5 M

r. C

herd

pong

Siri

wit

6 M

r. W

itoon

Sim

acho

kede

e

7 Pol

. G

en. N

opad

ol S

ombo

onsu

b

8 M

r. S

omch

ai K

uviji

tsuw

an

9 M

r. P

aibu

lya

Pun

yavu

tti

10

Mr.

Pic

hai C

hunh

avaj

ira

11

Mr.

Pra

jya

Phi

nyaw

at

12

Mr.

Cho

lana

t Yan

aran

op

13

Mr.

Roo

ngro

te R

angs

iyop

ash

14

Mr.

Pic

hit N

ithiv

asin

15

Mr.

Vee

rasa

k Kos

itpai

sal

DIR

EC

TO

R


Rem

ark

: /

= D

irect

or

// =

Man

agem

ent

X =

Cha

irman

SUBS

IDIA

RIES

TO

CG

C =

TO

C G

lyco

l Co.

, Ltd

.TC

C

= Tha

i Cho

line

Chl

orid

e C

o., L

td.

TEA

=

Tha

i Eth

anol

amin

es C

o., L

td.

TO

L

= Tha

i Ole

oche

mic

als

Co.

, Ltd

.BPE

= Ban

gkok

Pol

yeth

ylen

e PLC

PTTPE

= PTT P

olye

thyl

ene

Co.

, Ltd

.TSC

L

= Tha

i Sty

reni

cs C

o., L

td.

TTT

= Tha

i Tan

k Ter

min

al L

td.

APS

= A

llian

ce P

lant

Ser

vice

Co.

, Ltd

.

NPC

S&

E =

NPC

Saf

ety

and

Env

ironm

enta

l

Ser

vice

Co.

, Ltd

. C

H In

ter

= PTT C

hem

ical

In

tern

atio

nal P

te.,

Ltd

RELA

TED

CO

MPA

NIE

SPTT

= PTT P

LCSC

G

= The

Sia

m C

emen

t PLC

ASSO

CIA

TES

VN

T

= Vin

ytha

i PLC

HM

C

= H

MC

Pol

ymer

s C

o., L

td.

TPE

= T

hai P

olye

thyl

ene

Co.

, Ltd

.TPP

= T

hai P

olyp

ropy

lene

Co.

, Ltd

.TPC

=

Tha

i Pla

stic

and

Che

mic

als

PLC

BIG

=

Ban

gkok

Indu

stria

l Gas

Co.

, Ltd

.BST

= B

angk

ok S

ynth

etic

s C

o., L

td.

PTTA

R

= P

TT A

rom

atic

s an

d Ref

inin

g PLC

RO

C

= R

ayon

g O

lefin

s C

o., L

td.

SSM

C

= S

iam

Sty

rene

Mon

omer

Co.

, Ltd

.SIA

M M

ITSU

I =

Sia

m M

itsui

PTA

Co.

, Ltd

.TH

APPLI

NE

= Tha

i Pet

role

um P

ipel

ine

Co.

, Ltd

.

DH

IPA

YA

=

Dhi

paya

Insu

ranc

e PLC

PPC

L

= PTT P

heno

l Co.

, Ltd

.PTTPM

=

PTT P

olym

er M

arke

ting

Co.

, Ltd

.IR

PC

=

IRPC

PLC

PTTPL

= PTT P

olym

ers

Logi

stic

Co.

, Ltd

.TIG

=

Tha

i Ind

ustria

l Gas

PLC

PTTU

T

= PTT U

tility

Co.

, Ltd

.A

PI

= A

llian

ce P

etro

chem

ical

Inve

stm

ent

(Sin

gapo

re) Pte

., Lt

d.EFT

=

Eas

tern

Flu

id T

rans

port C

o., L

td.

PTT IC

T

= PTT IC

T S

olut

ions

Co.

, Ltd

.

PTT CHEM

TOCGC

TCC

TEA

TOL

BPE

PTTPE

TSCL

TTT

APS

NPC S&E

CH Inter

PTT

VNT

PPCL

PTTUT

PTTPM

API

EFT

PTT ICT

PTTPL

N

O.

NAM

E SUBS

IDIA

RIES

ASSO

CIA

TES/R

ELATE

D C

OM

PAN

IES

DET

AIL

OF

MAN

AG

EMEN

T O

F PT

T CH

EMIC

AL

AN

D ITS

SUBS

IDIA

RIES

, ASSO

CIA

TES A

ND

REL

ATE

D C

OM

PAN

IES

1 M

r. V

eera

sak

Kos

itpai

sal

2 M

s. P

anad

a Kan

okw

at

3 M

r. K

hubb

hol S

uksu

pha

4 M

r. J

iam

sak

Nan

tana

nate

5 M

s. P

untip

Oun

gpas

uk

6 M

r. A

thav

udhi

Hiru

nbur

ana

7 M

r. D

hane

s C

haro

ensu

paya

8 M

r. N

aron

g Bun

ditk

amol

9 M

r. S

uvit

Tin

nach

ote

10

Mr.

Thi

tipon

g C

hula

porn

sirid

ee

11

Mr.

The

erap

ol M

uenp

akde

e

12

Mrs

. Var

anee

Ubo

npoo

npho

l

MA

NA

GEM

EN

T

80

To the ShareholdersRecognizing the significance of compliance with good corporate governance principles, theBoard of Directors appointed the Nominating Committee to perform assignments in issuingtransparent criteria for the recruitment and selection of those to be nominated as directorsand President & CEO, and proposing them to the Board and/or the AGM for approval.

The Committee is chaired by Mr. Pala Sookawesh, with Mr. Prajya Phinyawat andMr. Cherdpong Siriwit (who replaced Mr. Olarn Chaipravat, who resigned from the Board) asmembers. Its term is from December 12, 2008 to December 11, 2011.

Meetings and performanceIn 2008 the Committee met five times with perfect attendance to perform its duties, assummarized below:

1. Deliberation of the names of directors that had completed their termsAt the 2008 AGM, five directors were due to leave their posts, namely Mr. Prasert Bunsumpun,Mr. Prajya Phinyawat, Mr. Paibulya Punyavutti, Lt.Gen. Sujin Muakkaew, and Mr. RoongroteRangsiyopash. After considering their qualifications, experience, skills, and suitability in thebest interests of the Company, the Committee proposed the reappointment of four andproposed an external person, Mr. Witoon Simachokedee, to the Board. This was theBoard’s proposal to the AGM, which approved the proposal.

2. Selection of the President & CEOAfter its deliberation, the Committee proposed to the Board the appointment of Mr. VeerasakKositpaisal, Executive Vice President, Polymer Products Value Centre, PTT Chemical Plc, toreplace Mr. Aditheb Bisalbutr, President & CEO, who resigned, with effect from October 1,2008. This was the Board’s approval.

3. Approval of directors in place of those who resignedBased on the qualifications of independent directors, the Committee proposed to the Boardthe appointment of Police General Nopadol Somboonsub and Mr. Somchai Kuvijitsuwan tofill the posts left vacant by Mr. Olarn Chaipravat and Mr. Tongchat Hongladaromp before theend of their terms.

4. Nominating members to the subcommitteesThe Board assigned this Committee to deliberate the composition of the subcommittees,namely the Audit Committee, the Nominating Committee, the Remuneration Committee, andthe Corporate Governance Committee, to replace all four subcommittees whose terms wereabout to end. The Committee proposed their findings to the Board, which approved theproposal.

REPORT OF THE NOMINATING COMMITTEE


Performing its duties to foster the confidence among shareholders and stakeholders in therecruitment and selection processes for directors and senior management, the Committeefully observed transparent actions in line with the Company’s criteria and procedures. Itsmain consideration is the qualifications of those that can enhance the performance of theBoard as a whole, which will in turn supplement long-term value to PTT Chemical.

(Mr. Pala Sookawesh)Chairman of the Nominating Committee

82

To the ShareholdersAdhering to good corporate governance principles for listed companies, the Board of Direc-tors appointed the Remuneration Committee as one of its subcommittees (or committees).This committee devises a fair and rational approach, procedures, and criteria for compensa-tion paid to directors, committee members, and the President & CEO and tables these forthe Board’s consideration and approval

The Committee is chaired by Mr. Pala Sookawesh, with Mr. Pichai Chunhavajira and Pol.Gen. Nopadol Somboonsup as members. The latter was appointed to replace Mr. PaibulyaPunyavutti on this committee at the end of his term. Its term is from December 12, 2008 toDecember 11, 2011.

Meetings and performanceIn 2008 the Committee met twice, with perfect attendance, to perform these duties for theBoard:

1. Decision on the amended compensation for directors and committee membersThe Committee tabled these for the approval of the 2008 AGM, based on the current com-pensation in relation to companies under PTT Group and the petrochemical industry. Suchcompensation reflects the additional responsibilities of the directors, the Company’s busi-ness expansion, as well as the growth in profitability, and proposed that the current compen-sation rates should remain intact. The shareholders concurred with this proposal.

2. Deliberation of a proposal for 2008 directors’ bonusesThe bonuses were considered in line with the Company performance or its net profits andwith industry peers. This proposal was tabled to the Board for subsequent submission to theAGM, which concurred with it.

3. Decision on the compensation for the President & CEOThe Committee deliberated this matter and forwarded its proposal to the Board:• Decided on the compensation for Mr. Aditheb Bisalbutr, the retiring one, against his

mutually decided performance appraisal during his term.• Decided on the compensation for Mr. Veerasak Kositpaisal, the incoming one, with effect

from October 1 2008, with his responsibility also taken into consideration.

Valuing the significance of instituting transparent deliberation processes for compensation,the Committee took into consideration the correlation between the Company performanceand responsibility of directors and the President & CEO, so that compensation decisionsmay comply with good corporate governance principles and maintain the long-term inter-ests of PTT Chemical.

(Mr. Pala Sookawesh)Chairman of the Remuneration Committee

REPORT OF THE REMUNERATIONCOMMITTEE

84

To the ShareholdersThe Corporate Governance Committee was appointed by the Board of Directors to beresponsible for proposing practical guidelines for corporate governance, as well as makingrecommendations for and promoting corporate governance as a culture of PTT Chemicalfrom the Company’s formation in 2005.

The Committee is chaired by Mr. Prajya Phinyawat, with Mr. Somchai Kuvijitsuwan andMr. Witoon Simachokedee as members. They replaced the Committee chaired by Mr. ManuLeopairote with Mr. Pichai Chunhavajira as a member, whose terms ended. Its current termis from December 12, 2008 to December 11, 2011.

Meetings and performanceIn performing its assigned duties in 2008, this committee held two meetings with perfectattendance. Their performance is summarized below:

1. Defined its criteria to update and amend the Good Corporate Governance Handbook toembrace a code of business conduct to align with the amendment to regulations andcriteria issued by regulatory agencies and prevailing business circumstances.

2. Amended the criteria or guidelines for promoting the rights and equality of shareholdersthrough extending the period for them to propose meeting agenda items and nominatesuitable candidates for directors in advance of the 2008 AGM to up to three months, thatis, from October 1 to December 31 each year, with effect from the 2009 AGM onward.

3. Approved the Company’s corporate governance plan for 2008, with a focus on interna-tionalizing such practices and encouraging earnest implementation.

4. Deliberated the approach of the Company’s business to ensure that it complies with thenew Securities and Exchange Act, announcements and requirements made or amendedby regulators of listed companies, including the appointment of a Corporate Secretary,defining of the procedure and process for deliberation of connected transactions; andsignificant items acquired/sold.

5. Reviewed and issued an approach for continuous improvement of the quality of AGMs.The 2008 AGM was rated by the Office of Securities and Exchange Commission (SEC) asa ‘perfect score‘ with special credit given to additional practices rated as ‘excellent’

REPORT OF THE CORPORATEGOVERNANCE COMMITTEE


6. Deliberated an approach for continuous improvement of corporate governance practicesand maintenance of quality, despite its ‘excellent‘ corporate governance assessment madeby regulators of listed companies. The move was intended to keep the Company improv-ing its effective and suitable corporate governance.

The Company’s good corporate governance move has won excellent cooperation from allinvolved, namely the shareholders, the Board of Directors, the management, and the rankand file employees. Special thanks are due to assorted organizations and regulatory agen-cies that have promoted, assessed, and supported the move to upgrade and internationalizeour practices to bolster the confidence and acceptance from the stakeholders and thepublic. On behalf of the Corporate Governance Committee, I would like to express mysincere appreciation to all.

(Mr. Prajya Phinyawat)Chairman of the Corporate Governance Committee

86

The Board of Directors, the management, and the staff of PTT Chemical Plc give priority todoing business under the principles of good corporate governance and are constantlycommitted to raise the level of corporate governance to international standards. Suchcommitment resulted in the Company’s assorted awards and certification: SET Awards 2008:Top Corporate Governance Reports Awards; Corporate Governance Report of Thai ListedCompanies 2008: Excellent CG Scoring; and Excellent 2008 AGM Assessment.

The Company also values close coordination and alliance with the regulators of listedcompanies, including the Office of the Securities and Exchange Commission (SEC), StockExchange of Thailand (SET), Listed Companies Association, Thai Institute of DirectorsAssociation (IOD), and Thai Investors Association, all of which share the objectives andmission of raising the level of corporate governance for the benefit of investors, shareholders,and all stakeholders in a fair and sustained way.

Compliance with Good Corporate Governance Principles in 2008The Board ensured the Companies observe SET’s principles in five main categoriescompletely and with consistently high quality.

Shareholders’ RightsPrinciple: Shareholders’ rights should be protected and the exercising of such rightsencouraged

Company practice:The Board values shareholders’ rights by refraining from violating or infringing on suchrights. This has been made a policy and disclosed in the Company’s Good CorporateGovernance Handbook.In 2007 the Board encouraged and supported this through the following actions.• Fundamental legal rights: PTT Chemical facilitated the exercising of these rights, namely

the exchange of securities and the right to receive a dividend.• Right to receive significant information: PTT Chemical disclosed up-to-date information to

SET and through its website in both Thai and English. Its investor relations unitcommunicates and addresses queries about changes or issues of current interest in anequitable manner.

• Right to attend meetings and vote: PTT Chemical facilitated all shareholders’ attendanceat meetings and exercising of their votes, as well as their major decisions at the AnnualGeneral Meeting of Shareholders (AGM) in 2008. It observed the approach advocated bySEC (the so-called AGM Checklist) and made continuous improvement, as evident underthe ’Equitable Treatment of Shareholders’ topic below.

REPORT ON CORPORATE GOVERNANCE


Equitable Treatment of ShareholdersPrinciple: All shareholders should be treated fairly

Company practice: To ensure the shareholders of fair treatment and full exercising of vot-ing privileges as owners, the Board has ensured a high quality of the AGM and strives toimprove this. It participated in an AGM assessment project organized by SEC and ThaiInvestors Association, at the end of which PTT Chemical was assessed as “excellent” for2008. It also prepared an assessment form for the meeting attendants to do the assessmentand provide helpful views for further improvement. Our actions are summarized below.

Equitable exercising of rights at shareholders’ meetings• The AGM was organized by the Company on 10 April 2008 at 10 a.m. at the 2nd floor

auditorium of PTT Plc Head Office. In so doing, the Company treated all shareholdersequally.

Before the meeting date:• The Company allowed each shareholder to propose agenda items for consideration at

the meeting ahead of the actual meeting date and also to nominate candidates fordirectors. The Board instituted criteria to support shareholders’ exercising of their rights.

• Shareholders were allowed to submit written questions about agenda items to the Boardahead of the meeting date through its website, by fax, and by letter.

• In addition to placing meeting notices in daily newspapers (Thai and English) for threeconsecutive days as required by law, meeting notices and documents were distributedthrough its website 30 days ahead of the meeting date. These were identical to what theCompany mailed to the shareholders 14 days ahead of the date. For good measure, italso publicized this through SET’s channels. The current approach is to improve on thistiming for sending the information to recipients.

• Adequate and clear information was disclosed in the meeting notice along with theopinions of the Board, without adding or modifying crucial information without notifyingthem in advance.

• Through the meeting notice, the Company informed shareholders of meeting participationcriteria, providing them with a list of all independent directors on proxy forms designed bythe Ministry of Commerce, to encourage them to choose their voting methods. Theseproxy forms also provided for shareholders’ written opinions on balloting.

Meeting date:• Registration was allowed through the bar-code system two hours ahead of the meeting,

and even after that, it allowed shareholders to register their attendance without losingtheir rights.

• The Company staged an shareholders Corner at the foyer, with officers of Investor Rela-tions on hand to provide information and answer shareholders’ queries.

• The Company telecast the meeting via a closed-circuit TV system for shareholders outsidethe meeting room to stay informed throughout the meeting.

• Before the meeting began, the Chairman informed the meeting about the meeting criteriaand ground rules as well as the procedures for balloting.

• The Board allowed shareholders to vote for directors individually, in which case all ballotswere collected and a neutral team of observes was assigned to verify the ballot counting.

• The Chairman, the subcommittee chairmen, directors and the President attended theAGM to explain and clarify questions. The Chairman introduced the directors andexecutives, as well as relevant attendees at each meeting. He provided ample opportunities

88

for shareholders to ask questions concerning meetings and Company business andcompiled questions sent to the Company in advance for clear explanation withsupplementary information.

After the meeting date:• The Company Secretary recorded all significant information at the AGM. She not only

disseminated the minutes through the Company’s website within 14 days from the meetingdate, but also ensured good meeting documentation that favored scrutiny and reference.

• The Company taped the proceeding at the meeting and placed it on the Company websitefor the information of those absent. Interested shareholders may file a request for a copyin the VCD format.

• To ensure shareholders of full dividend payment, after the payment had been made asapproved by AGM, the Company notified them about the outcome through SET’s channelsand details of the dividend payment via SET’s news system. The Company coordinatedwith the registrar at Thailand Securities Depository Co., Ltd. to ensure complete andaccurate rights to the dividends.

• In addition, the Company, represented by the Corporate Governance Committee, screenedthe recommendations and views received from shareholders who assessed the meetingfor ways to constantly improve shareholders’ meetings.

Control and Prevention of the Use of Inside Information• Directors and the management are required to report to SEC all changes in share

ownership under Article 59 of the Securities and Exchange Act.• The Corporate Governance Committee, for good practices, has instructed directors and

the management to refrain from buying and selling Company shares 45 days before thepublic release of the Company’s financial statements and one day after their disclosure toSET.

• The Company prepares an annual information disclosure table in compliance withregulations for the Board’s and the management’s reference on when to avoid engagingin share transactions.

• Written guidelines for maintaining and preventing the use of inside information areprovided for all to observe, with regular follow-ups.

• In deliberating and approving connected transactions, disclosure is to be made about theinterests of directors, the management, and connected parties, the value of eachtransaction, the views of independent directors, and related information to allow the Boardor shareholders to make proper decisions for the benefit of the Company.

• Guidelines are issued to prevent directors, executives with vested interests, and thoseconnected in one way or another from taking part in decision-making on a givenconnected transaction. Specifically, anyone who is connected with a transaction will beremoved from any involvement with that agenda item.

• The Company issued guidelines for preparing confidential agenda items for Boardmeetings; these guidelines are clear and incorporate the procedure and responsibleperson(s), meeting attendants, and storage of confidential documents.

Roles of StakeholdersPrinciple: Stakeholders should be duly taken care of, and cooperation should be promotedamong them

Company practice: In its Good Corporate Governance Handbook, designed for all toobserve, the Board has instituted a policy to treat individual groups of stakeholders in line


with their legal rights and agreements with the Company, while developing formats andapproaches for stakeholder participation in fostering sustainable performance. Such policyand measures are outlined below.

Shareholders : The Company is committed to creating the highest satisfaction forshareholders through its consideration of sustainable Companygrowth, continually suitable returns on investment, and transparentaction along with reliable accounting systems.

Customers : The Company is committed to creating customers’ satisfaction andconfidence through providing quality goods and services at fair prices.A customer satisfaction measurement is implemented to aiddecisions relating to improving and maintaining cordial relationships.

Business partners, : The Company takes into account business equality, integrity, andcompetitors, mutual benefit through strict compliance with the law, rules, and itsand creditors code of business conduct. It is also committed to fair competition

and complies strictly with the terms of all agreements with creditors.Employees : The Company has a clear policy to develop a learning organization

with a culture and atmosphere conducive to teamwork with fair com-pensation. The Company ensures work safety and maintains a goodworkplace while valuing knowledge development and transfer andlistening to opinions and recommendations from all employees alike.(Details of employee care appear on page 56)

Communities : Out of its consideration for the quality of life for communities andand society society - both around its plants and at the national level - the Company

deliberates matters of direct impact to business and expands tosocial responsibility by cultivating awareness of such responsibilityamong all employees. Other activities consisted of inviting communityrepresentatives to an open house at the plant and meet executivesto share views and recommendations, as well as sharing communityconcerns, problems, and solutions. The Company’s community relationsteam regularly visits communities to foster cordial relations.

Environment : Valuing the environment, the Company considers it a social duty totake part in environmental and natural resource stewardship. Fromthe stage of plant design, production technology selection, to wastedisposal processes, it considers business operation impacts on theenvironment. An innovation research and development (R&D)department has been instituted to promote efficient energyapplications.

In taking good care of all stakeholders mentioned above, the Company primarily recognizesthe mechanism of participation by stakeholders and devises a policy/measure forcompensation in case of damage to their legal rights. In addition, it has instituted acommunication channel with the Board through email at [email protected], to be handledby the Company Secretary, who will forward them to relevant committees and eventually tothe Board.

Disclosure and TransparencyPrinciple: The Company’s significant information should be disclosed accurately, completely,equitably, reliably, and in a timely manner.

90

Company practice: The Board recognizes and values the quality of information and fair,transparent, and equitably disclosure through easy access. To ensure such disclosure to allstakeholders, it engaged in the following:

Complete disclosure of information• As a rule, the Company fully discloses significant information, both financial and

non-financial, in an accurate, complete, and transparent way, with due screening in linewith the required procedures. During the year, no case arose of improper disclosure ofinformation. Regular assessment and efficiency improvement of the disclosure processare made. Each set of annual financial statements and all quarterly financial statementsare prepared, screened, and submitted to SEC and SET, and disclosed to shareholdersand investors ahead of requirements.

• The Company ensures that its financial information is accurate, complete, and factualunder its accounting standard, and has undergone perusal by the external auditor andthe Audit Committee. The Board also issues a report of its responsibility to financialreports, signed by the Chairman and the President, in the annual report and accompaniedby a report of the external auditor.

• The Company organizes meetings between the management and employees so that itsemployees may be aware of business strategies and direction, which will serve asguidelines for performing their duties and responsibilities.

Information Disclosure Channels and Responsible Parties• Significant, current, and complete Company information in line with good corporate

governance is posted on the www.pttchem.com website in both Thai and English, withfeatures accommodating questions and downloading. In 2008, the Company’s policy wasto improve the website to fully reflect the Company’s value while addressing the needs ofall stakeholders.

• An Investor Relations department has been instituted with a responsible owner to serveas a communication channel with shareholders and investors (both minor andinstitutional), analysts, and related parties, including SET and SEC. Top managementmembers take part in running investor relations activities, including meeting withinvestors and analysts under an annual schedule, participating in clarification andquestion-and-answer sessions on Company operation. Such information is clearlypresented and posted on the website after each meeting. A questionnaire is prepared togauge the satisfaction of analysts with the performance of Investor Relations so that itswork can be made more efficient.

• An additional channel for shareholders, investors, analysts, and the interested public isprovided to enable them to investigate additional information at www.pttchem.com.Alternatively, email the unit at [email protected], which has been publicized in the Company’sassorted media for shareholders and investors. Finally, an “IR News Release” servesanalysts’ interest in other Company information thoroughly and equitably.

In 2008, the Investor Relations Department conducted the following activities:• International meetings and roadshows with investors in Asia, Europe, and the United

States, a total of eight meetings• Participation in the Money Expo 2008 event from May 8 to 11 and the SET in the City event

from November 20 to 23. Besides providing information to prospective investors andshareholders through documents and exhibitions, the management and the Investor Relations team personally met and provided direct information to them


• Roadshows and conferences with local institutional and minor investors• Quarterly meetings with securities analysts to report on Company performance (financial

and social responsibility) after reporting it to SET• A total of 64 company visits and conference calls between Company executives and

shareholders, investors, and analysts as their request• Regular reports to SET as required by the SET principles of good corporate governance• Addressing telephone calls and emails to shareholders, investors, analysts, and

concerned agencies• Disclosure of important Company data through its website under “Investor Relations”,

including notifications to SET, shareholders’ meeting notices, and share prices.A Corporate Communication Department is in place to publicize and disseminate timelynews and movement, activities, and cooperation with agencies for the benefit of the media,including:• Press releases, photo releases, and publications to disseminate Company information,

including brochures, company profiles, fact sheets, and community newsletters• Press conferences, designed to allow Company executives to explain or clarify

Company performance and investment direction to the media after reporting them to SET• A press conference introducing the new President to members of the media corps on 1

October 2008, the first day of his term• Media visits to Company operation, as well as petrochemical and chemical business

education, designed to enable them to appreciate the business• Public relations through the website to expand the Company’s external communication

and intranet communication for employees’ information.

The Company continually conducted these activities under a plan that aligned with itsbusiness operation strategy while paying attention to the quality of disclosed information.

