BCPG’s Investment in the Phetchaburi Oil Terminal Project

Following the circulation of information and observations in various media regarding BCPG Public Company Limited’s (“BCPG”) investment in the Phetchaburi oil terminal project in 2022, including issues related to the purchase price, transaction structure, and approval process, Bangchak Group would like to provide the following information.

As Bangchak Group, Bangchak Corporation Public Company Limited (“the Company”), its executives, and the Company’s business operations have been referenced in relation to the transaction, Bangchak Group would like to provide additional information regarding the investment, including the transaction structure, valuation approach, and accounting treatment.

Due to infrastructure limitations at the Bangchak Phra Khanong Refinery (“the Refinery”), which does not have its own large-scale oil storage facilities, the Refinery has historically relied on external oil terminals, oil pipelines, and logistics systems. As oil storage and supply chain management are critical to refinery operations, the Company has continuously studied various options for crude oil terminal management to enhance energy security, reduce logistics constraints, and support business growth.

During 1994 - 1999, the Company used the FSU WYOMING floating storage unit to support refinery operations in the early stage, when refining capacity was approximately 70,000 barrels per day, with storage capacity of around 400 million liters. In 2000, the Company shifted to using two oil terminals in Si Racha District to support an increase in refining capacity to approximately 80,000 barrels per day and improve crude oil management efficiency. These facilities continued to be used for approximately 16 years.

Subsequently, as business volume and supply chain complexity increased, including the expansion of refining capacity to approximately 120,000 barrels per day, the Company continued to explore additional terminal and logistics solutions, including floating storage, leased terminals, and further infrastructure development. During 2017–2022, the Company used the FSU BONGKOT floating storage unit with storage capacity of approximately 300 million liters as a temporary solution to partially replace the Si Racha facilities while studying additional terminal and logistics infrastructure options.

Between 2010 - 2019, the Company engaged several independent consultants to study various oil terminal management options across multiple formats and locations, including the existing terminal in Phetchaburi Province, development of a new terminal at Chuk Samet in Chonburi Province, expansion of facilities in Rayong Province, and additional infrastructure development in Thailand’s western region, as well as floating storage and terminal leasing alternatives. These studies compared costs, storage capacity, pipeline systems, capability to accommodate large vessels, and logistics potential to support increasing refining capacity and growing supply chain requirements within Bangchak Group.

Following these studies, the Phetchaburi oil terminal project underwent significant infrastructure upgrades compared with its earlier configuration, including an increase in storage tanks from 16 to 20 tanks, storage capacity expansion from approximately 500 million liters to around 720 million liters, an increase in oil pipelines from 3 to 5 lines, and expansion of berthing points from 2 to 6 points. The upgraded facilities are also better able to support the increasing business volume and supply chain requirements of Bangchak Group over recent years.

At the same time, BCPG has been undergoing a portfolio transformation strategy to expand from renewable energy into energy infrastructure businesses and seek investments capable of generating stable recurring cash flow to strengthen long-term business resilience. The Phetchaburi oil terminal project therefore represented an investment opportunity aligned with such strategic direction, as well as with Bangchak Group’s growing infrastructure and logistics requirements.

In evaluating the investment, BCPG applied the Discounted Cash Flow (DCF) methodology based on projected future cash flow under service agreements and the infrastructure’s operational potential, using prudent financial assumptions, including service fee assumptions approximately 50% below market rates, together with independent expert assessments. The investment value of approximately THB 9 billion was within the range of such valuation.

The transaction was reviewed in accordance with procedures applicable to companies listed on the Stock Exchange of Thailand, including review by management, relevant subcommittees, and the BCPG Board of Directors, which carefully considered the transaction details, structure, business rationale, and valuation before the BCPG Board made the final investment decision.

The purchase price in 2022 differed from figures previously referenced in 2010, reflecting changes in the value of the oil terminal over time, including infrastructure development such as pipelines, berthing facilities, and oil storage tanks, as well as the project’s future income-generating potential.

The transaction involved the acquisition of part of the seller’s business operations. Accordingly, the relevant assets were separated and transferred through subsidiaries established by the counterparties to hold the assets prior to transfer, while BCPG conducted the acquisition through subsidiaries within its group. The establishment of such subsidiaries is a normal business and legal practice for the separation and transfer of specific assets and is consistent with BCPG’s appropriate financing structure.

Under applicable accounting standards, upon the transfer of the business, Purchase Price Allocation (PPA) was required to classify both tangible assets and other economic rights or benefits in accordance with financial reporting standards. The analysis indicated that, out of the approximately THB 9 billion purchase price, tangible assets accounted for approximately THB 6.49 billion, while intangible assets, including the value of existing oil terminal service agreements, amounted to approximately THB 1.9 billion. Net deferred tax assets and other assets amounted to approximately THB 170 million, with the remaining balance recognized as goodwill reflecting expected future cash flows. This allocation was undertaken to provide clearer classification of each asset category, while the aggregate value of all assets remained equal to the overall investment value.

Bangchak Group reaffirms that BCPG’s investment in this project was conducted in full compliance with the procedures and requirements applicable to listed companies, with transparency and proper approvals from authorized parties at each level. Certain observations raised recently may partly arise from incomplete information and differing understandings regarding the transaction structure and accounting principles applicable to business acquisitions. The Group remains committed to good corporate governance, transparency, and sound corporate governance practices in all aspects of its business operations and is prepared to cooperate with relevant authorities under appropriate processes.