INTEGRITY QUALITY SERVICE - Saha-Union Co., Ltd

SAHA-UNION
31
This year, the Company decided to sell Wuxi-Union
Cogeneration Power Plant to a major Chinese shareholder
since the city of Wuxi started to expand and had a policy
to remove factories from the urban area. Because Wuxi-
Union was located in the urban expansion area while many
major customers were forced to move away and Wuxi-Union
plant used coal as fuel, causing pollution in the society,
the government sector required that the plant be relocated
or change the fuel type to natural gas. Having considered
the condition, the Company believed that the power plant
was unable to continue its normal operation, unless a high
amount of money was invested to relocate the plant or alter
the production system as required by the government, which
might not be worth the cost. Therefore, the Company agreed
to sell its investment. Nevertheless, the Company was not
damaged by such decision. In addition, the joint venture
company Yunnan Energy Qujing-Union Power Co., Ltd. who
had been having a deficit operating result for a long time,
finally encountered a lack of liquidity. The business was
unable to generate profits since the coal price dramatically
rose while the sales price hardly went up. If the Company
continued the operation, it might affect the Company’s
financial status, so the Board of Directors of the joint venture
company had a resolution to cease the operation.
Power Plant Projects in Thailand
The Company has invested in 10% of the shares of Ratchaburi
Power Co., Ltd. (RPCL), a natural gas fired combined-cycle
power plant located in Baanrai Sub-district, Damnernsaduak
District, Ratchaburi Province, with Baht 7,325 million paidup
registered capital. This year, the plant was able to
operate with its full capacity meeting its target operating
result. This power plant company has been observing the
Environmental Impact Assessment (EIA). To ensure the
conservation and to control the impact on environment,
the company has implemented and been accredited with
the ISO 14000 for Environmental Management Standard.
Currently, the Company is in the process of obtaining the
Safety Management Standard TIS/OHSAS 18001.
INDUSTRY TRENDS AND COMPETITION
Electricity business is the country’s infrastructure. Production
and sales volume depend on economic growth of the
country. As an export oriented economy, China was affected
by the world’s economic recession in 2011 and might still
face the impact in 2012. Although at the end of 2011 the
government started to be more lenient on the financial
measure which might have stimulated new investments
and household consumptions, and thus increased the
demand for electricity, and with the rising demand for
steam among customers in the industrial area which was a
contributing factor that could alleviate the adverse effect,
China’s economic instability and the unbalance between
electricity price and coal price are still potential risk factors.
As a result, the power plants that could still operate must
adjust their business structure to focus on selling more
steam and limiting electricity sale to be in an appropriate
proportion as necessary.