Responsibilities of the BoardPrinciple: The Board, with a key role in corporate governance for the maximum benefit ofthe Company, is responsible for its performance.

Company practice: The Board has performed its duties with integrity, prudence, care, andavoids committing actions in contradiction with Company interests. It bases its actions onthe law, good corporate governance, and a code of business conduct for the confidence ofshareholders and investors. The Board supervises the Company’s compliance with theseprinciples in the following fashion:

Composition of the Board• The Board has deliberated the suitability of the present structure against its core mission

of supervising corporate governance practices and the performance of the management• The Board of 2008 consisted of 15 directors - 14 non-executives and one executive. Seven

were independent directors. Information about the terms of each director appears in theannual report, Form 56-1, and on the Company’s website. (Details about the Board appearon page 40)

• The Chairman and the President are two distinct persons with clear separation of roles.While the Chairman is not an independent director, he has performed his duty withindependence, particularly in expressing his views on the Company’s performance underthe Board policy and in the best interests of the Company, shareholders, and the country

• The Board has not only defined a formal and transparent recruitment procedure fordirectors, to be executed by the Nominating Committee, but has made it possible for

92

shareholders to nominate suitable persons for selection• The Board consists of experts with diverse skills and management experience in

petrochemicals and chemicals, the Company’s core products, as well as other disciplinesof benefit to the Company. As proof of such expertise, skills, qualifications, andexperience, the Company has disclosed the names, profiles, education, experience, andshareholding through the annual report, Form 56-1, and Company’s website.

Independent DirectorsCurrently numbering seven, which exceeds one-third of the composition of the Board, allindependent directors performed their duties by taking into account equitable benefits of allstakeholders. They meet all the qualifications stipulated by SEC, which are updated asfollows:• Hold up to 1% of the voting shares in PTT Chemical, its subsidiaries, associates, or

related companies, or potentially connected juristic persons (including the shares held bytheir close relatives)

• Have not been or are not involved in the management, or employees, wage earners, oradvisors on the payroll of PTT Chemical, its subsidiaries, associates, or equivalentcompanies, or juristic persons that could pose conflicts of interest, except when suchqualifications have ended for more than two years

• Are not related by blood or registration as parents, spouses, siblings, or children, spousesof any of the children to members of the management, major shareholders, thoseexercising control, or those about to be nominated as members of the management orthose exercising control over PTT Chemical or subsidiaries

• Have absolutely no vested interests in PTT Chemical, its subsidiaries, associates, orrelated companies, or juristic persons with possible conflicts of interest

• Do not serve as an external auditor or a professional service provider, such as a legaladvisor or a financial advisor of PTT Chemical, its subsidiaries, associates, or equivalentcompanies, or juristic persons that could pose conflicts of interest

• Are not appointed to protect the vested interests of directors, major shareholders, orshareholders who are related to major shareholders

• Have no characteristics that could bar the expression of their free views.

Terms of Directors• As stated in Company regulations, each director’s term is three years, in line with that

stated in the Public Company Limited Act. It is also stipulated that the Audit Committeecan be in office for up to two consecutive terms, except when the Board decidesotherwise. As for other directors, the Board would ensure that Company practices alignwith the good corporate governance principles.

• The Board defines the policy for serving as other companies’ directors to suit Companybusiness and circumstances. Information on such service at other companies appears inthe annual report, Form 56-1, and on the Company’s website.

• Recognizing the limit to the efficiency of serving as directors, the Board takes seriouslythe number of companies where Company directors also serve. Where Companydirectors serve in more than five companies with PTT as a major shareholder, suchpositions are in the business interests of PTT Chemical, which invests in thosecompanies. PTT Chemical will be including this policy in its good corporate governancepolicy, which is under revision.

• The Board has defined its policy and procedures for serving as directors in PTT ChemicalGroup for senior executives from the rank of vice president upward. The President has


the delegated authority for considering the suitability of such terms and the number ofcompanies each can serve in, to align the business direction and strategy with the policyof the Group. In practice, the management committee - consisting of the President andsenior executives - defines the approach for appointing them, including their knowledgeabout the business, competence, availability to track performance, and potential to takethe business to the stated goals. Each person may take up to eight directorships. (Detailsof directorships of senior executives appear on page 79) The Company has defined aunified compensation policy for its executives assigned to serve as directors in Groupcompanies.

Company SecretaryMs. Walaiporn Puspavesa, Vice President, Corporate Governance and Secretariat, has beenassigned to serve as Company Secretary under the amended Securities and Exchange Act.In performing her duties, she ensured that the Company and the Board observe the relevantlaws and regulations. (Details of the Company Secretary appear on page 70). The CompanySecretary can be contacted by email at [email protected].

SubcommitteesIn line with the good corporate governance principles, since the Company’s formationin 2005, the Board has appointed four subcommittees (usually referred to simply as‘committees’). To comply with good practices concerning the composition of the NominatingCommittee and Remuneration Committee, the Board at its meeting No. 9/2008 of 12December 2008 appointed committees in place of the old ones, which completed theirterms. The majority of these are independent directors, with the chairmen stipulated asindependent directors.

The subcommittees screen critical ad hoc matters with prudence and efficiency as assignedby the Board. They are to regularly report their findings and their performance for the year inthe annual report.

The Audit Committee:The current committee consists of three independent directors, all of whom are to beknowledgeable and experienced in reviewing financial statements for reliability. (See thequalifications and experience of the Audit Committee on page 41). A charter of thecommittee specifies its scope of authority and responsibility. This charter has been revisedand amended in line with an announcement of SET and another of SEC (amended in 2008)and won an approval from the Board in its meeting No. 5/2551 on 25 July 2008. The committee’sperformance was regularly reported to the Board, the annual performance appraisals wereconducted, the number of meetings was disclosed, along with the number of meetingsattended by individual directors. Its performance against the charter was reported toshareholders in the annual report. (A report of the committee appears on page 119) Thecharter has been publicized on the Company’s website.

The Nominating CommitteeThe current committee consists of three directors, two of whom are independentdirectors. Its term is three years. The Chairman, who is not the Chairman of the Board, is anindependent director. The committee performed its assigned duties of deliberating criteriaand recruitment process for directors and the President, and selected persons under therecruitment process with independence and transparency. A written charter is being draftedfor this committee, with completion and distribution planned for 2009. (Details of the

94

committee appears on page 69)

The Remuneration CommitteeThe current committee consists of three directors, two of whom are independent directors.Its term is three years. The Chairman, who is not the Chairman of the Board, is anindependent director. The committee deliberated criteria and formats of compensation paidto directors and the management with independence, fairness, transparency, and sensibility.A written charter is being drafted for this committee, with completion and distributionplanned for 2009. (Details of the committee appears on page 69)

The Corporate Governance CommitteeThe current committee consists of three directors, two of whom are independent directors.Its term is three years. The Chairman, who is not the Chairman of the Board, is anindependent director. The committee deliberated practical guidelines for good corporategovernance and provided recommendations to the Board for developing such guidelines inline with the practical guidelines of SEC, SET, and international standards. A written charteris being drafted for this committee, with completion and distribution planned for 2009.(Details of the committee appears on page 69)

Segregation of roles• The Board has clearly set its authority against that of the management, as stated in its

resolution to be adopted by relevant parties. Specifically, the financial authority and theauthority to decide on matters by the President are delegated in writing and valid for threeyears at a time.

• Besides, to achieve the Company’s goals as well as sustained balance among all partiesconcerned, the Board has decided on its proactive roles, duties, and responsibilities.It has not only endorsed critical operation matters, namely its vision, mission, strategies,financial goals, risks, plans, and budgets, as proposed by a so-called Top Team,consisting of the President, Senior and Executive Vice Presidents from differentdepartments and value centers. The Board has ensured that the managementimplements its policy and plans. To enable meetings to proceed smoothly andefficiently, the Top Team has jointly defined Top Team Meeting Norms and institutedannual appraisals.

Corporate Governance Policy and Code of Conduct• The Board has endorsed these documents, which cover the Board, the management, and

all employees in writing and encompass all five categories of good corporategovernance. A Good Corporate Governance Handbook has been disseminated throughthe website for external communication. It is disseminated inside the Company via intranet.The Board, the management, and other employees receive a copy of this handbook eachto master before signing their names and comply.

• Through the Corporate Governance Committee, the Board institutes assessment ofcompliance with the policy. An annual revision and assessment of performance areconducted. In 2008 the committee revised and amended the handbook, and this will becompleted by 2009. In addition, the committee endorsed the corporate governance plansevery year.

• In the annual performance appraisals, integrity - a Company culture concerningrighteousness, ethics, integrity, transparency, and openness to scrutiny, delivery ofpromises, and fairness to all - becomes part of Company personnel’s behaviorassessment. In addition, the good corporate governance topic has become part of the


orientation to all new staff.• PTT Chemical gave priority to the promotion of the good corporate governance culture

to ensure staff’s awareness and mastering of the principles involved. In 2008, it notonly staged promotional CG activities internally, but cooperated with listed PTT Groupcompanies in organizing a ‘PTT Group CG Day: CG in Action’ in which staff wereencouraged to present their application of the principles of CG. This latter event isregularly staged, with a very warm response from staff.

Conflicts of Interest• The Board followed the recommendations of SEC concerning Board approvals for

commercial transactions under agreements between PTT Chemical or its subsidiariesand directors, the management, or related parties, to comply with the new Securitiesand Exchange law before the promulgation.

• The Board determines policies and guidelines for dealing with transactions with potentialconflicts of interest among shareholders, the Board, the management, and otherconnected parties. These provided clear practical guidelines to ensure that engagementin such transactions are fair, sensible, and completely disclosed. A report form fordisclosing potentially conflicts of interest appears in the Good Corporate GovernanceHandbook for use by employees in reporting them to their respective superiors ifnecessary.

• The Board ensures prudent compliance with the stated procedures within reason andwith mutual independence, transparency of transactions, and maximum benefit to theCompany, considered accurate and complete by SET’s criteria.

• At each Board meeting, the Chairman reminds the directors of this policy, asks thosedirectors to declare potential conflicts of interest on any agenda item, and asks them torefrain from expressing opinions or voting on such agenda item.

• The Audit Committee deliberates the Company’s disclosure of information concerningconnected transactions or potential conflicts of interest to ensure accuracy andcompleteness against SET regulations.

• For the benefit of monitoring the vested interests of directors, the management, or relatedparties, regarded as connected to the management of PTT Chemical and its subsidiariesunder the new Securities and Exchange law, the Company will be requiring the reportingof such vested interests under the criteria and procedure to be defined by the Board in2009.

Internal Control and Audit• The Board values and institutes processes for business control, particularly financial

reporting and compliance with regulations, rules, and policies. An independent InternalAudit Department is charged with auditing compliance with the internal control systemand reporting to the Audit Committee and the Board. The Board annually reviews thesuitability and adequacy of internal control in five aspects, namely the controlenvironment, risk assessment, control activities, information and communication, andmonitoring.

• The Audit Committee ensures that the Company commands suitable and effectiveinternal control and internal audit, and reports its performance to the Board and theshareholders.

• At its meeting No. 1/2009 of 18 February 2009, with the Audit Committee in attendance,the Board reached a consensus that the Company’s internal control was adequate andeffective, which would ensure achievement of the Company’s objectives and goals. TheAudit Committee also provided recommendations to the management for the continuous

96

improvement of the system.• Internal Audit’s responsibilities lie in assessing the adequacy and effectiveness of the

internal control of business processes or activities against annual plans approved by theAudit Committee. Its findings are to be regularly reported to the Audit Committee. It alsosupports the effectiveness of supervision, risk management, and control by observing thecode of conduct and the professional standard for internal auditors in order to maintainthe independence and quality of internal audits. Proposals to appoint, transfer,terminate - as well as the performance - of the head of Internal Audit must have the priorconcurrence of the Audit Committee.

Risk ManagementThe Company has implemented a comprehensive risk management system throughout theentire organization. The Risk Management Committee, consisting of senior executives, isaccountable for risk management under the policy, and reports its performance to the AuditCommittee and the Board every quarter or when a significant risk or an anomaly arises. Toachieve the Company’s business objectives and goals, it is charged with deliberating thesuitability and adequacy against risk management practices and effectiveness, and staysinformed of warning signals to enable the Company to achieve its business objectives andgoals. (Details on risk management and risk factors appears on page 106)

Board Meetings• The Board fixes meeting dates and times for the year and informs all directors in advance

so that each may schedule their attendance at the meetings. Other extraordinarymeetings are scheduled as needed. If a director cannot attend a meeting, he/she mustsend an apology letter to the Chairman. The agenda items are jointly decided by theChairman and the President. The Company sends meeting notices with an agenda andsupport documents to directors so that they may have time to study them before themeeting. The policy is to have them delivered to directors at least seven days ahead ofeach meeting. Each member may also propose matters they consider important and mayrequest further information from the President, who serves as Secretary to the Board. TheChairman should allow sufficient time for management presentations and discussions bythe Board. Directors with potential conflicts of interest must neither attend meetings ontheir conflicts of interest nor vote on those issues.

• The prepared minutes of each meeting, with complete significant details, are to beapproved at subsequent Board meetings and signed by the Chairman of the meeting.Storage of the minutes must be in both hard copies and electronic form for convenientsearch, and a mechanism is in place to prevent minutes amendment without theacknowledgment of the Board.

• The number of Board meetings is compatible with the directors’ performance and thenature of Company business. Records show individual directors’ attendance at meetingsin line with SEC’s specifications. (Details of directors’ attendance appear on page 71).

• The management delivers significant documents/information to the Board regularly andencourages non-executive directors to hold their own meetings in the absence of themanagement to discuss concerns and problems of interest. To this end, the CorporateGovernance Committee has provided a practical approach, including meeting before thefull Board meeting, to come up with recommendations or deliberate other matters jointly.

Assessment of Board Performance• The Board institutes annual assessment to allow it to review its own performance,

problems, and obstacles during the past year.


• Self-assessment forms for directors come in two varieties: individual and group. Theintent is to assess their suitability in both policy formulation and implementation,structure/performance of the Board and subcommittees, and participation in meetingsand their proceeding.

• The Corporate Governance Committee deliberated initial assessment findings and tabledthem for the Board’s consideration and decision on ways to improve collaboration. TheBoard considered that both group and individual performances were suitable in aspectssuch as supervision and compliance with relevant laws and regulations. In addition, theBoard provided useful recommendations for the Company’s future conduct in line with itsprevailing circumstances in support of the Board’s performance.

Assessment of Audit Committee PerformanceThe Audit Committee assessed its performance in 2008 so as to review how it hadperformed against the assigned scope of responsibility, and reported its findings to theBoard as follows:• Assessment covered the eight areas under the jurisdiction of the Audit Committee, namely

its charter; composition; meetings; training and resources; responsibility; relationship withthe head of Internal Audit/external auditor, and the management; reporting to the Boardand shareholders; and quality assurance. Three grades were involved - not practiced,partly practiced, and fully practiced. In summary, most areas were fully practiced andnone was ‘not practiced’

• Individual self-assessment covered five areas, namely business knowledge; specialty;independence and fairness; appreciation of duties and responsibility; and dedication tooffice and meetings. Three grades were involved - little, moderate, and considerable. Insummary, most areas were rated as considerable and none rated as little.

Directors’ Compensation• The Remuneration Committee formulates clear policies and criteria for compensating

directors and tables them before the Board, which then seeks approval from theshareholders. The decision process for such compensation is transparent and thecompensation amounts are approved by the shareholders.

• The compensation structures/components must be fair, suit individual directors’responsibilities, reflect the Company’s performance, and must be comparable to those forthe industry in which the Company operates. Each director that also serves as committeemembers duly receives additional compensation.

• The Board also discloses the types of compensation and the sums given to directors, aswell as compensation for directors and senior executives serving as directors of PTTChemical subsidiaries required by position and responsibility in line with stated policies.

Compensation to the President• The Remuneration Committee decides the assessment criteria for the President for the

Board’s approval.• The Remuneration Committee appraises the performance of the President and decide on

his/her compensation in line with the preliminary assessment findings, which is to betabled for the Board’s consideration. The Chairman is to communicate the Board’sdecision to the President.

• In deliberating of the compensation of the new President, appointed on 1 October 2008,the Board decided that his compensation should be based on his new responsibility.(Details about compensation to the Board and the senior management appear onpage 71-77)

98

Development of Directors and the Management• The Board’s policy and means of training for directors are in place for both new

and current ones, as well as senior executives appointed to serve as directors of PTTChemical Group companies. It also regularly disseminates the regulations and practicalguidelines of SEC and SET to all of them by the following methods.

Incoming directors: PTT Chemical has instituted an orientation for all incoming directors,where information/knowledge is provided on the roles of directors along with other helpfuldocuments for the mastering of PTT Chemical Group business. Plant visits and meetingswith the management team are also arranged. New directors are encouraged to undergoIOD directors’ training.

Current directors: Continuing education is provided to these directors through sponsorshipof relevant training courses offered by IOD. All directors underwent such courses, andparticipation in more such courses are in the works, both concerning directors’ duties andCompany business in general.

Management executives: These executives are continually trained in relevant laws andregulations that are helpful to their performance in the management role, including aseminar designed to prime executives for the new Securities and Exchange law. Those thatare directors of PTT Chemical Group companies are encouraged to attend directors’ coursesat IOD; to date, more than 90% of Group company directors have passed IOD courses.

Relevant parties in corporate governance: The Company Secretary, the secretary to theAudit Committee, officers engaged in investor relations, as well as those doing relevant jobs,regularly attend assorted training courses and sit in on seminars on relevant and currenttopics, and topics that are helpful to their performance organized by SEC, SET, ListedCompanies Association, and IOD.

Succession Plan• For the succession and selection of senior executives, the Board defines and deliberates

relevant plans in line with stated plans. An alternative plan is in place in case thePresident or senior management cannot perform their duties.

Compliance with the above-mentioned good corporate governance reflects the Board’scommitment to upgrading such compliance on par with international practices, withcontinual improvement. We realize that the confidence and trust given by all are criticalin all circumstances, particularly the ongoing global economic crisis.


1. Executive SummaryIn the year 2008, PTT Chemical Public Company Limited (“the Company” or “PTTCH”) and itssubsidiaries reported net profits of Baht 11,739 million, or Baht 7.84 per share, down 39%comparing to the same period last year of Baht 19,167 million or Baht 12.85 per share. Theoperating results of the Company and its subsidiaries are shown below:

Comparing 2008 and 2007 operating results(Unit : Million Baht)

2007 2008 Change

Sales 73,870 81,960 11%EBITDA 25,343 20,258 (20%)Net Profit 19,167 11,739 (39%)Basic Earning Per Share (Baht) 12.85 7.84 (39%)

The decrease in net profits in 2008 comparing to that of 2007 was due mainly to1. An increase in feedstock cost;

An increase in naphtha cost from higher crude oil price in the 1Q/08, 2Q/08, and 3Q/08of 49%, 53%, and 46% respectively while HDPE price only rose 27%, 29%, and 23%respectively.

An increase in natural gas price from PTT to reflect market price, which has beenimplemented since August 2008.

2. An increase in processing cost and selling and administration cost due to theconsolidation of TOL (COD in Feb. 2008), TSCL (COD in May 2008), and ChemicalInternational Pte. Ltd., which owns 50% of Cognis Oleochemicals (M) Sdn Bhd (COM), inDecember 2008.

3. An inventory loss in 3Q/08 and 4Q/08 due to a significant drop in feedstock and productmarket price when compared to the Company’s cost.

Comparing 4Q/08 and 3Q/08 operating results(Unit : Million Baht)

3Q/08 4Q/08 Change

Sales 23,642 12,698 (46%)

EBITDA 6,786 (2,542) (137%)Net Profit 4,926 (4,182) (185%)Basic Earning Per Share (Baht) 3.29 (2.80) (185%)

MANAGEMENT’S DISCUSSIONAND ANALYSIS

100

The decrease in net profits in 4Q/08 comparing to that of 3Q/08 was due mainly to1. A drop in sales volumes due to plant shutdown as follows:

1.1 A commercial shutdown of Oleflex Unit (olefins plant I1) for 55 days (25 Oct. - 18 Dec.)1.2 A commercial shutdown of olefins plant I4-1 for 26 days (31 Oct. - 25 Nov.)1.3 A commercial shutdown of HDPE plant (olefins plant I1) for 10 days (18 - 27 Dec.)1.4 De-bottlenecking shutdown (planned) of I4-2 plant for 68 days (25 Oct. - 31 Dec.) 1.5 De-bottlenecking shutdown (planned) of TOCGC’s MEG plant for 43 days

(8 Oct. - 19 Nov.)2. Product to feed margin (HDPE over naphtha) decreased to 573 USD/ton or down by 22%.

In 4Q/08 HDPE price dropped from 1,709 USD/ton to 910 USD/ton or down by 47% whilenaphtha price decreased from 973 USD/ton to 337 USD/ton, or down by 65%.

3. An increase in inventory loss of Baht 269 million from a significant drop in feedstock andproduct market price when compared to the Company’s cost.

To enhance the Company’s competitiveness in petrochemical business and the Company’ssustainable long-term growth, and to stabilize the overall margins, which are related to theCompany’s main strategy, the Company has implemented several investment projects. Theinvestments are shown below:

To Enhance the Competitiveness

Project De-bottlenecking Project (Plant I4-2)Description To expand ethylene capacity by 100,000 tons per year

and propylene by 50,000 tons per yearProgress -Operation Start Up Date 4Q/2008

COD: January 2009

Project Ethane Cracker Project under PTT Polyethylene Co., Ltd.holding 100% by PTTCH

Description An ethylene plant with capacity of 1,000,000 tons per year, whichethane will be provided by PTT.

Progress Under construction phaseOperation Start Up Date 4Q/2009

To integrate into downstream businesses and related businesses to diversifythe investment risks

POLYMER PRODUCTSProject HDPE Expansion under PTT Chemical PLC.Description To expand HDPE capacity from 250,000 tons per year

to 300,000 tons per yearProgress Under construction phaseOperation Start Up Date 4Q/2009

Project HDPE Expansion under Bangkok Polyethylene PLC.Description To expand HDPE capacity from 250,000 tons per year

to 500,000 tons per yearProgress Under construction phaseOperation Start Up Date 4Q/2009


Project LLDPE and LDPE Projects under PTT Polyethylene Co., Ltd.holding 100% by PTTCH

Description A LLDPE plant with capacity of 400,000 tons per yearand LDPE plant with capacity of 300,000 tons per year

Progress Under construction phaseOperation Start Up Date LLDPE : 4Q/2009

LDPE : 2Q/2010

EO-BASED PERFORMANCE PRODUCTSProject MEG Expansion Project under TOC Glycol Co., Ltd.

holding 100% by PTTCHDescription To increase EO/EG capacity of 95,000 tons per yearProgress -Operation Start Up Date 4Q/2008

COD: December 2008

Project Phenol Projects under PTT Phenol Co., Ltd.holding 30% by PTTCH

Description A phenol plant with capacity of 200,000 tons per yearProgress During commissioning phaseOperation Start Up Date 2Q/2009

Project Ethanolamines Project under Thai Ethanolamines Co., Ltd.holding 100% by PTTCH

Description An ethanolamines plant with capacity of 50,000 tons per yearProgress Under construction phaseOperation Start Up Date 2Q/2009

Project Choline Chloride Project under Thai Choline ChlorideCo., Ltd.holding 100% by PTTCH

Description A choline chloride plant with capacity of 20,000 tons per yearProgress -Operation Start Up Date The project has been postponed due to high construction cost

Project Bis Phenol-A (BPA) Project under PTT Phenol Co., Ltd.holding 30% by PTTCH

Description A Bis Phenol-A plant with capacity of 150,000 tons per yearProgress Under construction phaseOperation Start Up Date 3Q/2010

OLEOCHEMICAL PRODUCTSProject MPR (Multi-Purpose Reactor) Project under

Thai Oleochemical Co., Ltd.holding 100% by PTTCH

Description MPR plant with capacity of 14,000 tons per yearProgress During selecting EPC contractorOperation Start Up Date 1Q/2010

102

2. Industry OverviewProduct price, feed stock price and product to feed margins

Feedstock Ethylene Propylene Derivatives Spread

HDPE MEG Ethylene Propylene

Unit : MOPS SEA MTP SEA MTP (FILM) SEA MTP- MTP- HDPE- MEG-

$/MT SEA Cont. MOPS MOPS MOPS MOPS

2007 677 1,180 1,139 1,154 1,159 1,352 1,126 463 482 676 449Q1 2008 857 1,237 1,325 1,293 1,358 1,607 1,453 468 502 750 597Q2 2008 1,027 1,385 1,439 1,523 1,506 1,679 1,257 412 479 653 230Q3 2008 973 1,379 1,508 1,572 1,612 1,709 1,230 534 639 736 257Q4 2008 337 530 851 626 891 910 835 514 554 573 4982008 798 1,133 1,281 1,253 1,342 1,476 1,194 482 543 678 395Source: CMAI

For ME unit of TOL, Selling price, feedstock (Crude Palm Oil-CPO), and spread margin in2008 are summarized as follows:

Unit : USD/ton

ME Price* CPO* ME-CPO

1Q/08 1,440 1,065 375

2Q/08 1,336 1,009 327

3Q/08 1,192 860 332

4Q/08 746 506 240Note : * Price of Ministry of Energy

3. Financial ResultsUnit : Baht Million

2007 2008 % Change

Sales Revenue 73,870 81,960 11%

Feedstock Cost (41,328) (50,979) 23%

Net Realize Value Adjustment - (753) 0%

Gross Margin 32,542 30,228 (7%)

Processing Cost (7,167) (9,444) 32%

Other Revenue 2,015 2,587 28%

S&A Expenses (2,047) (3,113) 52%

EBITDA 25,343 20,258 (20%)

Depre. & Amort. (3,561) (4,054) 14%

EBIT 21,782 16,204 (26%)

Financing Expenses (Net Interest Earned) (161) (814) 406%

FX Gain (Loss) 210 (910) (533%)

Share of Gain from Investment 27 40 48%

Earning to Minority (403) (461) 14%

Corporate Tax (2,288) (2,320) 1%

Net Profits 19,167 11,739 (39%)

Earnings Per Share (Baht/Share) 12.85 7.84 (39%)


1. In 2008, the Company recorded sales revenues of Baht 81,960 million, up 11% due mainlyto a hike in product price. HDPE (SEA) price was 1,476 USD/ton, up 9% and MEG (SEA)price was 1,194 USD/ton, up 6%. In addition, the Company also consolidated revenuesfrom PTT Chemical International Pte. Ltd., which owns 50% of Cognis Oleochemicals (M)Sdn Bhd (COM), in December 2008.

2. Processing cost was Baht 50,979 million, up 23% due to a hike in naphtha price from 677USD/ton to 798 USD/ton or up 18%. Natural feedstock cost bought from PTT also rose toreflect market price.

3. In 2008, the Company recorded inventory loss (Net Realize Value Adjustment) of Baht753 million, which was accounted for the Company’s NRV of Baht 284 million and theCompany’s subsidiaries and affiliates’ NRV of Baht 469 million.

4. Processing cost was Baht 9,444 million, up 32% due mainly to higher production of TOL,started COD in February 2008, and TSCL, started consolidating in May 2008, and theconsolidated of processing cost of COM in December 2008.

5. Selling and administrative expenses were Baht 3,113 million, up 52% due to higherexpenses which resulted from an increasing inflation in 2008, and the consolidation ofCOM’s SG&A in December 2008.

6. EBITDA was Baht 20,258 million, down 20% due to higher feedstock cost, processingcost, and SG&A.

7. The Company recorded interest expenses net interest income of Baht 814 million, up406% due to lower interest income. In 2008, the Company recorded interest expenses ofBaht 1,378 million while interest income was Baht 564 million, comparing to those of 2007of Baht 1,150 million and Baht 989 million respectively.

8. Loss from unrealized foreign currency exchange (FX) was Baht 910 million. This was duemainly to the weakening of Baht against US currency, which resulted in higher amount ofdebentures in Baht currency. (The Company has outstanding debentures of 300 MUSD)and also loss from FW contract of the Company and subsidiaries.

9. The company recorded lower net profit; however, Income tax was Baht 2,320 million, up1%. This was due mainly to an expiration of olefins plant I4’s tax privilege received underinvestment promotion program from BOI in December 2007. This resulted in a rise in taxrate from 15% to 30%.

10.In 2008, earning per share was recorded at Baht 7.84, down 39% due mainly to lower netprofit.

4. The Sales of ProductsIn 2008, ethylene sales volumes were 853,321 tons, down by 1%, while propylene salesvolumes were 317,692 tons, decreased by 8% comparing to those of 2007.

HDPE sales volumes (olefins plant I1’s HDPE unit and BPE) were 492,232 tons, up 1%comparing to those of 2007

MEG sales volumes of TOCGC in 2008 were 306,875 tons, decreased by 10% comparing tothose of 2007.

5. Production EfficienciesIn 2008, olefins production volumes were 1,437,432 tons, up 1% when compared to those of2007 despite the commercial shutdown of olefins plant I1 in 4Q/08. Ethylene productionvolumes were 1,121,410 tons, up 2% while propylene production volumes were 316,022 tons,down by 9%. The utilization rate of olefins was recorded at 84%.

104

HDPE production volumes (olefins plant I1’s HDPE unit and BPE) were 492,722 tons, downfrom those of 2007 by 5%, with utilization rate of 99%.

MEG production volumes of TOCGC were 310,121 tons, slightly down from 2007 by 1%, withutilization rate of 103%

2007 2008

Olefins PlantUtilization Rate 85% 84%

Olefins Yield 66% 67%

HDPE Plant (I1 + BPE)Utilization Rate 93% 99%

TOCGC’s MEG plantUtilization Rate 105% 103%

TOL’s ME plantUtilization Rate n.a. 55%Note:1. Capacity utilization rate is calculated from actual production divided by nameplate capacity.2. TOL started to consolidate revenues from Methyl Ester unit in 1Q/08.3. In 1Q/08 olefins plant I4-1 was shutdown for maintenance (unplanned) for 12 days (31 Jan. - 11 Feb.).

- HDPE plant (of olefins plant I1) was shutdown for maintenance (unplanned) for 10 days(29 Feb. - 6 Mar. and 10 - 12 Mar.).

- HDPE plant of BPE was shutdown for maintenance (unplanned) for 6 days (15 - 20 Mar.).4. In 2Q/08 Oleflex unit of olefins plant I1 was shutdown for maintenance (planned) for 42 days

(16 May - 27 June).5. In 3Q/08 olefins plant I4-1 was shutdown for maintenance (unplanned) for 11 days and BPE’s HDPE plant

was shutdown for maintenance (planned) for 30 days (1 - 30 Aug.).6. In 4Q/08 Oleflex unit (olefins plant I1) was commercial shutdown for 55 days (25 Oct. - 18 Dec.).

- Olefins plant I4-1 was commercial shutdown for 26 days (31 Oct. - 25 Nov.).- HDPE plant of olefins plant I1 was commercial shutdown for 10 days (18 - 27 Dec.).- Olefins plant I4-2 was shutdown for de-bottlenecking for 68 days (25 Oct. - 31 Dec.).- TOCGC’s MEG plant was shutdown for de-bottlenecking for 43 days (8 Oct. - 19 Nov.).

6. Financial StatusAssetsAs of December 31, 2008, the Company recorded total assets of Baht 152,318 million, up Baht18,804 million from end of 2007 to Baht 133,514 million or up 14%. This was due mainly to anincrease in property, plant, and equipment-net to Baht 100,061 million from Baht 75,184million, up Baht 24,877 million or 33% from an increase in work in construction of theCompany’s subsidiaries.

LiabilitiesAs of December 31, 2008, the Company recorded total liabilities of Baht 56,121 million, upBaht 17,004 million from end of 2007, to Baht 17,004 million, or up 43%. This was due mainlyto a rise in long-term loan and debentures of Baht 10,000 million and 12,000 millionrespectively, which resulted in the Company’s end of 2008 long-term loan and debentures ofBaht 13,733 million and Baht 28,257 million respectively.

Shareholders’ EquityAs of December 31, 2008, the Company had total shareholders’ equity of Baht 96,197 million,up Baht 1,801 million or up 2% from end of 2007. This was due mainly to an increase inun-appropriated retained earnings from Baht 39,044 million to Baht 40,306 million, up 3%.


Cash FlowsAs of December 31, 2008, the Company had cash flows from operations of Baht 17,758million while cash flow from investments was recorded at Baht 30,020 million, resulting in thenegative cash flow before financing activities (free cash flow) of Baht 12,263 million. TheCompany also recorded cash flow from financing activities of Baht 8,508 million. Thisresulted in negative cash and cash equivalent of Baht 3,755 million. When concluded withbeginning cash on hand of Baht 24,797 million, the Company’s ending cash and cash equivalentwas Baht 21,175 million as end of 2008.

Important Financial Ratios

2007 2008*

Current Ratio 2.39 2.96

EBITDA to revenue 32.97% 23.55%

Net Profit to revenue 24.93% 13.65%

Return on total assets 14.94% 8.21%

Return on equity 20.77% 12.20%

Interest Bearing Debt to equity 0.23 0.46

Net debt to equity (0.03) 0.25

Net debt to EBITDA (0.11) 1.16Note:Current ratio = Current assets divided by current liabilitiesEBITDA to revenue (Last 4 quarters) = EBITDA divided by total revenue (exclude

profits/(losses) from exchange rates and equity innet income of subsidiaries & associated companies)

Net profit on revenue (Last 4 quarters) = Net profit divided by total revenue (excludeprofits/ (losses) from exchange rates and equity innet income of subsidiaries & associated companies)

Return on total assets = Net profit divided by average total assets(Calculated on the past four quarters)

Return on equity = Net profit divided by average total shareholder’s equity(Calculated on the past four quarters)

Interest Bearing Debt to equity = Interest Bearing Debt divided by shareholder’s equity to equityNet Debt to equity = Interest Bearing Debt net from cash and cash equivalent and

current investments divided by shareholder’s equityNet Debt to EBITDA = Interest Bearing Debt net from cash and cash equivalent and

current investments divided by EBITDA

* The calculation of financial ratios is based on the method given by SET (The Stock Exchange of Thailand).

106

Risk ManagementRecognizing the business risks involved, PTT Chemical and its affiliates established asystematic, company-wide risk management system steered by a risk managementcommittee (RMC), comprising senior executives. An audit committee also provides advice tothe RMC regarding the suitability and sufficiency of the Company’s risk management policyand framework so that the overall business may achieve their targets.

The Company constantly ensured risk analysis for its group of companies in bothquantitative and qualitative aspects. A financial simulation is analyzed by the “Value at Risk(VaR)” approach, indicating financial impacts of various degrees resulting from key changes.Also, an analysis of impacts and the probability of risks affecting goal achievement or projectgoal achievement in the form of a 4x4 matrix was instituted together with a risk managementplan to reduce risk incidents. Finally, risk information is to be regularly reported to seniorexecutives, the Audit Committee, and the Board.

Risk FactorsPTT Chemical has closely aligned its risk management process with those of recognizedinternational standards. However, the nature of the petrochemical industry and activities ofPTT Chemical Group make it difficult to totally avoid risks. Therefore, certain risks, bothindustrial and corporate-specific ones, could have significant impacts on the Group’soperations.

Industrial RisksProduct and Feedstock Price RisksChanges in product and feedstock prices can significantly affect the Group’s operations, asits product and feedstock prices are those of, or formula-linked to, the world market, whichis subject to the direct impact of changes in product demand, which is in turn exposed to theglobal economy or domestic economy in major consuming countries, as well as capacitychanges of given products in world markets. All these are beyond the Group’s control.

Risk Mitigation Approach : PTT Chemical’s policy is to explicitly quote prices of productsand feedstock in all transaction contracts that reflect current prices in major markets (US, EUand Asian markets) to avoid drastic price fluctuations. Where suitable, it follows a policy ofbasing product and feedstock prices in all transaction contracts on production costs toreduce any adverse effect on the product supplier if the market prices fall below productioncosts. For example, the price of natural gas, the Company’s major feedstock, reflects thoseof polymers, its main products. Such policy gives more flexibility to the changes in prices ofthe end products, and thus lessens the impact of changing prices of products andfeedstock, especially during the industry’s down cycle.

RISK MANAGEMENT AND RISK FACTORS


PTT Chemical has instituted centralized output planning coordination among itsolefins & shared facilities, polymer products, and ethylene oxide (EO)-based performancegroups so that the distribution of ethylene and propylene for each product line andproduction in individual product groups may achieve efficiency and the highest returns andtemper the impacts of price fluctuations on feedstock and products.

PTT Chemical believes that the capacity expansion in olefins & shared facilities, polymerproducts, and ethylene oxide (EO)-based performance groups to achieve economies ofscale will lower the costs of production per unit. Higher total sales after the capacityexpansions would compensate for income lost due to a lower price per unit, especiallyduring the down cycle.

The Group constantly seeks opportunities to expand into downstream products with soundbusiness potential to reduce adverse effects if product prices in certain groups should falland tone down fluctuation in revenue and in net profits in the long term. Downstreamproducts, such as polymers, usually belong to different price cycles from that of ethylene, amain upstream product. Expansion into the downstream petrochemicals with high potentialand higher value-added lessens the impact of price competition in the long term and givesthe Company greater opportunities to venture into innovative products, an essential factorfor the sustained growth of the Group.

Recognizing the impacts of the recent slowdown in the global economy on the demand forits core products, resulting in demand reduction in line with the economy, the Group hasdrawn up a marketing plan for products with healthy potential or high spreads to be sold incountries or regions that could sustain more of such products.

Cluster-of-Plants RisksPTT Chemical Group’s plants are located at or around Map Ta Phut Industrial Estate and soare its major feedstock suppliers and principal customers. Therefore, serious damage orlosses to the Group’s production facilities, its major suppliers, customers, or the pipelinesystem could have severe impacts on the Company’s or its affiliates’ performance.

Risk Mitigation Approach : To reduce the impacts of such mishaps, the Group hasinstituted a security system at the plants that is up to international standards, and made it apolicy to lake out an all-risk insurance policy for projects with commercial operation, and aconstruction all-risk insurance policy for relevant projects under internationally acceptedstandards.

Environmental RisksBy its nature, industrial operations and general petrochemical operations tend to beassociated with activities that could harm human health and the environment.Mishaps may sighificantly harm stakeholders, business, and the image of PTT Chemical orits affiliates, in both short and long terms.

Risk Mitigation Approach : The Company’s health, safety, and environment policy framesits business mission, ranging from the choice of technology and processes, design andinstallation, work procedures, fostering of a safety culture, assessment of environmentalrisks, prevention and mitigation of environmental risks on stakeholders, strict compliancewith laws and standards, continual development and improvement of the environmentalmanagement system, and communication to all involved. This includes implementation of

108

the ISO 14001 environmental management system, preparation of reports on compliancewith preventive and mitigation measures, and continual monitoring of environmental qualityfor submission to the Office of Natural Resources and Environmental Policy and Planning.

Financial Risks(a) Foreign Exchange (FX) RisksTypically, PTT Chemical Group’s revenue and expenses are in US dollars or US dollar-linked,and foreign exchange (FX) risks could therefore affect income in the unhedged portion. Forinstance, should the Baht strengthen against the dollar, the Company would experience alower net profit in Baht. This clearly indicates that the currency exchange fluidity, over whichthe Group has no control, could have a significant impact on the Company’s net profits.

Risk Mitigation Approach : The Company manages FX risks by using natural-hedgemanagement, which seeks a balance between cash inflows and outflows, including capitalexpenditure, in foreign currencies. It also ensures that its net income - the differencebetween revenue and expenses tied to the US dollar - tracks the foreign loans. To elaborate,should the Baht appreciate, the Company’s net income drops with the foreign loans in Bahtequivalent.

(b) Interest Rate RisksOver the logn term, PTT Chemical’s policy is to maintain for the Group a net interest-bearingdebt-to-equity ratio of up to 100% and a net interest-bearing debt-to-EBITDA ratio of up to200% to create an optimal return on investment for stakeholders while supporting the Group’s operational and investment plans.

However, it is necessary to bear interest-rate risks from fluctuating and rising interest rates,particularly when the Group intends to secure loans. This may result in higher financialcosts, the inability to secure loans, or the necessity of issuing debt securities to the fullamount required by the Company and its affiliates.

Risk Mitigation Approach : To temper the impacts of fluctuating interest rates and a ratehike when the Company wishes to secure a loan or issue debt securities, PTT Chemicalmay seek to increase its short-term and medium-term credit lines. The Company may usefinancial instruments where necessary to minimize a negative impact when the financialmarket is in a state of flux. The Company also plans to arrange a bigger term (short-term andintermediate-term) and amount of the required loans or debt securities to synchronize withthe Company’s financial structure and need for capital, financial situation, interest rateoutlook, and the financial market for a given period.

Company-Specific RisksConflicts of Interest RisksSiam Cement Plc is a major shareholder of PTT Chemical (with 20.18 percent of the paid-upcapital), with subsidiaries producing olefins and HDPE, LDPE, and LLDPE polymers, similarto PTT Chemical Group (both in operational and planning stages), thus presenting apotential conflict of interest between the Group and Siam Cement because this may reducethe Company’s capability to maximize its profits. By the same token, PTT Plc, the largestshareholder, with 49.30 percent shares, is the major supplier of feedstock required by PTTChemical, supplying about four-fifths of PTT Chemical’s total required feedstock.


Risk Mitigation Approach : PTT Chemical not only observes a recognized goodcorporate governance policy and principles but stresses their importance and theimplementation at all levels of the Group’s operations. In addition, it has always observed theprinciple of conducting its business under the highest ethical standards. These principlesare expected and required to be implemented by Board members, executives, management,supervisors, employees, and contractor employees, all of whom must acknowledge andfollow the policies and guidelines set forth in the Company’s Good Corporate GovernanceHandbook. This includes guidelines for transactions with shareholders, subsidiaries, orassociates of shareholders, directors, or the management of PTT Chemical. The guidelinesalso include the practice of engaging in connected transactions, which prohibits concernedparties from voting on agendas of interests during a meeting of the Board or theshareholders. PTT Chemical is fully committed to abiding by the rules and regulations of theSecurities and Securities Exchange of Thailand Act of 1992 and its amendment of 2008 byappointing an independent directors and the Audit Committee to safeguard the interests ofminor shareholders and ensure fair treatment for all stakeholders.

Supplier RisksPTT Chemical procures about four-fifths of its total required feedstock from PTT Plc,therefore bearing a supplier risk.

Risk Mitigation Approach : As the major supplier is also the Company’s majorshareholder, the purchase of feedstock is mostly arranged under long-term agreements.The very nature of the petrochemical industry itself limits the ability of the feedstock supplierto obtain a new customer. There is therefore only a slim chance that either this feedstocksupplier or this ethylene customer would break its contracts at short notice. Consequently,the Company bears only a limited risk by having a large feedstock supplier.

Plant Operation RisksIn operating petrochemical plants, some potential occurrences from within and outside theGroup can unexpectedly cause disruption of plant operation. Human errors, accidents,insufficient or undeliverable utilities (electricity, water, steam, etc.), machinery failures andoperational failures of feedstock supply, or customer-related occurrences could lead to aninterruption in production with possible significant impacts on the Company’s or the Group’sfinancial performance.

Risk Mitigation Approach : Aware of these operational risks, PTT Chemical Group hasestablished business interruption plans for controlling emergency incidents, minimizing lossesand safeguarding personnel and the environment. Furthermore, the Group has scheduledpreventive and predictive maintenance procedures to minimize machinery risks. It has alsoestablished procedures and manuals for machinery maintenance to minimize errors,accidents, and disruptions. Finally, the Company and its subsidiaries have an all-riskinsurance policy to compensate for and minimize financial losses from such occurrences.

Project RisksPTT Chemical Group is expanding current and new product lines of upstream anddownstream petrochemicals, including production and services in support businesses likeutilities, jetties, and other support functions. Most projects, some of which are in the designor construction phase, are related to one another in the supply of feedstock and offtakingproducts, or in the transfer of electricity and steam between product lines and utilities. TheGroup inevitably encounters assorted project risks, some of which could have considerable

110

impacts on the projects themselves and ultimately on the Company or the Group. As projectrisks may result from feedstock supply or may be related to the environment, engineeringdesign, procurement, construction, execution, markets, and logistical risks, these risksmay cause project delays, cost overruns, or project viability, among others.

Risk Mitigation Approach : Aware of these project risks, PTT Chemical assigns a riskowner i.e., project owner, to be responsible for project risk management under the Company’srisk management policy and framework. The processes include identification of projectrisks, assessment of impacts and likelihood of occurrences of the relevant risks, formulationand implementation of risk management plans, and continual reporting and reviewing of arisk report. The Company believes that its systematic risk management will encourage riskowners, the management of the Company and its affiliates, and other relevant parties tobecome more aware of the risks encountered by concerned projects, while recognizing theimportance of the risk management of a project as well as that of the Group as a whole. Withproject risk management in place, the possibility of a risk is reduced and/or the projectowners will be better prepared should a risk occur. This also means that a direct loss or aloss of business opportunities would be proportionally less, enabling the Group to achieveits growth targets in the medium term and long term.

On the whole, project risk management by the Group focuses on minimizing the likelihood ofproject delays and keeping project costs under the budget. Moreover, the Company andits affiliates command a construction all-risk insurance policy covering projects underconstruction, which would compensate the Company and its affiliates for financial losses ifsevere project risks were to occur, thus minimizing risks to the Group.

Human Resource RisksThe Group is expanding its business further downstream, including derivatives, to manyprojects. After their commercial operation, the configuration and running of plants andmachinery, as well as product planning and sales management, may differ radically from thepresent. Current personnel of the Group may lack skills or experience in carrying out newmodes of operation efficiently, at the standard level, or at a competitive level. Alternatively,the Group may be unable to recruit external personnel with the required skills andexperience. In the worst case, such shortage could pose severe risks that hurt the Group’soperation significantly.

Risk Mitigation Approach: The Group has recognized these risks all along ever since itscontemplation of project operation and preparation of skilled and experienced people forassorted projects. To cope with this problem, the Group has decided on the use of sharedservices among its business units since 1 February 2008, whereby actions will be taken toupgrade its personnel’s capability and prepare training plans in line with personnelcompetency gaps and the Group’s strategic implementation. The Company is convincedthat such actions will not only add efficiency to the management and human resourcedevelopment of the Group, but also align with the need for human resources of ongoingprojects. On the whole, this would somewhat alleviate such human resource risks.

Financial Risks(c) Liquidity RisksThe Company recognizes the currently high uncertainty in financial markets, both domesticand international. While this uncertainty has somewhat subsided from the initial impactsfacing financial institutions in 2008, repercussions have been felt and may well continue to


do so in the future. Add to these the possible drops in prices and sales volumes against theGroup’s original estimates and need for capital under its investment plans; on the whole,it could be short on cash for a period, thus crippling PTT Chemical businesswise.

Risk Mitigation Approach : Recognizing the grave danger of running low on liquidity,PTT Chemical made it a policy for all its companies to generate maximum liquidity withoutimpacting routine businesses and planned project operations. To this end, centralizedcoordination has been instituted among expense plans for the above-mentioned businessundertaking to allow PTT Chemical to remain adequately liquid at all times.

112

Transactions with Shareholders and Connected CompaniesAs of 31 December 2008, some significant business transactions had taken place betweenthe Company and its shareholders and connected companies of common shareholders ordirectors.

Mainly concerning product and service transactions, these transactions were based onmarket or contractual prices. Below are the details.

Company PTT Plc (PTT)Business Petrochemical business operation & supportRelationship with PTT Chemical - Major shareholder with 49.30% shares

- Common director : Mr. Prasert Bunsumpun- Sales transactions of products and services

Company HMC Polymers Co., Ltd. (HMC)Business Manufacture & sale of PPRelationship with PTT Chemical - Holds 2.81% of the shares in PTTCH

- Common directors :1. Mr. Prajya Phinyawat 2. Mr. Pichit Nithivasin

- Sales transactions of products and services

Company Thai Plastic and Chemicals Plc (TPC)Business Manufacture & sale of PVCRelationship with PTT Chemical - Holds 0.62% of the shares in PTTCH

- Common director : Mr. Cholanat Yanaranop- Sales transactions of products and services

Company Thai Polyethylene Co., Ltd. (TPE)Business Manufacture & sale of PERelationship with PTT Chemical - TPE’s major shareholder (Siam Cement) is also a major

share holder of PTTCH- Common directors :

1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash- Sales transactions of products and services

Company Thai Polypropylene Co., Ltd. (TPP)Business Manufacture & sale of PPRelationship with PTT Chemical - TPP’s major shareholder (Siam Cement) is also a major

shareholder of PTTCH- Common directors :


CONNECTED TRANSACTIONS


Company PTT Aromatics and Refining Plc (PTTAR)Business Manufacture & sale of benzene, toluene, paraxylene, orthoxylene,

and mixed xylenes, and oil refinery businessRelationship with PTT Chemical - PTTAR’s major shareholder (PTT) is also a major shareholder

of PTTCH- Common directors :

1. Mr. Prasert Bunsumpun 2. Mr. Witoon Simachokedee3. Mr. Prajya Phinyawat 4. Mr. Pichai Chunhavajira


Company Rayong Olefins Co., Ltd. (ROC)Business Petrochemical businessRelationship with PTT Chemical - ROC’s major shareholder (Siam Cement) is also a major


1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash3. Mr. Pichit Nithivasin 4. Mr. Prajya Phinyawat


Company Siam Styrene Monomer Co., Ltd. (SSMC)Business Manufacture of styrene monomersRelationship with PTT Chemical - SSMC’s major shareholder (Siam Cement) is also a major



Company Siam Mitsui PTA Co., Ltd.Business Manufacture of purified terephthalic acidRelationship with PTT Chemical - Siam Mitsui’s major shareholder (Siam Cement) is also a major

shareholder of PTTCH- Common director : Mr. Cholanat Yanaranop- Sales transactions of products with PTTCH’s subsidiary

Company Thai Tank Terminal Ltd. (TTT)Business Storage and logistical services for liquid chemicals, oil, and gas at

Map Ta Phut Industrial EstateRelationship with PTT Chemical - A subsidiary of PTTCH (51% of the shares)

- Three TTT directors are PTTCH executives :1. Mr. Dhanes Charoensupaya 2. Mrs. Puntip Oungpasuk3. Mr. Narong Bunditkamol


Company Alliance Plant Service Co., Ltd. (APS), formerly known as NPTCMaintenance and Engineering Services Co., Ltd. (NPTC)

Business Maintenance and engineering services, etc. (domestic and Asia)Relationship with PTT Chemical - A subsidiary of PTTCH (60% of the shares)

- Two APS directors are PTTCH executives :1. Mr. Athavudhi Hirunburana 2. Mr. Jiamsak Nantananate

- Service transactions

Company NPC Safety and Environmental Service Co., Ltd. (NPC S&E)Business Safety and environment services for network government

agencies and private companiesRelationship with PTT Chemical - A wholly - owned subsidiary of PTTCH

- Four NPC S&E directors are PTTCH executives :1. Mr. Veerasak Kositpaisal 2. Mr. Jiamsak Nantananate3. Mr. Narong Bunditkamol 4. Mr. Suvit Tinnachote


114

Company PTT Utility Co., Ltd. (PTTUT)Business Production and sale of electricity, steam, and water for production

processesRelationship with PTT Chemical - A PTTCH associate with 40% of the shares

- PTTUT’s major shareholder (PTT) is also a major shareholderof PTTCH

- Three PTTUT directors are PTTCH executives :1. Mr. Athavudhi Hirunburana 2. Mr. Dhanes Charoensupaya3. Mr. Narong Bunditkamol

- Sales transactions of products

Company PTT Polyethylene Co., Ltd. (PTTPE)Business Manufacture of olefins and derivativesRelationship with PTT Chemical - A wholly - owned subsidiary of PTTCH

- Common director : Mr. Prajya Phinyawat- Four PTTPE directors are PTTCH executives :

1. Ms. Panada Kanokwat 2. Mr. Khubbhol Suksupha3. Mr. Suvit Tinnachote 4. Mrs. Puntip Oungpasuk


Company Thai Styrenics Co., Ltd. (TSCL)Business Manufacture and sale of petrochemical productsRelationship with PTT Chemical - A wholly-owned joint venture of PTTCH

- Common director : Mr. Veerasak Kositpaisal- Three TSCL directors are PTTCH executives :

1. Mr. Khubbhol Suksupha 2. Mrs. Puntip Oungpasuk3. Mr. Suvit Tinnachote


Company PTT Phenol Co., Ltd. (PPCL)Business Manufacture of phenol and by-productsRelationship with PTT Chemical - A PTTCH associate with 30% of the shares

- PPCL’s major shareholder (PTT) is also a major shareholderof PTTCH

- Common director : Mr. Prajya Phinyawat- Two PPCL directors are PTTCH executives :

1. Mrs. Puntip Oungpasuk 2. Mr. Dhanes Charoensupaya- Sales transactions of products and services

Company PTT Polymer Marketing Co., Ltd. (PTTPM)Business Marketing and distribution of polymer products for PTT GroupRelationship with PTT Chemical - A PTTCH associate with 25% of the shares

- PTTPM’s major shareholder (PTT) is also a major shareholderof PTTCH

- Common directors :1. Mr. Prajya Phinyawat 2. Mr. Veerasak Kositpaisal

- One PTTPM director is a PTTCH executive :Mr. Dhanes Charoensupaya


Company Star Petroleum Refining Co., Ltd. (SPRC)Business Oil refinery businessRelationship with PTT Chemical - SPRC’s major shareholder (PTT) is also a major shareholder

of PTTCH- Sales transactions of products


Company Vinythai Plc (VNT)Business Manufacture & sale of PVCRelationship with PTT Chemical - PTTCH holds 24.98% of the shares

- Common director : Mr. Veerasak Kositpaisal- One VNT director is a PTTCH executive : Mrs. Puntip Oungpasuk- Sales transactions of products

Company IRPC Plc (IRPC)Business Petrochemical businessRelationship with PTT Chemical - IRPC’s major shareholder (PTT) is also a major shareholder

of PTTCH- Common directors :

1. Mr. Prasert Bunsumpun 2. Mr. Pala Sookawesh3. Mr. Prajya Phinyawat

- Sales transactions of products

Company Bangkok Polyethylene Plc (BPE)Business Manufacture & sale of HDPERelationship with PTT Chemical - A wholly - owned subsidiary of PTTCH

- Common directors :1. Mr. Pala Sookawesh 2. Mr. Prajya Phinyawat

- One BPE director is a PTTCH executive : Mr. Suvit Tinnachote- Sales transactions of products and services

Company Bangkok Synthetics Co., Ltd. (BST)Business Manufacture & sale of mixed-C4s derivativesRelationship with PTT Chemical - BST has 1.46% of the shares in PTTCH

- Common directors :1. Mr. Pichit Nithivasin 2. Mr. Cholanat Yanaranop


Company Bangkok Industrial Gas Co., Ltd. (BIG)Business Manufacture and sale of industrial gasesRelationship with PTT Chemical - Common director : Mr. Pichit Nithivasin


Company Thai Petroleum Pipeline Co., Ltd. (THAPPLINE)Business Fuel pipeline transport servicesRelationship with PTT Chemical - THAPPLINE’s major shareholder (PTT) is also a major

shareholder of PTTCH- Common director : Mr. Pichai Chunhavajira- Service transactions

Company Eastern Fluid Transport Co., Ltd. (EFT)Business Pipeline infrastructural servicesRelationship with PTT Chemical - A PTTCH associate with 15% of the shares

- Common director : Mr. Athavudhi Hirunburana- Service transactions

Company Dhipaya Insurance Plc (DHIPAYA)Business Insurance businessRelationship with PTT Chemical - DHIPAYA’s major shareholder (PTT) is also a major

shareholder of PTTCH- Common director : Mr. Pichai Chunhavajira- Connected transactions

116

Company TOC Glycol Co., Ltd. (TOCGC)Business Manufacture & sale of MEGRelationship with PTT Chemical - A wholly-owned subsidiary of PTTCH

- Three TOCGC directors are PTTCH executives :1. Ms. Panada Kanokwat 2. Mrs. Puntip Oungpasuk3. Mr. Athavudhi Hirunburana


Company Thai Ethoxylate Co., Ltd. (TEX)Business Manufacture & sale of fatty alcohol ethoxylates, base chemicals

of personal healthcare productsRelationship with PTT Chemical - A PTTCH joint venture with 50% of the shares


Company Thai Ethanolamines Co., Ltd. (TEA)Business Manufacture & sale of ethanolamines and products for paint,

pharmaceutical, cosmetics, cement, etc.Relationship with PTT Chemical - A wholly - owned subsidiary of PTTCH

- Two TEA directors are PTTCH executives :1. Ms. Panada Kanokwat 2. Mr. Athavudhi Hirunburana


Company Thai Choline Chloride Co., Ltd. (TCC)Business Manufacture & sale of choline chloride for animal feedRelationship with PTT Chemical - A wholly-owned subsidiary of PTTCH

- Three TCC directors are PTTCH executives :1. Ms. Panada Kanokwat 2. Mr. Jiamsak Nantananate3. Mr. Athavudhi Hirunburana


Company Thai Oleochemicals Co., Ltd. (TOL)Business Manufacture & sale of methyl ester, fatty alcohol, and glycerineRelationship with PTT Chemical - A wholly-owned subsidiary of PTTCH

- Common director : Mr. Witoon Simachokedee- Three TOL directors are PTTCH executives :

1. Ms. Panada Kanokwat 2. Mrs. Puntip Oungpasuk3. Mr. Dhanes Charoensupaya


Company Vopak Holding International B.V.Business Logistics of chemical and oil products from manufacturers to

consumersRelationship with PTT Chemical - Vopak holds 49% of the shares in TTT, a PTTCH subsidiary

- Sales transactions of services among subsidiaries

Company Thai Industrial Gases Plc (TIG)Business Manufacture & sale of industrial gasesRelationship with PTT Chemical - Common director : Mr. Paibulya Punyavutti


Company PTT ICT Solutions Co., Ltd. (PTTICT)Business Services for information communication and technology to

PTT Group- A PTTCH associate with 20% of the shares- Common director : Mr. Athavudhi Hirunburana- Service transactions


Company PTT Polymers Logistic Co., Ltd. (PTTPL)Business Logistical services to PTT Group’s petrochemical businessesRelationship with PTT Chemical - PTTPL’s major shareholder (PTT) is also PTTCH’s major

shareholder- Common director : Mr. Prajya Phinyawat- Two PTTPL directors are PTTCH executives :

1. Mr. Veerasak Kositpaisal 2. Mr. Khubbhol Suksupha

Company Thai Fatty Alcohol Co., Ltd. (TFA)Business Manufacture & sale of oleochemicals, fatty alcohols,

and derivativesRelationship with PTT Chemical - A PTTCH joint venture with a subsidiary holding 50%

of the shares- Common director : Mr. Tongchat Hongladaromp- Sales transactions of products and services

Company Cognis Thai Co., Ltd.Business Manufacture of oleochemicals and petrochemical derivativesRelationship with PTT Chemical - Holds 50% of the shares in a PTTCH joint venture

Company Cognis Oleochemicals (M) Sdn BhdBusiness Manufacture of oleochemicals, fatty alcohols,

and all its derivativesRelationship with PTT Chemical - Its major shareholder (Cognis German) wholly owns

Cognis Thai Co., Ltd.

Company PTT Exploration and Production Plc (PTTEP)Business Petroleum exploration and productionRelationship with PTT Chemical - PTTEP’s major shareholder (PTT) is also a major


1. Mr. Prasert Bunsumpun 2. Mr. Pala Sookawesh3. Mr. Pichai Chunhavajira

Transactions with Connected PartiesFor 2007 and 2008, details of the Company’s transactions with connected parties appear inthe top pro forma financial statements as of year-end 2008 and 2007, item 5.

Needs and Justification of Connected TransactionsSales of products by PTT Chemical to connected parties have been carried out mainlyso that they may convert its products into their own for sale at prices corresponding tolong-term offtake agreements or spot prices. Prices must prove reasonable to both partiesand be based on market prices without any undue transfer of interests. When providingservices to connected parties, transactions must cover transportation or storage costs ofproducts. The charge for services is both market-based and benefit-based, without anytransfer of interests.

Product and feedstock supplies and/or services as well as the volume of products,feedstock or services given by connected parties must meet the needs and businessoperation of PTT Chemical. Prices of product trading or services are as agreed by theCompany and connected parties without any transfer of interests. In addition, the Companyis required to purchase feedstock for producing ethylene, propylene, and other by-productsfrom connected parties because the capacity and quality of such feedstock meet its needs.PTT Chemical also saves transportation expenses since feedstock bought from connectedparties can be transferred safely by the Company’s pipeline system from their plants in MapTa Phut Industrial Estate, Rayong.

118

Measures and Procedures for Approval of ConnectedTransactionsCompany regulations state that a director can acquire or dispose of company assets orperform any business transaction involving the Company either by himself or herself or onbehalf of others only with the approval of the Board.

Any director who personally gains from any acquisition or disposal of company assets orany transaction of the Company is not allowed to vote on that matter.

After securing approval from the Board, the Company can perform any businesstransaction or acquire or dispose of major assets in line with an announcement of theStock Exchange of Thailand (SET). This also applies to the Company’s subsidiaries in theSET announcement concerning connected transactions of registered companies as well asthe buying or selling of registered company assets.

Opinion of Independent DirectorsThe Company’s independent directors noted that the connected transactions compliedwith the requirements of the Board.

Policies and Trends of Future Connected TransactionsFuture connected transactions between the Company and connected parties will remainnormal and unexceptional without any transfer of interests. Pricing between them will beimplemented at arm’s length. Moreover, the prices of products or feedstock purchased fromconnected parties will be set in agreements or linked to market prices. In addition, servicecharges paid to connected parties will also be at arm’s length. The prices of products soldor purchased between the Company and connected parties will, as a rule, be linked to theMap Ta Phut market prices.

Disclosure of the Company’s connected transactions is to comply with the rules andregulations of the Securities and Exchange Commission (SEC) and SET.

The audit standards for connected parties will be as specified by the Federation ofAccounting Professions and Office of the Auditor-General.


The Board of Directors of PTT Chemical Plc appointed the Audit Committee, whosemembers are experts in finance, accounting, economics, management, and thepetrochemical industry, consisting of Mr. Manu Leopairote as Chairman, with Mr. CherdpongSiriwit and Mr. Paibulya Punyavutti as members. Their qualifications are in line with theNotification of the Stock Exchange of Thailand (SET) governing the qualifications and scopeof performance of the Audit Committee of 2008.

In 2008 a series of changes were seen in the Committee:On 20 June 2008, the Board appointed Mr. Manu Leopairote as its Chairman in place of andMr. Olarn Chaipravat, who resigned from the chairmanship and appointed Mr. CherdpongSiriwit as a member.

On 6 December 2008, the entire Audit Committee resigned at the end of its term. Then on12 December 2008, the Board decided at its meeting No. 9/2009 to appoint a new oneconsisting of the above-named persons to a three-year term.

Performance of the Audit CommitteeThe Committee has performed its duties and exercised its judgment under the scope ofauthority and duties specified in its charter, which was approved by the Board. TheCommittee held seven meetings in 2008 and held meeting No. 1/2009 on 17 February 2009to review the financial statements for the year 2008 and internal control for the same year.Company management and related executives also attended in their respective agendaitems. A separate meeting was held with the external auditor, with no managementmembers in attendance, to consult the auditor on assorted audit matters. Reviews andrecommendations were made by the Committee to each agenda item, summarized asfollows:

1. Reviewed the Company’s financial statements to ensure that these financial statementshad been duly prepared under generally accepted accounting principles and thesufficient disclosure of significant matters had been made for the benefit ofdecision-making by the users. Connected transactions were accurately and completelydisclosed. The statements consisted of quarterly and annual financial statements for2008, which, according to the external auditor, were essentially accurate under thegenerally accepted accounting principles. The Committee concurred with this.

2. Reviewed the internal control system assessment to ensure that the Company hadadequate and effective internal control that enabled it to achieve its objectives and, assuch, acknowledged that the system was both adequate and effective.

3. Reviewed the independence and effectiveness of internal audit practices based on theperformance of the head of internal audit; reviewed the charter of internal audit and

REPORT OF THE AUDIT COMMITTEE

120

monitored the audit plan submitted by the group to acknowledge the findings togetherwith the actions to address the recommendations of the auditor; acknowledged therestructuring of the internal audit group; revised the business manual and self-assessmentof the internal audit group while providing recommendations on the group’s qualityimprovement.

4. Considered and proposed for approval the external auditor team for independence. TheCommittee proposed for 2008 Mr. Nirand Lilamethawat, Mr. Winid Silamongkol, orMr. Vairoj Jindamaneepitak of KPMG Phoomchai Audit Ltd. together with their fees,considered appropriate, to the Board, who would then seek approval from theshareholders.

5. Deliberated connected transactions or those with possible conflicts of interest to ensurelawful actions and compliance with SET requirements. The Committee tracked andacknowledged connected transactions, disclosed in the notes to the annual andquarterly financial statements. Note that in 2008 no such cases required approval by theshareholders.

6. Reviewed the Company’s compliance with the Securities and Exchange laws,Notifications of SET, and relevant laws. The Committee acknowledged the audit findingsof the internal audit group in 2008. The audit identified no items or remarks about theactions of the Company that could be construed as being against the law.

7. Monitored and acknowledged performance on key Company activities, namely riskmanagement, production operation, Group business operation, and major constructionprojects.

8. Reviewed and improved the charter of the Audit Committee in line with theannouncement of SET concerning the qualifications and scope of operation of the AuditCommittee of 2008 and the announcement of the Securities and Exchange Commission;the revisions have been tabled for the Board’s consideration.

9. Carried out collective and self-assessment for the Audit Committee for the year to reviewtheir performance and accomplishments against the assigned scope of work and thenreported the findings to the Board.

10. Reported its activities in the annual information disclosure form and the annual report.Reports of its performance were regularly sent to the Board.

Having performed its duties as mentioned, the Committee commented about PTT Chemical’sfinance and accounting, internal audit, risk management, operation, major business groupsand projects for the management’s consideration. The internal audit group is charged withmonitoring corrective actions and reporting to the Committee each quarter.

The Audit Committee conducted its thorough duties under the scope and responsibility of itscharter. Its seven meetings were participated in by a majority of committee members; in fact,only once did a member request a leave of absence because of hospitalization. TheCommittee appreciates the constructive cooperation given by the Board, the management,the external auditor, and all related parties.

(Mr. Manu Leopairote)Chairman of the Audit Committee17 February 2009


Financial Statement of PTT Chemical Public Company Limited, and its subsidiaries includedin the consolidated financial statements has been prepared in compliance with notificationof Department of Commercial Registration dated September 14, 2001, under the third para-graph of section 11 of the Accounting Act 2000, in compliance with the accounting standarddetermined by the Federation of Accounting Professions.

The responsibilities of the Board of Directors towards the financial report of PTT ChemicalPublic Company Limited, and its subsidiaries has been provided to ensure that it hasrevealed the financial status, incomes and expenses, and consolidated cash flow on apractical and reasonable basis and the accounting data has been properly recorded inrelation to the property retention, including the anti-corruption and abnormal transactions.Regarding the provision of the financial report, the Company has considered and selectedproper accounting policy for regular practices in compliance with the generally acceptedaccounting standard and has disclosed significant data in the notes to the financialstatement, which the auditor has expressed the opinions to the financial statements ofPTT Chemical Public Company Limited and its subsidiaries in the auditor’s report.

(Mr. Pornchai Rujiprapa) (Mr. Veerasak Kositpaisal)Chairman President & CEO

THE BOARD OF DIRECTORS’ REPORT ON ITSRESPONSIBILITY TO FINANCIAL REPORT

124

AUDIT REPORT OF CERTIFIEDPUBLIC ACCOUNTANT

To the Shareholders of PTT Chemical Public Company LimitedI have audited the accompanying consolidated and separate balance sheets as at31 December 2008, and the related statements of income, changes in equity and cash flowsfor the year then ended of PTT Chemical Public Company Limited and its subsidiaries, andof PTT Chemical Public Company Limited, respectively. The Company’s management isresponsible for the correctness and completeness of information presented in thesefinancial statements. My responsibility is to express an opinion on these financialstatements based on my audit. The consolidated and separate financial statements of PTTChemical Public Company Limited and its subsidiaries, and of PTT Chemical PublicCompany Limited, respectively, for the year ended 31 December 2007 were audited byanother auditor whose report dated 22 February 2008 expressed an unqualified opinion onthose statements, with an emphasis paragraph on the change in accounting policy forinvestments in subsidiaries, associates and jointly-controlled entities from the equity methodof accounting to the cost method in the Company’s financial statements to comply with TAS44 (revised 2007), and the change in accounting policy for the valuation method of property,plant and equipment from revaluation to cost.

I conducted my audit in accordance with generally accepted auditing standards. Thosestandards require that I plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the consolidated and separate financial statements referred to above presentfairly, in all material respects, the financial positions as at 31 December 2008 and the resultsof operations and cash flows for the year then ended of PTT Chemical Public CompanyLimited and its subsidiaries, and of PTT Chemical Public Company Limited, respectively, inaccordance with generally accepted accounting principles.


I draw attention to note 27 to the financial statements. Starting from 1 January 2008,the Group has changed its accounting policy for goodwill from the cost less accumulatedamortisation method to the test for impairment method.

(Vairoj Jindamaneepitak)Certified Public AccountantRegistration No. 3565

KPMG Phoomchai Audit Ltd.Bangkok18 February 2009

126

PTT Chemical Public Company Limited and its SubsidiariesAs at 31 December 2008 and 2007

The accompanying notes are an integral part of these financial statements.

BALANCE SHEETS

128

PTT Chemical Public Company Limited and its SubsidiariesAs at 31 December 2008 and 2007

BALANCE SHEETS




PTT Chemical Public Company Limited and its SubsidiariesFor the years ended 31 December 2008 and 2007

STATEMENTS OF INCOME

130

PTT C

hem

ical

Pub

lic C

ompa

ny L

imite

d an

d its

Sub

sidi

arie

sFo

r th

e ye

ars

ende

d 31

Dec

embe

r 20

08 a

nd 2

007

STA

TEM

EN

TS O

F C

HA

NG

ES IN

EQ

UIT

Y

The

acc

ompa

nyin

g no

tes

are

an in

tegr

al p

art of

the

se fin

anci

al s

tate

men

ts.


PTT C

hem

ical

Pub

lic C

ompa

ny L

imite

d an

d its

Sub

sidi

arie

sFo

r th

e ye

ars

ende

d 31

Dec

embe

r 20

08 a

nd 2

007

STA

TEM

EN

TS O

F C

HA

NG

ES IN

EQ

UIT

Y

The

acc

ompa

nyin

g no

tes

are

an in

tegr

al p

art of

the

se fin

anci

al s

tate

men

ts.

132



STATEMENTS OF CASH FLOWS

134


NOTES TO THE FINANCIAL STATEMENTS

Annual Report 2008 PTT Chemical Public Company Limited 135 Notes to the financial statements For the years ended 31 December 2008 and 2007

Name of the entity Type of business Country of

incorporation Ownership interest (%)

2008 2007 Direct subsidiaries Bangkok Polyethylene

Plc. Manufacturing and distributing petrochemical products

Thailand 100 100

TOC Glycol Co., Ltd. Manufacturing and distributing petrochemical products

Thailand 100 100

Thai Ethanolamines Co., Ltd.

Manufacturing and distributing petrochemical products

Thailand 100 100

Thai Choline Chloride Co., Ltd.


Thailand 100 100

Thai Oleochemicals Co., Ltd.


Thailand 100 100

PTT Polyethylene Co., Ltd.


Thailand 100 100

NPC Safety and Environmental Service Co., Ltd.

Safety and environmental services

Thailand 100 100

PTT Chemical International Pte. Ltd.

Holding and operating international business

Singapore 100 -

Alliance Plant Services Co., Ltd.

Maintenance factory and services engineering

Thailand 60 60

Thai Tank Terminal Ltd.

Service for the storage and handling of liquid chemicals, oil and gas

Thailand 51 51


Name of the entity Type of business Country of

incorporation Ownership interest (%)

2008 2007 Indirect subsidiaries Thai Styrenics Co., Ltd. Manufacturing and

distributing petrochemical products

Thailand 100 -

Thai Fatty Alcohol Co., Ltd.


Thailand 100 -

PTT Chemical International (Asia Pacific ROH) Ltd.

Services rendering to the Group

Thailand 100 -

Jointly-controlled entities Thai Ethoxylate Co., Ltd. Manufacturing and

distributing petrochemical products

Thailand 50 50

Thai Fatty Alcohol Co., Ltd.


Thailand - 50

Cognis Oleochemicals (M) Sdn Bhd


Malaysia 50 -

2 Basis of preparation of the financial statements The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand.


The Group has adopted the following new and revised Thai Accounting Standards (TAS) which were issued by the FAP during 2007 and effective for accounting periods beginning on or after 1 January 2008: TAS 25 (revised 2007) Cash Flows Statements

TAS 29 (revised 2007) Leases

TAS 31 (revised 2007) Inventories

TAS 33 (revised 2007) Borrowing Costs

TAS 35 (revised 2007) Presentation of Financial Statements

TAS 39 (revised 2007) Accounting Policies, Changes in Accounting Estimates and Errors

TAS 41 (revised 2007) Interim Financial Reporting

TAS 43 (revised 2007) Business Combinations

TAS 49 (revised 2007) Construction Contracts

TAS 51 Intangible Assets

The adoption of these new and revised TAS does not have any material impact on the consolidated or separate financial statements except as disclosed in note 27. The FAP has issued during 2008 a number of revised TAS which are only effective for financial statements beginning on or after 1 January 2009 and have not been adopted in the preparation of these financial statements. These revised TAS are disclosed in note 30. The financial statements are presented in Thai Baht, rounded in the notes to the financial statements to the nearest million unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies.

The preparation of financial statements in conformity with TAS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The judgements, estimates and assumptions are based on historical experience and various other factors, including management’s assessment of the potential impact on the Group’s operations and financial position of the global economic crisis. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: Note 4 Acquisitions Note 10 Other long-term investments Note 12 Intangible assets Note 13 Deferred tax Note 28 Financial instruments


3 Significant accounting policies

(a) Basis of consolidation The consolidated financial statements relate to the Company and its subsidiaries and jointly-controlled entities (together referred to as the “Group”) and the Group’s interests in associates. Significant intra-group transactions between the Company and its subsidiaries and jointly-controlled entities are eliminated on consolidation. Subsidiaries Subsidiaries are those companies controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Jointly-controlled entities

Jointly-controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group’s proportionate share of the entities’ assets, liabilities, revenue and expenses combined with items of a similar nature on a line by line basis, from the date that joint control commences until the date that joint control ceases.

Associates

Associates are those companies in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Business combinations Business combinations are accounted for using the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.


(b) Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income. Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange rates ruling at the dates of the transactions.

Foreign entities

The assets and liabilities of foreign entities are translated to Thai Baht at the foreign exchange rates ruling at the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of foreign entities are stated at exchange rates ruling on the balance sheet date. The revenues and expenses of foreign entities are translated to Thai Baht at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on translation are recognised in a separate component of equity until disposal of the investments. Where monetary items, in substance, form part of the Group’s net investment in a foreign entity, foreign exchange differences arising on such monetary items and related hedges are recognised directly in a separate component of equity until disposal of the investment.

(c) Derivative financial instruments

Derivative financial instruments are used to manage exposure to foreign exchange, interest rate arising from operating and financing activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the statement of income when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of income.

The fair value of interest rate swaps is based on broker quotes at the balance sheet date. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the balance sheet date.

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the balance sheet date for the residual maturity of the contract using a risk-free interest rate (based on government bonds).


(d) Cash and cash equivalents Cash and cash equivalents in the statements of cash flows comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.

(e) Trade and other accounts receivable Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.

(f) Inventories

Raw materials, work in progress and finished goods

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost principle, and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale.

(g) Investments

Investments in subsidiaries, jointly-controlled entities and associates

Investments in subsidiaries, jointly-controlled entities and associates in the separate financial statements of the Company are accounted for using the cost method. Investments in associates in the consolidated financial statements are accounted for using the equity method.

Investments in equity securities

Equity securities which are not marketable are stated at cost less impairment losses.

Disposal of investments

On disposal of an investment, the difference between net disposal proceeds and the carrying amount is recognised in the statement of income. If the Group disposes of part of its holding of a particular investment, the deemed cost of the part sold is determined using the weighted average method applied to the carrying value of the total holding of the investment.


(h) Property, plant and equipment

Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Leased assets

Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Property, plant and equipment acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.

Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Plant, machinery and equipment 3-30 years Facilities system 7-30 years Factory tools and equipment 3-15 years Buildings and other constructions 10-25 years Leasehold improvement 6-30 years Furniture, fixtures and office equipment 3-20 years Vehicles 5 years

No depreciation is provided on freehold land or assets under construction.

(i) Intangible assets

Goodwill

Goodwill in a business combination represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired. The Group has changed its accounting policy for goodwill with effect from 1 January 2008 as discussed in note 27. Acquisitions prior to 1 January 2008

Goodwill represents the amount recognised under the Group’s previous accounting policy under which goodwill was stated at cost less accumulated amortisation and impairment losses. Acquisitions on or after 1 January 2008

Goodwill is stated at cost. Subsequent measurement

Goodwill is measured at cost less impairment losses. In respect of equity accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment.


Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses.

Amortisation

Amortisation is recognised in the statement of income on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are as follows:

Production licence fees 10 - 20 years Computer software 5 - 10 years Right to use pipe rack 15 yearsTrademark 10 years

(j) Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. Goodwill and other intangible assets with indefinite useful lives, and intangible assets not yet available for use, are tested for impairment annually and as and when indicators of impairment are identified. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.

Calculation of recoverable amount

The recoverable amount of non-financial assets is the greater of the assets’ net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed. Impairment losses recognised in prior periods in respect of other non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


(k) Interest-bearing liabilities Interest-bearing liabilities are recognised initially at fair value less attributable transaction charges. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of income over the period of the borrowings on an effective interest basis.

(l) Trade and other accounts payable Trade and accounts payable are stated at cost.

(m) Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of income as incurred.

Share based payments

The share option programme allows the Group’s employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(n) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(o) Revenue Revenue excludes value added taxes and is arrived at after deduction of trade discounts.

Sale of goods and services rendered

Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods. Service income is recognised as services are provided.

Rental income Rental income from investment property is recognised in the statement of income on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income.


Interest and dividend income Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payments is established.

(p) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made. Contingent rentals are charged to the statement of income for the accounting period in which they are incurred.

Finance costs

Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognised in the statement of income using the effective interest rate method.

(q) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of income except to the extent that it relates to items recognised directly in equity.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date and applicable to the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is provided, using the liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not recognised for goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.


4 Acquisitions On 20 June 2008, the Company invested SGD 205.2 million to acquire 205.2 million ordinary shares representing 100% of the issued share capital of PTT Chemical International Pte. Ltd. at their par value of SGD 1 per share.

Subsequently, on 23 July 2008, PTT Chemical International Pte. Ltd. entered into Share Purchase Agreement for a 50% stake in Cognis Oleochemicals (M) Sdn Bhd which is incorporated in Malaysia from Cognis BV, which is a related party, at Baht 4,854 million. The acquiree’s net assets at the acquisition date (24 November 2008) comprised the following:

Recognised values

Fair value adjustments

Carrying amounts

(in million Baht) Cash and deposits at financial institutions 959 - 959 Trade accounts receivable 2,344 - 2,344 Inventories 2,276 - 2,276 Other current assets 243 - 243 Long-term investments 28 - 28 Property, plant and equipment 2,889 - 2,889 Intangible assets 165 - 165 Deferred tax assets 23 - 23 Other non-current assets 77 - 77 Interest-bearing liabilities (1,863) - (1,863)Trade accounts payable (1,429) - (1,429)Other current liabilities (619) - (619)Deferred tax liabilities (44) - (44)Other non-current liabilities (593) - (593)Net identifiable assets and liabilities 4,456 - 4,456 Goodwill on acquisition 398 Consideration paid 4,854 Cash acquired (959) Net cash outflow 3,895


5 Related party transactions and balances Related parties are those parties linked to the Group as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.

Relationships with related parties that control or jointly control the Group are being controlled or jointly controlled by the Company or have transactions with the Group were as follows: Name of entities Country of

incorporation/ nationality

Nature of relationships

PTT Plc. Thailand Major shareholder, some common directors

Bangkok Polyethylene Plc. Thailand Subsidiary, 100% shareholding, some common directors

TOC Glycol Co., Ltd. Thailand Subsidiary, 100% shareholding

Thai Ethanolamines Co., Ltd. Thailand Subsidiary, 100% shareholding

Thai Choline Chloride Co., Ltd. Thailand Subsidiary, 100% shareholding

Thai Oleochemicals Co., Ltd. Thailand Subsidiary, 100% shareholding, some common directors

PTT Polyethylene Co., Ltd. Thailand Subsidiary, 100% shareholding, some common directors

NPC Safety and Environmental Service Co., Ltd.

Thailand Subsidiary, 100% shareholding

Alliance Plant Services Co., Ltd.

Thailand Subsidiary, 60% shareholding

Thai Tank Terminal Ltd. Thailand Subsidiary, 51% shareholding

Thai Ethoxylate Co., Ltd. Thailand Jointly - controlled entity, 50% shareholding

Thai Fatty Alcohols Co., Ltd. Thailand Subsidiary of the Company’s subsidiary

Cognis Oleochemical (M) Sdn Bhd

Malaysia Jointly - controlled entity of subsidiary, 50% shareholding by a subsidiary


Name of entities

Country of incorporation/ nationality


PTT Utility Co., Ltd. Thailand Associate, 40% shareholding

PTT Phenol Co., Ltd. Thailand Associate, 30% shareholding, some common directors

PTT Polymer Marketing Co., Ltd. Thailand Associate, 25% shareholding, some common directors

Vinythai Plc. Thailand Associate, 25% shareholding, some common directors

PTT ICT Solutions Co., Ltd. Thailand Associate, 20% shareholding

Eastern Fluid Transport Co., Ltd. Thailand Associate, 15% shareholding, 15% shareholding by a subsidiary

Thai Styrenics Co., Ltd. Thailand Subsidiary of the Company’s subsidiary HMC Polymers Co., Ltd. Thailand The Company’s shareholder, some common

directors

Thai Polyethylene Co., Ltd. Thailand Major shareholder as the Company’s shareholder , some common directors

Thai Polypropylene Co., Ltd. Thailand Major shareholder as the Company’s shareholder, some common directors

Thai Plastic and Chemical Plc. Thailand The Company’s shareholder, some common directors

Thai Industrial Gas Plc.

Thailand Some common directors

Bangkok Industrial Gas Co., Ltd. Thailand Some common directors

Bangkok Synthetic Co., Ltd. Thailand The Company’s shareholder, some common directors

IRPC Plc. Thailand The Company’s shareholder, some common directors

PTT Aromatic and Refinery Plc. Thailand Major shareholding by the Company’s major shareholder, some common directors

PTT Exploration and Production Plc.

Thailand Major shareholding by the Company’s major shareholder


Name of entities

Country of incorporation/ nationality


Rayong Olefins Co., Ltd. Thailand Major shareholding by the Company’s shareholder, some common directors

Siam Styrene Monomer Co., Ltd. Thailand Major shareholding by the Company’s shareholder, some common directors

Star Petroleum Refining Co., Ltd. Thailand Major shareholding by the Company’s shareholder

Siam Mitsui PTA Co., Ltd. Thailand Major shareholding by the Company’s shareholder, some common directors

Thai Petroleum Pipeline Co., Ltd. Thailand Major shareholding by the Company’s major shareholder, some common directors

PTT Polymer Logistic Co., Ltd. Thailand Major shareholding by the Company’s major shareholder, some common directors

Dhipaya Insurance Plc. Thailand Major shareholding by the Company’s major shareholder, some common directors

Vopak Holding International B.V. Netherlands Shareholder of a subsidiary

Cognis Thai Co., Ltd. Thailand Shareholder of a jointly – controlled entity

Cognis Group Related to shareholder of a jointly – controlled entity

The pricing policies for particular types of transactions are explained further below: Transactions

Pricing policies

Revenue from sale of goods Contract price / Regional market price / World market price Revenue from rendering of services Agreed price Purchase of goods/raw materials Contract price / Market price Interest on loan Cost of fund


Significant transactions for the years ended 31 December 2008 and 2007 with related parties were as follows:

Consolidated financial statements

Separate financial statements

2008 2007 2008 2007 (in million Baht) Major Shareholder Sales of goods or rendering of services 4,632 3,251 1,821 3,240 Purchases of goods or receiving of services 43,735 37,211 43,554 37,193 Other income 12 9 12 7 Other expense 98 270 79 263 Subsidiaries Sales of goods or rendering of services - - 14,869 13,346 Purchases of goods or receiving of services - - 730 - Other income - - 1,887 113 Other expense - - 125 - Interest income - - 1,131 336 Jointly – controlled entities Sales of goods or rendering of services - - - 4 Other income - - 7 10 Associates Sales of goods or rendering of services 29,757 25,087 19,362 17,223 Purchases of goods or receiving of services 913 670 108 56 Other income 144 31 143 29 Other expense 151 160 132 159 Other related parties Sales of goods or rendering of services 33,337 28,148 29,958 27,438 Purchases of goods or receiving of services 1,318 4,954 327 4,899 Other income 2 11 2 7 Other expense 122 939 93 902


Balances as at 31 December 2008 and 2007 with related parties were as follows:

Trade accounts receivable from related parties



2008 2007 2008 2007 (in million Baht) Major Shareholder PTT Plc. 190 429 76 426 Subsidiaries Bangkok Polyethylene Plc. - - 530 951 TOC Glycol Co., Ltd. - - 406 565 Thai Oleochemicals Co., Ltd. - - 4 - Thai Tank Terminal Ltd. - - 6 11 Thai Styrenics Co., Ltd. - - 1 - Associates PTT Utility Co., Ltd. 46 1 - - PTT Phenol Co., Ltd. 143 - 111 - PTT Polymer Marketing Co., Ltd. 1,504 2,326 758 1,049 Vinythai Plc. 138 1,192 134 1,189 Other related parties HMC Polymers Co., Ltd. 316 573 314 572 Thai Polyethylene Co., Ltd. 212 794 212 793 Thai Polypropylene Co., Ltd. 54 367 54 367 Thai Plastic and Chemical Plc. 176 790 176 790 Thai Industrial Gas Plc. 5 11 - 11 Bangkok Industrial Gas Co., Ltd. 9 20 9 20 Bangkok Synthetic Co., Ltd. 43 164 42 161 IRPC Plc. 1 335 - 335 PTT Aromatics and Refinery Plc. 53 506 27 430 PTT Exploration and Production Plc. 5 1 - - Rayong Olefins Co., Ltd. - 476 - 476 Siam Styrene Monomer Co., Ltd. 1 282 - 277 Star Petroleum Refining Co., Ltd. 12 38 1 38 Siam Mitsui PTA Co., Ltd. 2 8 - - PTT Polymer Logistics Co., Ltd. - 1 - 1 Cognis Thai Co., Ltd. 103 155 - - Cognis Japan Ltd. - 1 - - PT Cognis Indonesia 4 - - - Cognis Kimya Sanayi Ticalet - 25 - - 3,017 8,495 2,861 8,462 Less allowance for doubtful accounts - - - - Net 3,017 8,495 2,861 8,462 Bad and doubtful debts expenses for the year

-

-

-

-


Other receivables from related parties Consolidated financial statements


2008 2007 2008 2007 (in million Baht) Major Shareholder PTT Plc. 11 9 5 7 Subsidiaries

Bangkok Polyethylene Plc. - - 9 - TOC Glycol Co., Ltd. - - 14 19 Thai Ethanolamine Co., Ltd. - - 7 7 Thai Choline Chloride Co., Ltd. - - 3 6 Thai Oleochemicals Co., Ltd. - - 11 11 PTT Polyethylene Co., Ltd. - - 34 25 NPC Safety and Environmental Service Co., Ltd.

-

-

10

11

Alliance Plant Services Co., Ltd. - - 55 7Thai Tank Terminal Ltd. - - 1 1 Thai Fatty Alcohol Co., Ltd. - - 2 - Jointly – controlled entities Thai Ethoxylate Co., Ltd. - - 2 3 Thai Fatty Alcohol Co., Ltd. - - - 2 Associates PTT Utility Co., Ltd. 4 4 4 4 PTT Phenol Co., Ltd. 2 3 2 3 PTT Polymer Marketing Co., Ltd. - 2 - 2 PTT ICT Solutions Co., Ltd. 14 35 14 35 Other related parties Thai Industrial Gas Plc. - 4 - 4 Cognis Thai Co., Ltd. 2 5 - - 33 62 173 147 Less allowance for doubtful accounts - - - - Net 33 62 173 147 Bad and doubtful debts expenses for the year

-

-

-

-


Loans to related parties Interest rate



2008

2007

2008

2007

2008

2007

(% per annum) (in million Baht) Short-term loans Subsidiaries NPC Safety and Environmental Service Co., Ltd.

5.4-5.6 - - - 230 - Thai Oleochemicals Co., Ltd.

5.4-5.75 6 - - 7,215

4,400

Thai Ethanolamines Co., Ltd.

5.4-5.6 - - - 550 -

- - 7,995 4,400

Less allowance for doubtful accounts - - - -

Short-term loans to related parties, net - - 7,995 4,400

Long-term loans Subsidiaries TOC Glycol Co., Ltd. - 4.8 - - - 1,923 Bangkok Polyethylene Plc.

5.4-5.75 6

-

- 2,030

540

PTT Polyethylene Co., Ltd.

5.4-5.75 6

-

- 19,648

3,700

- - 21,678 6,163 Less allowance for doubtful accounts - - - - Long-term loans to related parties, net - - 21,678 6,163 Summary of loans to related parties Short-term loans - - 7,995 4,400 Long-term loans - - 21,678 6,163 - - 29,673 10,563 Less allowance for doubtful accounts - - - - Total loans to related parties, net - - 29,673 10,563 Bad and doubtful debts expenses for the year - - - -


Movements during the years ended 31 December 2008 and 2007 of loans to related parties were as follows:

Long-term loan agreements

On 31 August 2007, the Company entered into an unsecured long-term loan agreement with PTT Polyethylene Co., Ltd. with the credit limit of Baht 25,300 million. The loan bears interest at the rate of the Company’s cost of fund. This loan is repayable in equally quarter instalments commencing from June 2010 within 8 years.

On 5 September 2007, the Company entered into an unsecured long-term loan agreements with Bangkok Polyethylene Plc. with the credit limit of Baht 3,805 million. The loan bears interest at the rate of the Company’s cost of fund. This loan is repayable equally in semi-annual instalments commencing from September 2010 within 7 years.

Loans to related parties



2008 2007 2008 2007 (in million Baht) Short-term loans Subsidiaries At 1 January - - 4,400 - Increase - - 3,695 4,717 Decrease - - (100) (317) At 31 December - - 7,995 4,400 Long-term loans Subsidiaries At 1 January - - 6,163 4,975 Increase - - 17,438 4,240 Decrease - - (1,923) (3,052) At 31 December - - 21,678 6,163



2008 2007 2008 2007 (in million Baht) Investments in subsidiaries, jointly - controlled entities and associates (Note 9) 8,000

6,905

42,113

35,731


Trade accounts payable to related parties Consolidated financial statements


2008 2007 2008 2007 (in million Baht) Major Shareholder PTT Plc. 1,486 7,381 1,485 7,380 Associate PTT Utility Co., Ltd. 103 141 1 10 Other related parties Thai Plastic and Chemical Plc. 1 - - - Bangkok Industrial Gas Co., Ltd. 10 7 5 5 Bangkok Synthetic Co., Ltd. 10 4 4 4 IRPC Plc. 4 48 - 48 PTT Aromatics and Refinery Plc. - 103 - 103 Rayong Olefins Co., Ltd. - 475 - 475 Siam Styrene Monomer Co., Ltd. 44 - - - Star Petroleum Refining Co., Ltd. - 103 - 103 Vopak Holding International B.V. 157 134 - - Cognis Thai Co.,Ltd. 5 - - - Cognis Oleochemicals (M) Sdn Bhd - 6 - - Total 1,820 8,402 1,495 8,128

Other payables to related parties Consolidated financial statements


2008 2007 2008 2007 (in million Baht) Major Shareholder PTT Plc. 74 54 52 41 Subsidiaries Bangkok Polyethylene Plc. - - 28 - TOC Glycol Co., Ltd. - - 6 - Thai Oleochemicals Co., Ltd. - - 6 - NPC Safety and Environmental Service Co., Ltd

-

-

21

10

Alliance Plant Services Co., Ltd. - - 336 1 Thai Tank Terminal Ltd. - - 4 20 Associates Vinythai Plc. 1 - 1 - PTT Utility Co., Ltd. 4 - - - PTT ICT Solutions Co., Ltd. 37 65 32 65 Eastern Fluid Transport Co., Ltd. 2 1 2 1 Other related parties Thai Plastic and Chemical Plc. 1 2 1 2 Thai Industrial Gas Plc. 12 10 10 10 Bangkok Industrial Gas Co., Ltd. 1 - 1 - IRPC Plc. 2 - 2 - PTT Aromatics and Refinery Plc. 3 9 3 9 PTT Polymer Logistics Co., Ltd. 17 5 11 - Dhipaya Insurance Plc. 13 28 10 8 Cognis Thai Co., Ltd 1 - - - Cognis Deutscheland - 5 - - Total 168 179 526 167


Significant agreements with related parties

Sales Agreements

On 16 December 1992, the Company entered into the Olefins Sales Agreement with five downstream petrochemical companies, for the period of 15 years commencing from 1 June 1995. Under the agreement it is agreed that purchases by these companies will not be lower than the volume specified in the agreement with Olefins product prices based on prices prevailing in the world market.

On 6 February 2002, the Company entered into the Purchase and Sale of Expansion Ethylene Agreement with PTT Public Co., Ltd. for the period of 7 years commencing from commercial operation date of expansion unit of the Company. Product prices are based on prices prevailing in the world market.

On 1 July 2003, the Company entered into the Ethylene Sales Agreement with Thai Polyethylene Company Limited. The selling price structure is characterized by profit sharing from polyethylene product (HDPE). This agreement will expire in 2016.

On 1 November 2003, the Company entered into the Ethylene Sales Agreement with Thai Plastic and Chemicals Public Company Limited and concurrently abrogated its obligations under the former Olefins Sales Agreement and Expansion Olefins Sales Agreement. A new selling price structure for Ethylene is formulated under this agreement with reference to the world market price. This agreement will expire in 2016.

On 25 February 2004, the Company entered into the Propylene Sales Agreement with HMC Polymers Company Limited, pricing structure is profit sharing based on the average price of polypropylene (PP Film). The agreement is effective from 1 January 2004, and will expire on 31 December 2016.

On 1 June 2004, the Company entered into the Propylene Sales Agreement with Thai Polypropylene Company Limited, pricing structure is profit sharing based on the average price of polypropylene (PP Film). The agreement will expire on 31 December 2016.

On 28 February 2005, the Company entered into the additional Ethylene Sales Agreement with Vinythai Public Company Limited at market prices, for the period of 15 years. The Ethylene selling prices are based on market prices. The Company has delivered the product and commenced the agreement with Vinythai Public Company Limited in April 2007.

On 7 July 2006, the Company entered into the Ethylene Sales Agreement with TOC Glycol Company Limited, for the period of 15 years. The Ethylene selling prices are based on Ethane prices that PTT Public Company Limited charges to the Company.

On 25 May 2007, the Company entered into the Propylene Sales Agreement with PTT Phenol Company Limited, for the period of 15 years. The selling prices are based on Polypropylene and Propylene world market prices.

On 1 July 2008, the Company renewed the Propylene Sales Agreement with IRPC Public Company Limited, for the period of 1 year. The selling prices are based on Propylene world market price. The above agreement is effective from 1 July 2008, and will expire on 30 June 2009.

On 1 June 2008, the Company entered into the additional Ethylene Sales Agreement with Vinythai Public Company Limited, for the period of 1 year. The selling prices are based on the world market price.


Hydrogen Supply Agreement

On 1 October 2005, the Company entered into the Raw Hydrogen Supply Agreement (Raw H2) with Bangkok Synthetics Company Limited, for the period of 4 years and expiring on 30 September 2009.

On 1 October 2005, the Company entered into the Purified Hydrogen Supply Agreement (Pure H2) with Bangkok Industrial Gas Company Limited, for the period of 3 years commencing from the date of the first receipt of the product on 23 November 2005. The agreement can be extended by further terms of 1 year with the mutual agreement of both parties.

Pyrolysis and Gasoline Supply Agreement

On 1 January 2001, the Company entered into the Pyrolysis and Gasoline Agreement with PTT Aromatics and Refinery Public Company Limited, for the period of 15 years commencing from the date of the first receipt of the product on 2 November 1996 to 1 November 2011.

Mixed C4 Supply Agreements

The Company entered into two Supply Mixed C4 Agreements with Bangkok Synthetic Company Limited. The term of the agreement dated 20 October 1997 was 10 years from product receiving date on 8 September 1997 to 7 September 2008. The term of the agreement dated 16 December 1992 was 15 years from product receiving date on 1 June 1995 to 31 May 2010.

Tail Gas Supply Agreement

On 11 February 2005, the Company entered into the Tail Gas Supply Agreement with TOC Glycol Company Limited, for the period of 15 years commencing from the date of the first receipt of the product on 1 August 2007 to 31 July 2022.

Feedstock and Fuel Gas Sales Agreements

On 18 October 1991, the Company entered into NGL Supply Agreement and LPG Supply Agreement with PTT Public Co., Ltd., for the period of 15 years commencing from 1 June 1995, Commercial Operation Date of the Company, and is renewable for another period of 5 years with the agreement of both parties.

On 1 June 1999, the Company entered into Purchase and Sale of Light Naphtha and Raffinate Agreement with PTT Public Co., Ltd., for the period of 13 years.

On 9 September 1999, the Company entered into the Feedstock Sales Agreement and the Natural Gas Sales Agreement with PTT Public Company Limited (PTT). Under the Feedstock Sales Agreement, the feedstock pricing structure is changed to link to the olefins prices which the Company sells to its customers, in the manner stipulated in the agreement. This agreement is effective from 1 January 1999, is to continue in force for 12 years, and is renewable for another period of 5 years with the agreement of both parties. The Natural Gas Sales Agreement is the standard agreement under which PTT sells Natural Gas to small power producers (SPP). This agreement is effective from 1 January 1999, is to continue in force for 20 years, and is renewable for another period of 4 years with the agreement of both parties.

On 17 September 2001, the Company entered into Ethane Supply Agreement with PTT Public Company Limited, for the period of 15 years commencing from 1 August 2005 (Startup date) and renewable for another period of 5 years with the agreement of both parties.


On 31 July 2003, the Company amended the part of the Feedstock Sales Agreement with PTT Public Company Limited dealing with Ethane. Under the amendment the pricing structure is changed to link to the Company’s selling price for Polyethylene (HDPE). This agreement is effective from 1 July 2003, and will expire in 2016.

On 20 February 2004, the Company entered into a Feedstock Sales Agreement with PTT Public Company Limited under which the Propane/LPG pricing structure was changed from profit sharing based on the price of Propylene to profit sharing based on the average price of Polypropylene (PP Film). The amendment is effective from 1 January 2004, and extends the original expiry date of the agreement from 31 December 2010 to 31 December 2016.

On 23 September 2005, a subsidiary entered into Purchase and Sale Agreement of the Liquefied Natural Gas Agreement with PTT Public Co., Ltd. for the period of 15 years. The agreement period commenced on the date of the first receipt and distribution of the gas and could be extended in accordance with the condition of the agreement.

Utilities Sales Agreements

On 8 June 1999, the Company entered into Memorandum of Understanding of Power Supply with Bangkok Polyethylene Public Company Limited (BPE) to supply 12 MWh. electricity, for the period of 15 years commencing from 31 October 2000.

On 1 January 2007, the Company entered into extended Utilities Sales Agreement with HMC Polymers Company Limited (HMC) to supply utilities for the period of 10 years.

On 1 January 2007, the Company entered into extended Utilities Sales Agreement with Thai Polyethylene Company Limited (TPE) to supply utilities for the period of 10 years.

The Company entered into Power Supply Agreement with Thai Tank Terminal Company Limited to supply 2.5 MWh. electricity for the period of 15 years commencing from January 2002.

On 1 January 2007, the Company entered into extended Utilities Sales Agreement with Thai Plastic and Chemical Public Company Limited to supply utilities for the period of 10 years.

The Company entered into Power Supply Agreement with Thai Plastic and Chemical Public Company Limited PVC9 to supply 3 MWh. Electricity, for the period of 5 years commencing from January 2007 and renewable for 5 years.

The Company entered into Memorandum of Understanding of Power Supply after the expiry of the Agreement with Bangkok Industrial Gas Company Limited to supply 5 MWh. electricity for the period from 1 October 2007 to 30 September 2008. The extension of this agreement is in process.

On 1 May 2008, the Company entered into Power Supply Agreement with Thai Styrenics Company Limited to supply 1.2 MWh. electricity for the period of 6 years.

Nitrogen Supply Agreement

On 2 May 2003, the Company entered into the Nitrogen Supply Agreement with Bangkok Industrial Gases Company Limited for the period of 10 years commencing from 16 October 2004, and renewable with the provision of 2 years’ notice prior to the expiry date.


On 26 January and 23 September 2004, the Company entered into two Supply Nitrogen Agreements with Bangkok Industrial Gases Company Limited for the period of 3 years commencing from 1 December 2004 and 1 July 2005, respectively, and renewable with the provision of 1 years’ notice prior to the expiry date. The extension of this agreement is in process.

On 5 September 2006, the Company entered into the Nitrogen Supply Agreement with Thai Industrial Gases Public Company Limited for the period of 8 years. The agreement can be terminated by either party providing not less than 12 months’ prior written notice to the counterparty.

Polyethylene Sales Agreement

On 29 September 2006, the Company entered into the Polyethylene Sales Agreement with PTT Polymer Marketing Company Limited, for the period of 15 years commencing from 1 January 2007. Under this agreement, the Company entirely sells all HDPE products to PTT Polymer Marketing Company Limited for distributing to the customers. Under the Polyethylene Sale Agreement, the Polyethylene pricing structure is changed to link to the Polyethylene product price, which the Company sells to ended customers, adjusted by the appropriate marketing expenses for fairness to both parties.

Shareholder’s Commercial Support Agreement

The Company, as the issuer of bonds, entered into Shareholder’s Commercial Support Arrangement with PTT Public Co., Ltd. (PTT) and bondholders’ representative, under which PTT has provided a commercial trade credit line amounting to USD 100 million to the Company (As at 31 December 2008, this commercial credit line had not been used).

Agreement for purchase of materials and utilities

On 23 September 2005, a subsidiary entered into Natural Gas Sales Agreement with PTT Public Company Limited, for the period of 15 years commencing from the date of the first receipt and distribution of the natural gas which could be extended by either party providing not less than 6 months’ prior written notice to the other party.

On 5 April 2007, a subsidiary entered into Sales and Purchase Steam Agreement with PTT Utility Company Limited covering steam, electricity and demineralised water for the period of 15 years commencing from 1 January 2007.

Share Service Agreements

On 24 December 2008, the Company entered into Share Service Agreements with its 7 subsidiaries for the provision of general services. Service charges will be reviewed and agreed in the fourth quarter of each year. The agreements are effective from 1 July 2008 and may be terminated by either party with 3 months written notice.


6 Cash and cash equivalents

The currency denomination of cash and cash equivalents as at 31 December was as follows:

7 Trade accounts receivable

Consolidated

financial statements Separate

financial statements 2008 2007 2008 2007

(in million Baht) Cash on hand 1 1 - - Cash at banks – current accounts 879 - - - Cash at banks – savings accounts 2,060 5,436 729 4,513 Fixed deposit 387 - - - Highly liquid short-term investments 17,848 19,360 17,442 18,187 Total 21,175 24,797 18,171 22,700



2008 2007 2008 2007 (in million Baht) Thai Baht (THB) 19,966 23,348 18,169 21,496 United States Dollars (USD) 267 1,449 2 1,204 Euro (EUR) 512 - - - Others 430 - - - Total 21,175 24,797 18,171 22,700



Note 2008 2007 2008 2007 (in million Baht) Related parties 5 3,017 8,495 2,861 8,462 Other parties 3,242 4,039 194 264 6,259 12,534 3,055 8,726 Less allowance for doubtful accounts (15) (2) (2) (2) Total 6,244 12,532 3,053 8,724 Bad and doubtful debts expenses for the year - - - -


Aging analyses for trade accounts receivable were as follows:

The normal credit term granted by the Group ranges from 19 days to 90 days.

The currency denomination of trade accounts receivable as at 31 December was as follows



2008 2007 2008 2007

(in million Baht)

Related parties Within credit terms 2,978 7,859 2,861 7,826 Overdue:

Less than 3 months 35 634 - 634 3 - 6 months 4 2 - 2 6 - 12 months - - - - Over 12 months - - - -

3,017 8,495 2,861 8,462 Less allowance for doubtful accounts - - - - Net 3,017 8,495 2,861 8,462

Other parties

Within credit terms 2,850 4,022 188 255 Overdue:

Less than 3 months 370 11 4 5 3 - 6 months 11 3 - 2 6 - 12 months 2 1 - - Over 12 months 9 2 2 2

3,242 4,039 194 264 Less allowance for doubtful accounts (15) (2) (2) (2) Net 3,227 4,037 192 262 Total 6,244 12,532 3,053 8,724



2008 2007 2008 2007 (in million Baht) Thai Baht (THB) 3,877 10,295 3,055 8,726 United States Dollars (USD) 1,300 2,239 - - Euro (EUR) 649 - - - Others 433 - - - Total 6,259 12,534 3,055 8,726


8 Inventories

In 2008, the Company and subsidiaries recognised allowance for decline in net realisable value of inventories of Baht 284 million and Baht 753 million, respectively, which was included in cost of sale of goods.

9 Investments in subsidiaries, jointly-controlled entities and associates



2008 2007 2008 2007 (in million Baht) Finished goods 3,594 1,431 864 801Work in progress 676 59 - - Raw materials 1,753 2,715 805 2,368Factory supplies 273 115 102 102Spare parts 2,120 1,912 1,751 1,665Goods in transit 21 11 6 11 8,437 6,243 3,528 4,947Less allowance for decline in value of inventories (773) - (284) - allowance for obsolescence (17) - (11) - Net 7,647 6,243 3,233 4,947



2008 2007 2008 2007 (in million Baht) At 1 January 6,905 5,036 35,731 23,599 Share of profits of investments - equity method 40 28 - - Acquisitions 1,107 1,877 6,382 12,132 Dividend income (52) (36) - - At 31 December 8,000 6,905 42,113 35,731

Ann

ual R

epor

t 200

8

P

TT C

hem

ical

Pub

lic C

ompa

ny L

imite

d 1

62

Not

es to

the

finan

cial

stat

emen

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2008

and

200

7

Inve

stm

ents

in s

ubsi

diar

ies,

join

tly-c

ontro

lled

entit

ies

and

asso

ciat

es a

s at

31

Dec

embe

r 200

8 an

d 20

07, a

nd d

ivid

end

inco

me

from

thos

e in

vest

men

ts fo

r the

yea

rs th

en

ende

d w

ere

as fo

llow

s:

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

O

wne

rshi

p in

tere

st

Paid

-up

capi

tal

Cos

t met

hod

Eq

uity

met

hod

Im

pairm

ent

A

t equ

ity -

net

D

ivid

end

inco

me

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

2007

(%)

(in m

illio

n Ba

ht)

Ass

ocia

tes

PT

T U

tility

Co.

, Ltd

. 40

40

6,

859

6,85

92,

744

2,74

4 2,

478

2,61

5 -

- 2,

478

2,61

5 -

-

PTT

Phen

ol

C

o., L

td.

30

30

6,89

2 3,

202

2,06

8 96

1 1,

836

852

- -

1,83

6 85

2 -

-

PTT

Po

lym

er

M

arke

ting

C

o., L

td.

25

25

40

4010

10

30

38

- -

30

38

-

- V

inyt

hai P

lc.

25

25

7,11

1 7,

111

3,29

7 3,

297

3,59

93,

360

- -

3,59

9 3,

360

50

35

Ea

ster

n

Flui

d

Tran

spor

t

Co.

, Ltd

. 23

23

10

10

1 1

108

- -

10

8 2

1

PTT

ICT

Solu

tions

C

o., L

td.

20

20

150

150

30

30

4732

-

- 47

32

-

-

Tot

al

8,

150

7,04

3 8,

000

6,90

5 -

- 8,

000

6,90

5 52

36

Ann

ual R

epor

t 200

8

P

TT C

hem

ical

Pub

lic C

ompa

ny L

imite

d 1

63

Not

es to

the

finan

cial

stat

emen

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2008

and

200

7

Sepa

rate

fina

ncia

l sta

tem

ents

Ow

ners

hip

inte

rest

Pa

id-u

p ca

pita

l C

ost m

etho

d

Impa

irmen

t

At c

ost -

net

Mar

ket p

rice

Div

iden

d in

com

e 20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

(%)

(in m

illio

n Ba

ht)

Subs

idia

ries

Ban

gkok

Poly

ethy

lene

Plc

. 10

0 10

0 1,

700

1,70

0 3,

664

3,66

4 -

- 3,

664

3,66

4 -

- -

18

0 TO

C G

lyco

l

Co.

, Ltd

. 10

0 10

0 5,

395

5,39

5 5,

395

5,39

5 -

- 5,

395

5,39

5 -

- 4,

336

1,

329

Thai

Etha

nola

min

e

Co.

, Ltd

. 10

0 10

0 90

0 45

0 90

0 45

0 -

- 90

0 45

0 -

- -

-

Thai

Cho

line

Chl

orid

e

C

o., L

td.

100

100

280

280

280

280

- -

280

280

- -

-

- Th

ai O

leo-

Che

mic

als

C

o., L

td.

100

100

2,40

0 2,

400

2,40

0 2,

400

- -

2,40

0 2,

400

- -

-

- PT

T

Po

lyet

hyle

ne C

o.,

Lt

d.

100

100

15,1

00

15,1

00

15,7

00

15,7

00

- -

15,7

00

15,7

00

- -

-

- N

PC S

afet

y

an

d En

viro

n-

m

enta

l Ser

vice

Co.

, Ltd

. 10

0 10

0 16

5 10

5 16

5 10

5 -

- 16

5 10

5 -

- -

-

Ann

ual R

epor

t 200

8

P

TT C

hem

ical

Pub

lic C

ompa

ny L

imite

d 1

64

Not

es to

the

finan

cial

stat

emen

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2008

and

200

7

Sepa

rate

fina

ncia

l sta

tem

ents

Ow

ners

hip

inte

rest

Pa

id-u

p ca

pita

l C

ost m

etho

d

Impa

irmen

t

At c

ost -

net

Mar

ket p

rice

D

ivid

end

inco

me

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

(%)

(in m

illio

n Ba

ht)

Alli

ance

Pla

nt

Serv

ices

Co.

, Ltd

. 60

60

42

42

25

25

-

-

25

25

-

-

- -

Thai

Tan

k

Te

rmin

al L

td.

51

51

900

900

459

45

9

-

-

459

45

9

-

-

411

358

PTT

Che

mic

al

Inte

rnat

iona

l Pt

e. L

td.

10

0

-

4,

765

-

4,

765

-

-

-

4,76

5

-

-

-

-

- A

ssoc

iate

s

PTT

Util

ity

C

o., L

td.

40

40

6,85

9 6,

859

2,74

4

2,74

4

-

-

2,77

4

2,74

4

-

-

-

-

PTT

Phen

ol

C

o., L

td.

30

30

6,89

2 3,

202

2,06

8

961

-

-

2,

068

96

1

-

-

-

-

PTT

Poly

mer

Mar

ketin

g

C

o., L

td.

25

25

40

40

10

10

-

-

10

10

-

-

-

-

Vin

ytha

i Plc

. 25

25

7,

111

7,11

1 3,

297

3,

297

-

-

3,

297

3,

297

-

-

50

35

Ea

ster

n Fl

uid

Tran

spor

t Co.

, Ltd

. 15

15

10

10

1

1

-

-

1

1

-

-

1

-

PTT

ICT

Solu

tions

Co.

, Ltd

. 20

20

15

0 15

0 30

30

-

-

30

30

-

-

-

-

Jo

intly

-con

trol

led

entit

y

Thai

Eth

oxyl

ate

Co.

, Ltd

. 50

50

42

0 42

0 21

0

210

-

-

21

0

210

-

-

-

-

Tot

al

42,1

13

35,7

31

-

-

42

,113

35,7

31

-

-

4,

798

1,90

2


The following summarised financial information on associated companies which have been accounted for using the equity method is not adjusted for the percentage of ownership held by the Group:

Owner-

ship

Total assets

Total

liabilities

Total

revenues

Net profit/ (loss)

(%) (in million Baht) 2008 PTT Utility Co., Ltd. 40 15,661 9,466 2,687 (343)PTT Phenol Co., Ltd. 30 14,676 8,555 34 (407)PTT Polymer Marketing Co., Ltd. 25 1,877 1,759 28,342 (33)Vinythai Plc. 25 15,830 2,292 13,320 1,035Eastern Fluid Transport Co., Ltd. 15 75 29 184 19PTT ICT Solutions Co., Ltd. 20 840 607 947 73Total 48,959 22,708 45,514 344 2007 PTT Utility Co., Ltd. 40 11,125 4,586 1,519 (145)PTT Phenol Co., Ltd. 30 8,423 5,584 2 (208)PTT Polymer Marketing Co., Ltd. 25 2,779 2,629 24,614 88Vinythai Plc. 25 16,548 3,828 12,680 654Eastern Fluid Transport Co., Ltd. 15 52 18 59 7PTT ICT Solutions Co., Ltd. 20 691 531 648 11Total 39,618 17,176 39,522 407

Ann

ual R

epor

t 200

8

P

TT C

hem

ical

Pub

lic C

ompa

ny L

imite

d 1

66

Not

es to

the

finan

cial

stat

emen

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2008

and

200

7

The

follo

win

g su

mm

aris

ed fi

nanc

ial i

nfor

mat

ion

on in

tere

sts

in jo

intly

-con

trolle

d en

tity

whi

ch h

as b

een

incl

uded

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts

repr

esen

ts th

e G

roup

’s sh

are:

O

wne

r-sh

ip

Cur

rent

as

sets

Non

-cu

rren

t as

sets

T

otal

as

sets

Cur

rent

lia

bilit

ies

Non

-cu

rren

t lia

bilit

ies

Tot

al

liab-

ilitie

s

T

otal

re

venu

es

T

otal

ex

pens

es

Net

Pr

ofit

(%

) (in

mill

ion

Baht

) 20

08

Thai

Eth

oxyl

ate

Co.

, Ltd

. 50

31

424

155

585

143

228

1,22

41,

131

93

T

otal

314

241

555

8514

322

81,

224

1,13

1

93

20

07

Thai

Eth

oxyl

ate

Co.

, Ltd

. 50

32

624

056

616

716

533

292

888

6

42

Tot

al

32

624

056

616

716

533

292

888

6

42


10 Other long-term investments

The currency denomination of other long-term investments as at 31 December was as follows:

Consolidated


financial statements 2008 2007 2008 2007

(in million Baht) Other long-term investments Other non marketable equity securities Alliance Petrochemical Investment (Singapore) Pte. Ltd. (16.67% Shareholding)

290

290

290

290

Guangzhou Keylink Chemical Co., Ltd.

(15% Shareholding) 29 - - - 319 290 290 290



2008 2007 2008 2007 (in million Baht) Singapore Dollars (SGD) 290 290 290 290 Hong Kong Dollars (HKD) 29 - - - Total 319 290 290 290

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

68 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

11

Pro

pert

y, p

lant

and

equ

ipm

ent

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Land

Pl

ant,

mac

hine

ry

and

equi

pmen

t

Pipe

line

and

met

erin

g

Fact

ory

equi

pmen

t an

d to

ols

Bui

ldin

gs

Leas

ehol

d im

prov

e-m

ent

Bui

ldin

gs

impr

ove-

men

t

Fu

rnitu

re,

fixtu

res

and

equi

pmen

t

Veh

icle

s

A

sset

s und

er

cons

truct

ion

To

tal

Cos

t (in

mill

ion

Baht

) A

t 1 Ja

nuar

y 20

07

1,85

6 57

,296

77

373

8

1,8

04

361

4163

337

013

,417

76

,289

A

dditi

ons

132

29

-

70

96

-2

7011

426

,802

27

,315

Tr

ansf

ers

487

8,39

8 39

242

49

11

9

38-

(9,4

26)

- D

ispo

sals

-

(3

4)-

(279

)-

-

-(1

52)

(88)

(123

) (6

76)

At 3

1 D

ecem

ber

2007

an

d 1

Jan

uary

200

8 2,

475

65,6

89

1,16

557

1 1,

949

37

252

589

396

30,6

70

103,

928

Add

ition

s -

665

-77

54

1

-14

411

924

,692

25

,752

Tr

ansf

ers

689

9,07

1 62

422

1,

451

76

223

08

(12,

172)

1

Dis

posa

ls

- (3

8)-

(3)

(89)

(2

)-

(17)

(15)

(438

) (6

02)

Acq

uisi

tion

thro

ugh

busi

ness

com

bina

tions

130

6,

400

--

2,84

1

--

246

23

404

10

,044

Tr

ansl

atio

n di

ffer

ence

s on

cons

olid

atio

n (2

)

144

--

6 -

-9

-

(26)

131

At 3

1 D

ecem

ber

2008

3,

292

81,9

31

1,78

966

76,

212

44

754

1,20

153

143

,130

13

9,25

4 F

inan

ce c

osts

cap

italis

ed

Fi

nanc

e co

sts c

apita

lised

durin

g 20

07 (n

ote

22)

-

-

-

-

-

-

-

-

- 1

1 R

ates

of i

nter

est c

apita

lised

du

ring

2007

(% p

er a

nnum

)-

-

-

-

-

-

-

-

-

4-6

4

-6

Fina

nce

cost

s cap

italis

ed

du

ring

2008

(not

e 22

) -

-

-

-

13

-

-

-

-

1 14

R

ates

of i

nter

est c

apita

lised

durin

g 20

08 (%

per

ann

um)

-

-

-

-

4-6

-

-

-

-

4-6

4

-6

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

69 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Dep

reci

atio

n ch

arge

for t

he y

ear

-

(3,3

41)

(9

6)

(

84)

(1

36)

(19)

(2

)

(94

)

(88

)

-

(3,

860)

D

ispo

sals

-

19

-

4

5

8

1

-

18

1

2

-

11

2 A

cqui

sitio

n th

roug

h bu

sine

ss

com

bina

tions

-

(5,0

67)

-

-

(1

,719

)

-

-

(2

23)

(12

)

-

(7

,021

) Tr

ansl

atio

n di

ffer

ence

s on

cons

olid

atio

n -

(129

)

-

-

8

-

-

(9

)

-

-

(130

) A

t 31

Dec

embe

r 20

08

-

(34,

102)

(575

)

(444

)

(2,8

31)

(2

35)

(4

0)

(7

10)

(2

56)

-

(3

9,19

3)

N

et b

ook

valu

e

O

wne

d as

sets

2,

475

40

,105

686

20

7

907

155

14

133

10

30

,670

75,3

62

Ass

ets u

nder

fina

nce

leas

es

-

-

-

-

-

-

-

54

218

-

2

72

Tot

al a

t 31

Dec

embe

r 20

07

2,47

5

40,1

05

68

6

207

907

15

5

14

18

7

228

30

,670

75,6

34

Net

boo

k va

lue

O

wne

d as

sets

3,

292

47

,829

1,21

4

223

3

,381

212

14

416

2

5

43,1

30

99

,736

A

sset

s und

er fi

nanc

e le

ases

-

-

-

-

-

-

-

75

25

0

-

3

25

Tot

al a

t 31

Dec

embe

r 20

08

3,29

2

47,8

29

1

,214

223

3

,381

212

14

491

275

43

,130

100,

061

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Land

Pl

ant,

mac

hine

ry

and

equi

pmen

t

Pipe

line

and

met

erin

g

Fact

ory

equi

pmen

t an

d to

ols

Bui

ldin

gs

Leas

ehol

d im

prov

e-m

ent

Bui

ldin

gs

impr

ove-

men

t

Furn

iture

, fix

ture

s and

eq

uipm

ent

Veh

icle

s

A

sset

s und

er

cons

truct

ion

To

tal

(in

mill

ion

Baht

) A

ccum

ulat

ed d

epre

ciat

ion

At 1

Janu

ary

2007

-

(2

2,74

1)

(4

29)

(5

69)

(9

43)

(2

06)

(3

7)

(4

92)

(1

68)

-

(2

5,58

5)

Dep

reci

atio

n ch

arge

for t

he y

ear

-

(2,8

75)

(5

0)

(7

4)

(

99)

(

11)

(

1)

(

62)

(

73)

-

(3

,245

) D

ispo

sals

-

32

-

279

-

-

-

15

2

73

-

536

At 3

1 D

ecem

ber

2007

and

1 J

anua

ry 2

008

-

(25,

584)

(479

)

(364

)

(1,0

42)

(2

17)

(3

8)

(4

02)

(1

68)

-

(2

8,29

4)

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

70 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Dep

reci

atio

n ch

arge

for

th

e ye

ar

-

(2

,351

)

(63)

(6

7)(5

6)

(11)

-(7

7)(6

5) -

(2,6

90)

Dis

posa

ls

-

--

3 -

--

146

- 23

A

t 31

Dec

embe

r 20

08

-

(23,

568)

(541

)(4

13)

(516

)(2

12)

(38)

(402

)(1

83)

- (2

5,87

3)

The

Com

pany

fina

ncia

l sta

tem

ents

La

nd

Pl

ant,

mac

hine

ry

and

equi

pmen

t

Pipe

line

and

met

erin

g

Fact

ory

equi

pmen

t an

d to

ols

Bui

ldin

gs

Leas

ehol

d im

prov

e-m

ent

Bui

ldin

gs

impr

ove-

men

t

Fu

rnitu

re,

fixtu

res

and

equi

pmen

t

Veh

icle

s

A

sset

s und

er

cons

truct

ion

To

tal

(in

mill

ion

Baht

) C

ost

At 1

Janu

ary

2007

48

9 41

,289

76

771

1

909

328

3853

629

37,

733

53,0

93

Add

ition

s 6

4

11

-

24

--

246

924,

311

4,55

0 Tr

ansf

ers

479

7,90

9 39

242

48

119

37-

(8,9

27)

- D

ispo

sals

-

(2

8)-

(279

)-

--

(137

)(8

4)(1

22)

(650

) A

t 31

Dec

embe

r 20

07

an

d 1

Jan

uary

200

8 1,

032

49,1

81

1,15

949

8 95

733

949

482

301

2,99

5 56

,993

A

dditi

ons

-

298

-

50

--

-11

872

6,14

9 6,

687

Tran

sfer

s 68

9 95

2 71

21

907

37-

229

-(2

,906

)-

Dis

posa

ls

- (1

4)-

(3)

--

-(1

4)(8

)(4

09)

(448

) A

t 31

Dec

embe

r 20

08

1,72

1 50

,417

1,

230

566

1,86

437

649

815

365

5,82

9 63

,232

A

ccum

ulat

ed d

epre

ciat

ion

A

t 1 Ja

nuar

y 20

07

-

(19,

105)

(4

29)

(565

)

(408

) (1

92)

(37)

(4

26)

(135

) -

(2

1,29

7)D

epre

ciat

ion

char

ge fo

r th

e ye

ar

-

(2

,140

)

(49)

(6

3)

(52)

(9

) (1

) (4

9)

(59)

-

(2

,422

) D

ispo

sals

-

28

-

27

9

-

-

-

136

70

-

51

3 A

t 31

Dec

embe

r 20

07

-

and

1 J

anua

ry 2

008

-

(21,

217)

(4

78)

(349

)

(460

) (2

01)

(38)

(3

39)

(124

) -

(

23,2

06)

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

71 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

The

Com

pany

fina

ncia

l sta

tem

ents

Land

Pl

ant,

mac

hine

ry

and

equi

pmen

t

Pipe

line

and

met

erin

g

Fact

ory

equi

pmen

t an

d to

ols

Bui

ldin

gs

Leas

ehol

d im

prov

e-m

ent

Bui

ldin

gs

impr

ove-

men

t

Furn

iture

, fix

ture

s and

eq

uipm

ent

Veh

icle

s

A

sset

s und

er

cons

truct

ion

To

tal

(in

mill

ion

Baht

)

N

et b

ook

valu

e

O

wne

d as

sets

1,

032

27

,964

681

14

9

497

13

8

11

10

1

3

2,99

5

33,5

71

Ass

ets u

nder

fina

nce

leas

es

-

-

-

-

-

-

-

42

17

4

-

216

T

otal

at 3

1 D

ecem

ber

2007

1,

032

27

,964

681

14

9

497

13

8

11

14

3

177

2,

995

33

,787

N

et b

ook

valu

e

O

wne

d as

sets

1,

721

26

,849

689

15

3

1,34

8

164

11

356

4

5,

829

37

,124

A

sset

s und

er fi

nanc

e le

ases

-

-

-

-

-

-

-

57

178

-

23

5 T

otal

at 3

1 D

ecem

ber

2008

1,

721

26

,849

689

15

3

1,34

8

164

11

413

18

2

5,82

9

37,3

59

A

s at 3

1 D

ecem

ber 2

008,

the

gros

s car

ryin

g am

ount

of c

erta

in fu

lly d

epre

ciat

ed p

rope

rty a

nd e

quip

men

t tha

t wer

e st

ill in

use

am

ount

ed to

Bah

t 919

.03

mill

ion

in th

e co

nsol

idat

ed

finan

cial

stat

emen

ts (2

007:

Bah

t 744

.76

mill

ion)

and

am

ount

ed to

Bah

t 732

.98

mill

ion

in th

e se

para

te fi

nanc

ial s

tate

men

ts (2

007:

Bah

t 632

.06

mill

ion)

.

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

72 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

12

Inta

ngib

le a

sset

s

C

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Li

cens

e fo

r

Rig

ht fo

r

prod

uctio

n So

ftwar

e R

ight

to u

seR

ight

to u

se

othe

r

proc

ess

Lice

nces

Pi

pelin

e Je

tty

oper

atio

n G

oodw

ill

Tota

l C

ost

(in m

illio

n Ba

ht)

At 1

Janu

ary

2007

81

926

925

114

972

2,94

35,

142

Add

ition

s -

15

- -

796

-81

1 Tr

ansf

ers

- 28

-

1 -

-29

A

t 31

Dec

embe

r 20

07 a

nd 1

Jan

uary

200

8 81

9 31

2 25

11

5 1,

768

2,94

35,

982

Add

ition

s 30

7

- -

30

431

498

Acq

uisi

tion

thro

ugh

busi

ness

com

bina

tions

1,

758

- -

- 55

36

1,84

9 Tr

ansf

ers

26

79

- -

(89)

-

16

Tran

slat

ion

diff

eren

ces o

n co

nsol

idat

ion

71

- -

- 4

176

A

t 31

Dec

embe

r 20

08

2,70

4 39

8 25

11

5 1,

768

3,41

18,

421

Acc

umul

ated

am

ortis

atio

n

At 1

Janu

ary

2007

(3

15)

(113

) (8

) (5

)-

(78)

(5

19)

Am

ortis

atio

n ch

arge

for t

he y

ear

(63)

(32)

(2

) (7

)-

(312

)(4

16)

At 3

1 D

ecem

ber

2007

and

1 J

anua

ry 2

008

(378

)(1

45)

(10)

(1

2)-

(390

)(9

35)

Am

ortis

atio

n ch

arge

for t

he y

ear

(78)

(36)

(2

) (7

)(3

)-

(126

) A

cqui

sitio

n th

roug

h bu

sine

ss c

ombi

natio

ns

(1,6

35)

- -

- (4

1)-

(1,6

76)

Tran

sfer

s 17

(1

7)

- -

- -

- Tr

ansl

atio

n di

ffer

ence

s on

cons

olid

atio

n (6

8)-

- -

(2)

- (7

0)

Loss

from

impa

irmen

t -

- -

- -

(1)

(1)

At 3

1 D

ecem

ber

2008

(2

,142

)(1

98)

(12)

(1

9)(4

6)(3

91)

(2,8

08)

N

et b

ook

valu

e

A

t 31

Dec

embe

r 20

07

441

167

15

103

1,76

8 2,

553

5,04

7 A

t 31

Dec

embe

r 20

08

562

200

13

96

1,72

2 3,

020

5,61

3


13 Deferred tax

Deferred tax assets and liabilities determined after appropriate offsetting are included in the balance sheets as follows:

Separate financial statements License for

production Software licences Others Total

(in million Baht) Cost At 1 January 2007 680 220 - 900Additions - 8 - 8Transfers - 28 - 28At 31 December 2007 and 1 January 2008 680 256 - 936Additions - - 6 6Transfers - 15 - 15At 31 December 2008 680 271 6 957 Accumulated amortisation At 1 January 2007 (241) (93) - (334)Amortisation charge for the year (57) (24) - (81)At 31 December 2007 and at 1 January 2008 (298) (117) - (415)Amortisation charge for the year (57) (27) - (84)At 31 December 2008 (355) (144) - (499) Net book value At 31 December 2007 382 139 - 521At 31 December 2008 325 127 6 458



2008 2007 2008 2007 (in million Baht) Deferred tax assets 197 1 113 1 Deferred tax liabilities (750) (641) (648) (641) Net (553) (640) (535) (640)


Movements in deferred tax assets and liabilities during the year were as follows:

Consolidated financial statements (Charged) / credited to:

At 1 January

2008

Statement of income (note 23) Equity

Acquisition of

subsidiary

Exchange differences

At 31 December

2008 Deferred tax liabilities (in million Baht) Depreciation and

amortization

(618)

(75)

-

(16)

-

(709) Finance lease assets (23) 1 - - - (22) Net gain on remeasurement to fair value of interest rate swap contracts

-

(12)

-

-

-

(12) Others - (1) - (6) - (7) Total (641) (87) - (22) - (750) Deferred tax assets Net loss on

remeasurement to fair value of cross currency interest rate swap contracts

-

46

-

2

-

48 Allowance for net

realizable value of inventories

-

112

-

7

-

119 Others 1 27 - 2 - 30 Total 1 185 - 11 - 197 Net

(640)

98

-

(11)

-

(553)


Consolidated financial statements (Charged) / credited to:

At 1 January

2007

Statement of income (note 23) Equity

Acquisition of

subsidiary

Exchange differences

At 31 December

2007 Deferred tax liabilities (in million Baht) Depreciation and

amortization

(605)

(13)

-

-

-

(618) Finance lease assets (18) (5) - - - (23) Total (623) (18) - - - (641) Deferred tax assets Allowance for doubtful

accounts

1

-

-

-

-

1 Total 1 - - - - 1 Net

(622)

(18)

-

-

-

(640)

Separate financial statements (Charged) / credited to:

At 1 January

2008

Statement of income (note 23)

Equity

At 31 December

2008 (in million Baht) Deferred tax liabilities Depreciation (618) 2 - (616)Finance lease assets (23) 4 - (19)Net gain on remeasurement to fair value of interest rate swap contracts - (13) - (13)Total (641) (7) - (648) Deferred tax assets Allowance for net realizable value of inventories - 72 - 72 Net loss on remeasurement to fair value of cross currency interest rate swap - 38 - 38 Others 1 2 - 3 Total 1 112 - 113 Net

(640)

105

-

(535)


14 Interest-bearing liabilities

Separate financial statements (Charged) / credited to:

At 1 January

2007

Statement of income (note 23)

Equity

At 31 December

2007 Deferred tax liabilities (in million Baht) Depreciation (605) (13) - (618) Finance lease assets (18) (5) - (23) Total (623) (18) - (641) Deferred tax assets Allowance for doubtful accounts 1 - - 1 Total 1 - - 1 Net

(622)

(18)

-

(640)



2008 2007 2008 2007 (in million Baht) Current Short-term loans from financial institutions

unsecured 979 38 - - Current portion of long-term loans from

financial institutions secured 392 259 - -unsecured 913 830 546 546

1,305 1,089 546 546Debentures secured 400 1,257 400 1,257 Current portion of finance lease liabilities 130 98 100 80 2,814 2,482 1,046 1,883Non-current Long-term loans from financial institutions

secured 431 571 - -unsecured 13,302 2,837 11,636 2,182

13,733 3,408 11,636 2,182Debentures

secured 400 800 400 800unsecured 27,857 14,986 27,857 14,986

28,257 15,786 28,257 15,786 Finance lease liabilities 234 209 166 163 42,224 19,403 40,059 18,131Total 45,038 21,885 41,105 20,014


The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities, as at 31 December were as follows:

Secured interest-bearing liabilities as at 31 December were secured on the following assets:

The principal features of debentures as at 31 December were as follows:



2008 2007 2008 2007 (in million Baht) Within one year 2,684 2,384 946 1,803 After one year but within five years 16,270 6,238 14,269 5,065 After five years 25,720 12,956 25,624 12,903 Total 44,674 21,578 40,839 19,771



2008 2007 2008 2007 (in million Baht) Machinery and equipment 14,460 13,736 12,000 12,000 Total 14,460 13,736 12,000 12,000

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

78 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Faci

litie

s Fa

ce V

alue

In

tere

st

C

onso

lidat

ed

finan

cial

stat

emen

ts

Se

para

te

finan

cial

stat

emen

ts

C

urre

ncy

(in

mill

ion)

Pe

r sha

re

Yea

rs

R

ates

(%) p

.a.

Rep

aym

ent T

erm

s 20

08

20

07

20

08

20

07

(in m

illio

n Ba

ht)

Secu

red

and

in

stal

lmen

t of

prin

cipa

l de

bent

ure

whi

ch

cond

ition

spec

ified

in

the

agre

emen

t

Bah

t 2,

000

1,00

0 -

A

vera

ge B

aht 6

-m

onth

tim

e de

posi

t rat

e pl

us

2.5%

p.a

.

Prin

cipa

l and

inte

rest

ar

e pa

yabl

e on

sem

i-an

nual

bas

is a

nd

mat

urity

to re

deem

on

24 S

epte

mbe

r 201

0.

800

2,

057

80

0

2,05

7

U

nsub

ordi

nate

d an

d un

secu

red

debe

ntur

e,

valu

e of

deb

entu

re is

99

.46

perc

enta

ge o

f the

fa

ce v

alue

, a ti

me

perio

dof

10

year

s

U.S

. D

olla

rs

300

10,0

00

-

5.5

Inte

rest

is p

ayab

le o

n se

mi-a

nnua

l bas

is a

nd

mat

urity

to

rede

em o

n 24

June

201

5

10,4

83

10

,116

10,

483

10

,116

U

nsub

ordi

nate

d an

d un

secu

red

debe

ntur

e B

aht

2,10

0 1,

000

-

4.58

In

tere

st is

pay

able

on

sem

i-ann

ual b

asis

and

m

atur

ity t

o re

deem

on

10 O

ctob

er 2

012

2,08

5

2,08

2

2,08

5

2,08

2

U

nsub

ordi

nate

d an

d un

secu

red

debe

ntur

e B

aht

2,80

0 1,

000

-

5.5

Inte

rest

is p

ayab

le o

n se

mi-a

nnua

l bas

is a

nd

mat

urity

to

rede

em o

n 10

Oct

ober

201

7

2,78

9

2,78

8

2,78

9

2,78

8

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

79 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Faci

litie

s Fa

ce V

alue

In

tere

st

C

onso

lidat

ed

finan

cial

stat

emen

ts

Se

para

te

finan

cial

stat

emen

ts

C

urre

ncy

(in

mill

ion)

Pe

r sha

re

Yea

rs

R

ates

(%) p

.a.

Rep

aym

ent T

erm

s 20

08

20

07

20

08

20

07

(in m

illio

n Ba

ht)

Uns

ubor

dina

ted

and

unse

cure

d de

bent

ure

Bah

t 5

00

1,00

0 -

5.

6 In

tere

st is

pay

able

on

sem

i-ann

ual b

asis

and

m

atur

ity t

o re

deem

on

22 O

ctob

er 2

015

500

-

500

-

Uns

ubor

dina

ted

and

B

aht

8,00

0 1,

000

1-3

5.

3 In

tere

st is

pay

able

on

8,

000

-

8

,000

-

unse

cure

d de

bent

ure

4-

5

6

quar

terly

bas

is a

nd

mat

urity

to

rede

em o

n 4

Dec

embe

r 201

3

U

nsub

ordi

nate

d an

d

Bah

t 4,

000

1,00

0 1-

3

5.3

Inte

rest

is p

ayab

le o

n 4

,000

-

4,

000

-

unse

cure

d de

bent

ure

4-

5

6

quar

terly

bas

is a

nd

6-

7

6.45

m

atur

ity t

o re

deem

on

4 D

ecem

ber 2

015

Tot

al

28

,657

17

,043

28

,657

17,0

43

Less

Cur

rent

por

tion

(400

)

(1

,257

)

(400

)

(1

,257

) N

et

2

8,25

7

15

,786

28

,257

1

5,78

6

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

80 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

The

deta

ils o

f loa

ns a

s at 3

1 D

ecem

ber w

ere

as fo

llow

s:

Faci

litie

s In

tere

st

C

onso

lidat

ed

finan

cial

stat

emen

ts

Se

para

te

finan

cial

stat

emen

ts

Cur

renc

y (in

m

illio

n)

Yea

rs

In

tere

st R

ates

(%) p

.a.

Rep

aym

ent T

erm

s 20

08

20

07

20

08

20

07

The

Com

pany

(in m

illio

n Ba

ht)

U.S

. Dol

lars

(R

evol

ving

cre

dit f

acili

ty h

as

cond

ition

s as s

peci

fied

in th

e ag

reem

ent)

135

-

LIB

OR

plu

s 0.4

3% p

.a.

Rep

aym

ent o

f pr

inci

pal v

arie

d w

ith

repa

ymen

t of i

nter

est i

n ev

ery

thre

e m

onth

or

six

mon

ths o

r upo

n te

rmin

atio

n of

the

agre

emen

t ( S

epte

mbe

r 201

0)

-

-

-

-

B

aht

(Dra

w-d

own

only

per

mitt

ed

until

Dec

embe

r 200

6)

3,00

0 -

A

vera

ge 3

mon

th –

fixed

de

posi

t rat

e of

G

over

nmen

t Sav

ing

Ban

k pl

us 2

.5%

p.a

.

Elev

en se

mi-a

nnua

l ins

talm

ents

with

gra

ce

perio

d fo

r the

firs

t 24

mon

ths c

omm

enci

ng

from

the

date

of s

igni

ng a

gree

men

t.

( Sep

tem

ber 2

005)

2,

181

2,

726

2

,181

2,72

6

B

aht

1,

000

-

THB

FIX

plu

s 0.3

2 %

p.a

. The

prin

cipa

l will

be

repa

yabl

e w

hen

the

agre

emen

t is t

erm

inat

ed (t

he ti

me

of p

erio

d 7

year

s com

men

cing

26

Aug

ust 2

008)

.

1,00

0

-

1,00

0

-

B

aht

7,

500

-

Hig

hest

inte

rest

rate

for

6 m

onth

-fix

ed d

epos

it

plus

1.8

75 %

p.a

.

Fifte

en se

mi-a

nnua

l ins

talm

ents

with

gra

ce

perio

d fo

r the

firs

t 36

mon

ths s

tarti

ng fr

om

the

date

of s

igni

ng a

gree

men

t. (A

ugus

t 20

08)

7,50

0

-

7,50

0

-

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

81 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Fa

cilit

ies

Inte

rest

Con

solid

ated

fin

anci

al st

atem

ents

Sepa

rate

fin

anci

al st

atem

ents

C

urre

ncy

(in

mill

ion)

Y

ears

Inte

rest

Rat

es (%

) p.a

. R

epay

men

t Ter

ms

2008

2007

2008

2007

(in m

illio

n Ba

ht)

Bah

t

1,50

0 -

4.

55 %

N

ine

sem

i-ann

ual i

nsta

lmen

ts w

ith g

race

pe

riod

for t

he fi

rst 3

6 m

onth

s sta

rting

from

th

e da

te o

f sig

ning

agr

eem

ent (

Sept

embe

r 20

08).

1,50

0

-

1,50

0

-

Subs

idia

ries

B

aht

(Con

ditio

ns a

s spe

cifie

d in

th

e ag

reem

ent)

450

-

THB

FIX

3 M

plu

s 0.3

%

p.a.

Th

e pr

inci

pal i

s rep

ayab

le o

n qu

arte

rly b

asis

,in

15

inst

alm

ents

, com

men

cing

on

1 Ju

ne

2006

.

120

24

0

-

-

B

aht

(Con

ditio

ns a

s spe

cifie

d in

th

e ag

reem

ent)

1,00

0 -

TH

BFI

X 3

M p

lus 0

.3 %

p.

a.

The

prin

cipa

l is r

epay

able

on

quar

terly

ba

sis,

in 1

7 in

stal

men

ts, c

omm

enci

ng o

n 1

June

200

8.

835

70

0

-

-

U

SD

(Con

ditio

ns a

s spe

cifie

d in

th

e ag

reem

ent)

22.4

-

LI

BO

R p

lus 1

.45%

p.a

.

The

prin

cipa

l is r

epay

able

on

sem

i-ann

ual

basi

s, in

7 in

stal

men

ts c

omm

enci

ng o

n 31

M

ay 2

006.

220

38

0

-

-

B

aht

36

9.2

-

3 m

onth

-fix

ed d

epos

it

rate

plu

s 2.2

5% p

.a.

The

prin

cipa

l is r

epay

able

on

sem

i-ann

ual

basi

s, in

7 in

stal

men

ts c

omm

enci

ng o

n 31

M

ay 2

006.

104

18

5

-

-

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

82 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

C

urre

ncy

Faci

litie

s In

tere

st

C

onso

lidat

ed

finan

cial

stat

emen

ts

Se

para

te

finan

cial

stat

emen

ts

(in

m

illio

n)

Yea

rs

In

tere

st R

ates

(%) p

.a.

Rep

aym

ent T

erm

s 20

08

20

07

20

08

2007

(in m

illio

n Ba

ht)

Bah

t

1,30

0 -

M

LR m

inus

1.1

25%

-1.2

5%

p.a.

Th

e pr

inci

pal i

s rep

ayab

le o

n se

mi-

annu

al b

asis

, in

14 in

stal

men

ts

com

men

cing

on

1 Ju

ne 2

009

336

91

-

-

Bah

t

135

-

Hig

hest

inte

rest

rate

for 3

m

onth

-fix

ed d

epos

it pl

us

2.25

% p

.a.

The

prin

cipa

l is r

epay

able

on

quar

terly

ba

sis,

in 1

4 in

stal

men

ts c

omm

enci

ng in

N

ovem

ber 2

009.

70

-

-

-

Join

tly-c

ontr

olle

d en

titie

s

Bah

t

286

-

Inte

rest

rate

for 3

mon

th-

fixed

dep

osit

plu

s 3%

p.a

.

The

prin

cipa

l is r

epay

able

on

quar

terly

ba

sis,

in 1

4 in

stal

men

ts c

omm

enci

ng

on 3

1 A

ugus

t 200

8.

164

17

5

-

-

Euro

-

EUR

IBO

R p

lus 0

.6%

p.a

. R

epay

able

on

mat

urity

dat

e in

201

1 1,

008

-

-

-

Tot

al

15,0

38

4,

497

12

,181

2,72

6

Less

: Cur

rent

por

tion

(

1,30

5)

(1

,089

)

(5

45)

(54

5)

Net

13,

733

3,

408

11

,636

2,18

1

As a

t 31

Dec

embe

r 200

8 th

e G

roup

and

the

Com

pany

had

unu

tilis

ed c

redi

t fac

ilitie

s tot

allin

g B

aht 3

0,99

7.48

mill

ion

and

16,7

55.8

5 m

illio

n, re

spec

tivel

y (2

007:

Bah

t 45,

215.

42

mill

ion

and

Baht

14,

579.

21 m

illio

n, re

spec

tivel

y).


Finance lease liabilities

Finance lease liabilities as at 31 December were payable as follows:

The currency denomination of interest-bearing liabilities as at 31 December was as follows:

15 Trade accounts payable

Consolidated financial statements 2008 2007 Principal Interest Payments Principal Interest Payments

(in million Baht) Within one year 130 17 1 147 98 14 112 After one year but within

five years 234 17 251 209 16 225Total 364 34 398 307 30 337

Separate financial statements 2008 2007 Principal Interest Payments Principal Interest Payments

(in million Baht) Within one year 100 12 112 80 11 91 After one year but within

five years 166 12 178 163 12 175Total 266 24 290 243 23 266



2008 2007 2008 2007 (in million Baht) Thai Baht (THB) 32,349 11,391 30,625 9,899United States Dollars (USD) 10,746 10,494 10,480 10,115Others 1,943 - - -Total 45,038 21,885 41,105 20,014

Note



2008 2007 2008 2007 (in million Baht) Related parties 5 1,820 8,402 1,495 8,128 Other parties 1,610 485 72 238 Total 3,430 8,887 1,567 8,366


The currency denomination of trade accounts payable as at 31 December was as follows:

16 Other current liabilities

17 Share capital



2008 2007 2008 2007 (in million Baht) Thai Baht (THB) 3,142 8,819 1,567 8,364 United States Dollars (USD) 50 22 - 2 Euro (EUR) 71 46 - - Others 167 - - - Total 3,430 8,887 1,567 8,366



2008 2007 2008 2007 (in million Baht) Other payables 1,000 314 992 242 Retentions 342 222 159 131 Accrued interest and other accrued expenses 1,057 618 252 359 Value-added tax payable 18 - - 289 Withholding tax payable 199 197 159 177 Others 331 266 117 98 Total 2,947 1,617 1,679 1,296

Par value 2008 2007 per share Number Baht Number Baht

(in Baht) (million shares / million Baht) Authorised At 1 January

-ordinary shares 10 1,519 15,191 1,519 15,191 At 31 December

ordinary shares 10 1,519 15,191 1,519 15,191 Issued and paid up At 1 January

- ordinary shares 10 1,497 14,966 1,490 14,901 Issue of new shares 10 - 2 7 65 At 31 December

ordinary shares 10 1,497 14,968 1,497 14,966


In year 2008, holders of 258,000 warrants under the Company’s Employee Stock Ownership Plan exercised their rights to purchase 258,000 ordinary shares in the Company at the exercise price of Baht 66.50 per share. The Company registered the increase in the paid-up share capital of Baht 2,580,000 (divided into 258,000 shares at Baht 10 par value) with the Ministry of Commerce, increasing the issued and paid-up share capital from Baht 14,965,716,000 (divided into 1,496,571,600 shares at Baht 10 par value) to Baht 14,968,296,000 (divided into 1,496,829,600 shares at Baht 10 par value). The new shares were issued at Baht 66.50 per share, resulting in an increase in share premium of Baht 14,577,000.

In year 2007, holders of 6,456,300 warrants under the Company’s Employee Stock Ownership Plan exercised their rights to purchase 6,456,300 ordinary shares in the Company at the exercise price of Baht 66.50 per share. The Company registered the increase in the paid-up share capital of Baht 64,563,000 (divided into 6,456,300 shares at Baht 10 par value) with the Ministry of Commerce, increasing the issued and paid-up share capital from Baht 14,901,153,000 (divided into 1,490,115,300 shares at Baht 10 par value) to Baht 14,965,716,000 (divided into 1,496,571,600 shares at Baht 10 par value). The new shares were issued at Baht 66.50 per share, resulting in an increase in share premium of Baht 364,780,950.

As at 31 December 2008, there were 22.29 million units of unexercised warrants, which will expire on 28 September 2011.

18 Reserves

Share premium Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.

Currency translation changes The currency translation changes recognised in equity relate to: (a) foreign exchange differences arising from translation of the financial statements of foreign

operations to Thai Baht; (b) foreign exchange differences arising on translation of monetary items which form part of the

Group’s net investment in foreign operations, provided certain conditions are met. Legal reserve Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.


19 Segment information Segment information is presented in respect of the Group’s business segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. The Group comprises the following main business segments: Segment 1 Olefins / Shared Facilities Segment 2 Polymers Segment 3 EO-Based Performance Segment 4 Oleochemicals Segment 5 Services & Others

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

87 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Bus

ines

s seg

men

t res

ults

Se

gmen

t 1

Se

gmen

t 2

Segm

ent 3

Se

gmen

t 4

Segm

ent 5

E

limin

atio

ns

T

otal

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

(in

mill

ion

Baht

) R

even

ue

55,2

27

51,1

31

24,5

5022

,212

12,1

9014

,335

5,75

9 -

3,02

52,

229

(16,

634)

(14,

323)

84,1

17

75,5

84

Inte

rest

inco

me

1,61

8 1,

204

2351

3354

9 7

118

(1,1

31)

(335

)56

4 98

9 O

ther

inco

me

532

1,09

1 17

815

511

553

103

4510

4(4

68)

(810

)47

1 53

8 U

nallo

cate

d re

venu

e 4,

798

1,90

3 -

--

--

--

-(4

,798

)(1

,903

)-

- T

otal

rev

enue

62

,175

55

,329

24

,751

22,4

1812

,338

14,4

425,

871

52

3,04

62,

241

(2

3,03

1)(1

7,37

1)

85,1

52

77,1

11

Cos

t of s

ales

45

,560

40

,090

20

,069

16,9

008,

417

7,82

96,

172

61,

587

1,08

6 (1

6,82

9)(1

4,06

9)64

,976

51

,842

Se

lling

and

adm

inis

trativ

e

E

xpen

ses

2,53

3 1,

567

572

925

107

253

343

136

220

169

(499

)(8

76)

3,27

6 2,

174

Oth

er e

xpen

ses

601

66

178

665

415

8 3

-8

--

1,00

2 87

T

otal

exp

ense

s 48

,694

41

,723

20

,819

17,8

318,

589

8,08

66,

673

14

51,

807

1,26

3

(17,

328)

(14,

945)

69

,254

54

,103

Pr

ofit

(loss

) bef

ore

inte

rest

and

inco

me

tax

expe

nses

13,4

81

13,6

06

3,93

24,

587

3,74

96,

356

(802

)(9

3)1,

239

978

(5,7

03)

(2,4

26)

15,8

98

23,0

08

Inte

rest

exp

ense

1,

208

1,02

9 14

385

2321

028

2 4

5522

(333

)(2

00)

1,37

8 1,

150

Inco

me

tax

expe

nse

2,19

4 2,

155

2414

(1)

-(9

1)-

150

118

44

-

2,

320

2,28

7

Pr

ofit

(loss

) for

the

year

10

,079

10

,422

3,

765

4,48

83,

727

6,14

6(9

93)

(97)

1,03

483

8(5

,414

)(2

,226

)12

,200

19

,571

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

88 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Bus

ines

s seg

men

t fin

anci

al p

ositi

on

Se

gmen

t 1

Se

gmen

t 2

Segm

ent 3

Se

gmen

t 4

Segm

ent 5

E

limin

atio

ns

Tot

al

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

20

08

2007

(in m

illio

n Ba

ht)

Cas

h an

d ca

sh e

quiv

alen

t 12

,610

16

,510

5

,956

6,82

227

388

9 1,

743

383

593

193

- -

21,1

75

24,7

97

Trad

e ac

coun

ts re

ceiv

able

2,

295

7,67

4 1,

505

2,32

685

33,

943

2,36

6 -

373

268

(1,1

48)

(1,6

78)

6,24

4 12

,533

O

ther

acc

ount

s rec

eiva

ble

173

147

273

115

6 1

- -

(184

)(9

4)33

62

In

vent

orie

s 2,

700

4,40

4 1,

342

1,14

029

928

72,

966

372

3941

30

2 (2

)7,

648

6,24

2 Sh

ort-t

erm

loan

s to

rela

ted

Pa

rties

7,

995

4,4

00

--

--

- -

- -

(7,9

95)

(4,4

00)

- -

Oth

er c

urre

nt a

sset

s 96

3

650

555

3,70

5 31

2 30

7 41

1 26

9 41

3 18

9(1

,010

)(3

,668

)1,

644

1,45

2 In

vest

men

ts in

subs

idia

ries,

join

t ven

ture

and

ass

ocia

ted

Com

pani

es

42,1

13

35,7

31

- -

- -

- -

-

-(3

4,11

3)(2

8,82

6)8,

000

6,90

5 O

ther

long

term

inve

stm

ent

235

236

55

55

- -

28

- 2

2(2

)(2

)31

8 29

1 Lo

ng te

rm lo

an to

rela

ted

Parti

es

21,6

78

6,16

3 -

- -

- -

- -

-(2

1,67

8)(6

,163

)-

- Pr

oper

ty, p

lant

and

Eq

uipm

ent

34,4

66

31,0

25

40,8

01

21,6

49

11,3

19

9,98

5 10

,429

6,16

1 4,

201

3,79

0(1

,155

)3,

024

100,

061

75,6

34

Inta

ngib

le a

sset

s 17

4 19

6 2,

031

2,06

7 43

2

649

88

12

9 14

02,

586

2,55

4 5,

612

5,04

7 D

efer

red

tax

asse

ts

105

1 27

-

17

- 49

- -

- -

- 19

8

1 O

ther

non

-cur

rent

ass

ets

156

314

312

19

827

207

91

11

1

1 (2

)(2

)1,

385

55

0 T

otal

ass

ets

125,

663

107,

451

52,6

11

37,7

86

13,9

54

15,6

25

18,7

38

7,2

85

5,75

1 4,

624

(64,

399)

(39,

257)

152,

318

133

,514

Ann

ual R

epor

t 200

8

PT

T Ch

emica

l Pub

lic C

ompa

ny L

imite

d 1

89 N

otes

to th

e fin

anci

al st

atem

ents

Fo

r th

e ye

ars e

nded

31

Dec

embe

r 20

08 a

nd 2

007

Shor

t – te

rm lo

ans f

rom

fin

anci

al in

stitu

tions

-

- -

--

-97

9 38

--

- -

979

38

Shor

t-ter

m lo

ans f

rom

rela

ted

Pa

rties

-

- -

-55

0-

7,21

5 4,

400

230

-(7

,995

)(4

,400

)-

- Tr

ade

acco

unts

pay

able

1,

561

8,35

5 66

11,

019

560

861

1,32

1 59

316

213

(989

)(1

,620

)3,

430

8,88

7 O

ther

acc

ount

s pay

able

to

re

late

d pa

rties

51

4 16

7 10

742

3744

30

1249

7(5

69)

(93)

168

179

Paya

bles

to c

ontra

ctor

s 15

4 24

8 2,

740

3,71

462

321

13

248

7526

(22)

(1)

3,02

2 4,

556

Cur

rent

por

tion

of lo

ng-te

rm

Lo

ans

442

443

427

351

2110

48

-36

728

5-

- 1,

305

1,08

9 C

urre

nt p

ortio

n of

deb

entu

res

324

1,02

2 76

235

--

- -

--

- -

400

1,25

7 In

com

e ta

x pa

yble

19

5 1,

330

15-

--

15

-37

41(1

18)

(85)

144

1,28

6 O

ther

cur

rent

liab

ilitie

s 1,

360

1,05

1 53

457

954

756

702

133

580

169

(776

)(3

71)

2,94

7 1,

617

Long

-term

loan

s fro

m

fin

anci

al in

stitu

tions

9,

424

1,77

0 2,

212

727

143

165

1,29

6 91

658

655

- -

13,7

33

3,40

8 Lo

ng-te

rm lo

ans f

rom

rela

ted

Pa

rties

-

- 21

,678

4,24

0-

1,92

3-

--

-(2

1,67

8)(6

,163

)-

- D

eben

ture

s 22

,884

12

,807

5,

373

2,97

9-

--

--

--

- 28

,257

15

,786

D

efer

red

tax

liabi

litie

s 51

6 51

9 20

512

1-

-28

-

1-

- -

750

640

Oth

er n

on-c

urre

nt li

abili

ties

239

244

6748

1314

599

570

64(2

)(2

)98

6 37

3 T

otal

liab

ilitie

s 37

,613

27

,956

34

,095

14,0

551,

933

3,39

412

,246

4,

986

2,38

31,

460

(32,

149)

(12,

735)

56,1

21

39,1

16

Se

gmen

t 1

Segm

ent 2

Se

gmen

t 3

Segm

ent 4

Se

gmen

t 5

Elim

inat

ions

T

otal

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

2008

20

07

(in

mill

ion

Baht

)


20 Selling and administrative expenses

21 Personnel expenses

The defined contribution plans comprise provident funds established by the Group in Thailand for its employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 2% to 10% of their basic salaries and by the Group at rates ranging from 5% to 10% of the employees’ basic salaries. The provident funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Manager.

22 Interest and financial expenses



2008 2007 2008 2007 (in million Baht) Distribution 195 179 13 18 Personnel 1,203 1,005 892 775 Administrative 1,554 809 1,623 781 Depreciation and amortisation 262 181 208 150 Loss on disposal of fixed assets 62 - 27 - Total 3,276 2,174 2,763 1,724



2008 2007 2008 2007 (in million Baht) Wages and salaries 2,805 2,328 1,895 1,700 Contribution to defined contribution plans 119 91 83 71 Others 20 7 - - Total 2,944 2,426 1,978 1,771



Note 2008 2007 2008 2007 (in million Baht) Interest paid and payable to financial institutions

1,392

1,151

1,264

1,064

Capitalised as cost of assets under construction 11

(14)

(1)

-

-

Net 1,378 1,150 1,264 1,064


23 Income tax

Income tax reduction Royal Decree No. 387 B.E. 2544 dated 5 September 2001 grants companies listed on the Stock Exchange of Thailand a reduction in the corporate income tax rate from 30% to 25% for taxable profit not exceeding Baht 300 million for the five consecutive accounting periods beginning on or after enactment. Listed companies that received income tax reduction under this Royal Decree are also eligible to continue the period of tax reduction under Royal Decree No. 475 but not beyond the 2010 accounting period ending on or after 31 December 2010. The Company has, accordingly, calculated income tax on its taxable profit for the years ended 31 December 2008 and 2007 at the corporate income tax rate as specified in the Royal Decree.



Note 2008 2007 2008 2007 Current tax expense (in million Baht) Current year 2,359 2,341 2,236 2,208 Under / (over) provided in prior years 58 (71) 63 (71) 2,417 2,270 2,299 2,137 Deferred tax expense 13 Movements in temporary differences (98) 18 (105) 18 Total 2,319 2,288 2,194 2,155

Reconciliation of effective tax rate Consolidated financial statements 2008 2007

Rate (%)

(in million Baht)

Rate (%)

(in million Baht)

Profit before tax 14,520 21,859 Income tax using the Thai corporation tax rate 30.00% 4,356 30.00% 6,558 Income tax reduction (0.09%) (13) - - Effect of different tax rates in foreign jurisdictions (0.01%) (1) - - Income not subject to tax (16.98%) (2,466) (19.92%) (4,354)Expenses not deductible for tax purposes 3.05% 443 0.39% 84 Total 15.97% 2,319 10.47% 2,288

Reconciliation of effective tax rate Separate financial statements 2008 2007

Rate (%)

(in million Baht)

Rate (%)

(in million Baht)

Profit before tax 16,614 16,892 Income tax using the Thai corporation tax rate 30.00% 4,984 30.00% 5,068 Income tax reduction (0.08%) (13) - - Income not subject to tax (18.57%) (3,086) (17.37%) (2,935)Expenses not deductible for tax purposes 1.86% 309 0.13% 22 Total 13.21% 2,194 12.76% 2,155


24 Promotional privileges By virtue of the provisions of the Industrial Investment Promotion Act of B.E. 2520, the Group has been granted privileges by the Board of Investment relating to production and distribution of petrochemical product, Polyethylene plastic resin, utilities and production support facilities such as jetty and buffer tank farm services for liquid chemical and marine transportation services. The privileges granted include: (a) exemption from payment of import duty on machinery approved by the Board; (b) exemption from payment of income tax for certain operations for a period of eight years from the

date on which the income is first derived from such operations; and (c) a 50% reduction in the normal income tax rate on the net profit derived from certain operations

for a period of five years, commencing from the expiry date in (b) above. As promoted companies, the Company and its subsidiaries must comply with certain terms and conditions prescribed in the promotional certificates. Summary of revenues from promoted and non-promoted businesses: Consolidated financial statements 2008 2007

Promotedbusi-

nesses

Non-promoted businesses

Total

Promoted busi-

nesses


Total (in million Baht) Export sales 3,984 1 3,985 5,563 5 5,568Local sales 39,598 54,199 93,797 66,229 17,251 83,480Service income 2,969 859Eliminations (16,634) (14,323)Total Revenues 84,117 75,584

Separate financial statements 2008 2007

Promotedbusi-

nesses


Total

Promoted busi-

nesses


Total (in million Baht) Export sales - - - 72 - 72Local sales 24,970 43,198 68,168 55,130 7,620 62,750Service income - 151 151 96 194 290Total Revenues 24,970 43,349 68,319 55,298 7,814 63,112


25 Earnings per share Basic earnings per share

The calculations of basic earnings per share for the years ended 31 December 2008 and 2007 were based on the profit for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the years as follows:

Diluted earnings per share The calculations of diluted earnings per share for the years ended 31 December 2008 and 2007 were based on the profit for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the years after adjusting for the effects of all dilutive potential ordinary shares as follows:



2008 2007 2008 2007 (in million Baht / million shares) Profit attributable to equity holders of the

Company (basic)

11,739

19,167

14,420

14,736 Number of ordinary shares outstanding at 1

January 1,496.6 1,490.0 1,496.6 1,490.0Effect of shares issued during the year 0.1 1.6 0.1 1.6Weighted average number of ordinary

shares outstanding (basic)

1,496.7

1,491.6

1,496.7

1,491.6 Earnings per share (basic) (in Baht) 7.84 12.85 9.63 9.88



2008 2007 2008 2007 (in million Baht / million shares) Profit attributable to equity holders of the

Company (diluted) 11,739 19,167 14,420 14,736 Weighted average number of ordinary shares

outstanding (basic) 1,496.7 1,491.6 1,496.7 1,491.6 Effect of shares options on issue - - - - Weighted average number of ordinary

shares outstanding (diluted) 1,496.7 1,491.6 1,496.7 1,491.6 Earnings per share (diluted) (in Baht) 7.84 12.85 9.63 9.88


26 Dividends At the Board of Directors meeting held on 22 August 2008, the Board approved the appropriation of interim dividends of Baht 3 per share, amounting to Baht 4,490 million, from the net profit for the six-month period ended 30 June 2008. The dividend was paid to shareholders on 19 September 2008.

At the annual general meeting of the shareholders of the Company held on 10 April 2008, the shareholders approved the appropriation of dividends of Baht 6 per share, amounting to Baht 8,966 million, from the net profit of 2007 after deducting the interim dividends of Baht 2 per share, amounting to Baht 2,980 million, paid to shareholders during 2007 from the net profit for the six-month period ended 30 June 2007. The balance of dividend, amounting to Baht 5,986 million, was paid to shareholders during 2008.

At the Board of Directors meeting held on 24 August 2007, the Board approved the appropriation of interim dividends of Baht 2 per share, amounting to Baht 2,980 million, from the net profit for the six-month period ended 30 June 2007. The dividend was paid to shareholders on 19 September 2007.

At the annual general meeting of the shareholders of the Company held on 19 April 2007, the shareholders approved the appropriation of dividends of Baht 5.25 per share, amounting to Baht 6,926 million, from the net profit of 2006 after deducting the interim dividends of Baht 2 per share, amounting to Baht 2,980 million, paid to shareholders during 2006 from the net profit for the six-month period ended 30 June 2006. The balance of dividend, amounting to Baht 4,098 million, was paid to shareholders during 2007.

27 Changes in accounting policies The following change of accounting policy by the Group has no effect on the separate financial statements of the Company.

Until 31 December 2007, the Group accounted for goodwill at cost less accumulated amortisation.

Amortisation was charged to the statement of income over the estimated useful life of 10 years. The annual amortisation charge to the statement of income was Baht 349 million. The carrying amount of goodwill as at 31 December 2007 was Baht 2,553 million.

During 2007, the Federation of Accounting Professions issued Thai Accounting Standard (TAS) 43 (revised 2007) “Business Combinations” which is effective for accounting periods beginning on or after 1 January 2008. TAS 43 (revised 2007) requires that the carrying amount of goodwill in the financial statements at the beginning of the first annual accounting period beginning on or after 1 January 2008 that arose from a business combination for which the agreement date was before 1 January 2008 shall be to discontinue amortising such goodwill, eliminate the carrying amount of the related accumulated amortisation with a corresponding decrease in goodwill, and from the beginning of the first annual period beginning on or after 1 January 2008 test all goodwill arising from business combinations for impairment in accordance with relevant Thai Accounting Standards.


The Group has, accordingly, applied the change in its accounting policy for goodwill prospectively from 1 January 2008. The financial statements for the year ended 31 December 2007 have not been affected by this change in accounting policy. The effect of the change in accounting policy on the Group’s consolidated financial statements for the year ended 31 December 2008 is to reduce the charge to the statement of income for the year ended 31 December 2008 resulting from the amortisation of goodwill that would have been recognised under the former accounting policy by approximately Baht 360 million, with a corresponding increase in reported profit for the year. Management has determined that there is no impairment in the carrying value of goodwill as at 31 December 2008.

28 Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes. Risk management is integral to the whole business of the Group. The Group continually has a system of risk management process to create an acceptable and appropriate balance of risk. Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its cash flows because the Group’s finances loans which have both floating and fixed interest rates, for their operations. The Group mitigates this risk by ensuring that the majority of its borrowings are at fixed interest rates. The effective interest rates of loans receivable as at 31 December and the periods in which the loans receivable mature or re-price were as follows:


Effective interest

rate

Within 1 year

After 1 year but within 5

years

After 5 years

Total

(% per annum)

(in million Baht)

2008 Current

Loans receivable – Related parties MLR-1.75% 7,995 - - 7,995Non-current

Loans receivable – Related parties MLR-1.75% - 20,835 843 21,678Total 7,995 20,835 843 29,673 2007 Current

Loans receivable – Related parties MLR-1.75% 4,400 - - 4,400Non-current

Loans receivable – Related parties MLR-1.75% - 6,163 - 6,163Total 4,400 6,163 - 10,563


The effective interest rates of interest-bearing liabilities at 31 December 2008 and 2007 and the periods in which those liabilities mature or re-price were disclosed in note 14.

Foreign currency risk

The Group is exposed to foreign currency risk relating to purchases and sales, including borrowings which are denominated in foreign currencies. The Group primarily utilizes forward exchange contracts to hedge such financial assets and liabilities denominated in foreign currencies. The forward exchange contracts entered into at the balance sheet date also relate to anticipated purchases and sales, denominated in foreign currencies, for the subsequent period. In addition, the Group uses derivative financial instruments, principally interest rate and currency swaps, to manage exposure to fluctuations in interest rates and in exchange rates on specific debt securities and borrowings. At 31 December, the Group and the Company were exposed to foreign currency risk in respect of financial assets and liabilities denominated in the following currencies:

Consolidated


financial statements Note 2008 2007 2008 2007

USD (in million Baht) Cash and cash equivalents 6 267 1,449 2 1,204 Trade accounts receivable 7 1,300 2,239 - - Advance payment 290 59 290 59 Interest-bearing liabilities 14 (10,746) (10,494) (10,480) (10,115)Trade accounts payable 15 (50) (22) - (2)Payable to contractors (1,058) (1,464) - - Other payable (267) (165) (248) (162)Gross balance sheet exposure (10,264) (8,398) (10,436) (9,016)Currency swaps 63 57 63 57 Currency forwards 5 272 - - Net exposure (10,196) (8,069) (10,373) (8,959)

EUR Cash and cash equivalents 6 512 - - - Trade accounts receivable 7 649 - - - Advance payment 384 13 384 13 Interest-bearing liabilities 14 (1,583) - - - Trade accounts payable 15 (71) (46) - - Other payable (123) (33) (85) (33)Gross balance sheet exposure (232) (66) 299 (20)Currency swaps 1 - - - Currency forwards - - - - Net exposure (231) (66) 299 (20)


Consolidated



(in million Baht) SGD Cash and cash equivalents 6 3 - - - Other investments 10 290 290 290 290 Payable to contractors (10) (6) - - Other payable (17) (8) (7) (2)Gross balance sheet exposure 266 276 283 288 Currency swaps - - - - Currency forwards - - - - Net exposure 266 276 283 288

GBP Cash and cash equivalents 6 5 - - - Trade accounts receivable 7 18 - - - Other payable (1) - (1) - Gross balance sheet exposure 22 - (1) - Currency swaps - - - - Currency forwards - - - - Net exposure 22 - (1) -

JPY Cash and cash equivalents 6 17 - - - Trade accounts receivable 7 234 - - - Advance payment 439 67 439 67 Interest-bearing liabilities 14 (38) - - - Trade accounts payable 15 (97) - - - Other payable (191) (6) (191) (6)Gross balance sheet exposure 364 61 248 61 Currency swaps - - - - Currency forwards - - - - Net exposure 364 61 248 61

MYR Cash and cash equivalents 6 367 - - - Trade accounts receivable 7 120 - - - Interest-bearing liabilities 14 (311) - - - Trade accounts payable 15 (68) - - - Gross balance sheet exposure (108) - - - Currency swaps - - - - Currency forwards - - - - Net exposure (108) - - -


Consolidated



(in million Baht) CAD Trade accounts receivable 7 20 - - - Interest-bearing liabilities 14 (11) - - - Trade accounts payable 15 (2) - - - Gross balance sheet exposure 7 - - - Currency swaps - - - - Currency forwards - - - - Net exposure 7 - - -

BRL Cash and cash equivalents 6 16 - - - Trade accounts receivable 7 14 - - - Gross balance sheet exposure 30 - - - Currency swaps - - - - Currency forwards - - - - Net exposure 30 - - -

HKD Cash and cash equivalents 6 6 - - - Trade accounts receivable 7 5 - - - Other investments 10 29 Gross balance sheet exposure 40 - - - Currency swaps - - - - Currency forwards - - - - Net exposure 40 - - -

CNY Cash and cash equivalents 6 16 - - - Trade accounts receivable 7 22 - - - Gross balance sheet exposure 38 - - - Currency swaps - - - - Currency forwards - - - - Net exposure 38 - - -


Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Group as and when they fall due. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, the majority of the customers are on the long-term contracted commitment and parts of them are the Company’s shareholders which the company has consistently collected from them. For the customers who do not have the long-term contracted commitments, the Group monitors the risk on an ongoing basis and would do the business only with the credible customers by limiting the credit lines and requesting the guarantee on some cases. For the export, the credit of counterparty will be considered and will demand a payment on a case to case basis. Management does not anticipate material losses from its debt collection. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. Fair values The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value of trade and other short-term receivables is taken to approximate the carrying value. The fair value of investments in equity securities, which are held for held-to-maturity, are determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only. The fair value of interest rate swaps is based on broker quotes at the balance sheet date. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the balance sheet date.

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the balance sheet date for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Fair values of financial assets and liabilities, together with the carrying values shown in the balance sheets at 31 December were as follows:


29 Commitments with non-related parties

Consolidated


Financial statements

Fair

value Carrying

value Fair

value Carrying

Value 2008 (in million Baht) Current Debentures 400 400 400 400 Non-current Debentures 22,957 28,257 22,957 28,257 Total 23,357 28,657 23,357 28,657 2007 Current Debentures 1,257 1,257 1,257 1,257 Non-current Debentures 17,852 15,786 17,852 15,786 Total 19,109 17,043 19,109 17,043



2008 2007 2008 2007 (in million Baht) Capital commitments Contracted but not provided for Land 21 - - -Plant, machinery and equipment 13,346 27,936 5,750 427Buildings 199 - 6 -Other 28 - - -Total 13,594 27,936 5,756 427



2008 2007 2008 2007 (in million Baht) Non-cancellable operating lease

commitments

Within one year 598 2 - -After one year but within five years 361 3 - -After five years 100 - - -Total 1,059 5 - -


30 Thai Accounting Standards (TAS) not yet adopted

The Group has not adopted the following revised TAS that have been issued as of the balance sheet date but are not yet effective. These revised TAS will become effective for financial periods beginning on or after 1 January 2009. TAS 36 (revised 2007) Impairment of Assets

TAS 54 (revised 2007) Non-current Assets Held for Sale and Discontinued Operations

The adoption and initial application of these revised TAS is not expected to have any material impact on the consolidated or separate’s financial statements.

31 Reclassification of accounts Certain accounts in the 2007 financial statements have been reclassified to conform to the presentation in the 2008 financial statements as follows:

2007 Consolidated


financial statements

Before reclass.

Reclass.

After reclass.

Before reclass.

Reclass.

After reclass.

(in million Baht) Balance sheet Cash and cash equivalents 24,841 (44) 24,797 22,713 (13) 22,700 Other current assets 1,408 44 1,452 785 13 798 Property, plant and equipment 75,721 (88) 75,634 33,787 - 33,787 Intangible assets 4,959 88 5,047 521 - 521 Trade accounts payable 8,893 (6) 8,887 - - - Payables to contractors 4,400 155 4,555 - - - Other current liabilities 1,766 (149) 1,617 - - - Current portion of debentures 1,246 11 1,257 1,246 11 1,257 Debentures 15,797 (11) 15,786 15,797 (11) 15,786



2008 2007 2008 2007 (in million Baht) Other commitments Unused letters of credits 482 435 467 435 Bank guarantees 204 140 157 137 Land and building lease - 76 - 45 Other agreements 72 129 73 129 Total 758 780 697 746

202

Audit FeeIn 2008, PTT Chemical Plc and its subsidiaries paid Baht 7.28 million in audit fee to theexternal auditor’s office.

Non - Audit FeeNone

AUDIT FEE


ABBREVIATIONS

EG Ethylene Glycol EO Ethylene Oxide EVA Ethylene Vinyl Acetate FA Fatty Alcohol HDPE High Density Polyethylene LDPE Low Density Polyethylene LLDPE Linear Low Density Polyethylene LPG Liquefied Petroleum Gas ME Methyl Ester MEG Mono Ethylene Glycol NGL Natural Gasoline PC Polycarbonate PE Polyethylene PET Poly Ethylene Terephthalate PP Polypropylene PS Polystyrene PTA Purified Terephthalic Acid PVC Poly Vinyl Chloride PYGAS Pyrolysis Gasoline VCM Vinyl Chloride Monomer Others

CEO Chief Executive Officer

CG Corporate Governance

COM Cognis Oleochemicals (M) Sdn Bhd

CSR Corporate Social Responsibility

Chemical Products

13.62% Carbon ReductionUsing less paper is an effective way of saving trees and protect environment.By cutting down the amount of paper used for this annual report, we help reduce energy consumption needed for transportation and carbon dioxide emission, hence decreasing pollution and global warming.

Fully aware of our social responsibility and our commitment to sustainable development, PTT Chemical makes great efforts to improve efficiency use of resources and to help reduce the global warming.

DON’T CUT DOWN TREES, CUT DOWN CARBON FOOTPRINT

pttch : annual report 2008

Documents

monitoring award

total assets total revenues111

work environment award

total liabilities

diw awardthis award

total shareholders equity

annual report

consecutive year