- Information Memorandum - Esso (Thailand) Public Company Limited (ESSO) Head Office 3195/17-29 Rama IV Road, Klongton Sub-district, Klongtoey District, Bangkok 10110 Tel 0-2262-4000 Fax 0-2262-4800 Website www.esso.co.th Refinery and 118 Mu 2 Sukhapiban 7 Road, Thoongsukha Sub-district, Sriracha Aromatic Plant District, Cholburi 20230 Location Tel 038-408-000 Fax 038-493-938 Listing Date As of May 6, 2008 (Trading commencement on May 6, 2008) Listing Securities No. of common shares: 3,383,333,300 shares Par value per share: Baht 4.9338 Total value: Baht 16,692,689,835.54 Capital As of May 6, 2008 (Trading commencement) Registered Capital Common Shares Baht 17,110,007,246.71 Preferred Shares Baht - Paid-up Capital Common Shares Baht 16,692,689,835.54 Preferred Shares Baht - Secondary Market SET Offering Price Baht 10 Offering Date Subscription period: 21 and 22 April 2008 for bank retails and general public and 23-25 and 28 April 2008 for institutional investors Offering Shares Total shares offered amounted to 930,416,600 shares includes - Primary shares of 773,333,300 or 22.86% of total paid-up shares* - Secondary shares by the Ministry of Finance of 72,500,000 or 2.14% of total paid-up shares* - Over-allotment shares of 84,583,300 (Phatra Securities, as over-allotment agent, has borrowed shares from ExxonMobil International Holding Inc.) *Exclude over-allotment shares Objectives and The company expects to use the net proceeds from the combined plans for utilizing offering (including additional proceeds from over-allotment shares the capital increase exercised) to partially repay short-term loans under Syndicate Bank Loan from Commercial Banks with the balance for working capital and other general corporate purposes. Green Shoe Option Phatra Securities Public Company Limited, as an over-allotment agent, has borrowed 84,583,300 shares from ExxonMobil International Holding Inc. Within 30 days, borrowed shares will be returned through the following methods 1. Purchase of shares in open market and/or 2. Exercise of the over-allotment option to purchase additional shares from the Company For borrowed shares under over-allotment option, EMIHI may demand that the shares it has lent to the over-allotment agent be returned upon five business days of the receipt of notice. As a result, the stabilization period may be shorter than 30 days Type of Business and Nature of Operation 1. Product Characteristics We are an integrated petroleum refining and marketing company, and we also manufacture and market aromatics and other chemicals. We and our predecessors have operated in Thailand for over 100 years. We sell refined petroleum products to retail consumers through our extensive network of Esso branded retail service stations as well as directly to commercial customers in the industrial, wholesale, aviation and marine sectors. We also sell aromatics and other chemical products that we manufacture to domestic commercial customers. In some cases we export products for sale outside of Thailand. Our primary types of products are: 1. Refined petroleum products from the fractionation and refining of crude oil, primarily LPG, gasoline, jet fuel/kerosene, diesel, fuel oil and asphalt. We also sell lubricant products; and 2. Aromatics and other chemical products, primarily paraxylene, benzene concentrate and solvents, which we produce, and plasticizers, which are manufactured by a third party using raw materials provided by us. Our refinery is capable of processing a wide range of crude oil, which we source from the Middle East, Far East and West Africa. Our choice of feedstocks and product slates at any time depends on relative prices and yields. We decide on our product slate with input from sales and marketing personnel, based on our assessment of demand and projected prices for the various products that we can produce, typically around three months in advance of expected orders. We also sell over 300 lubricant products, for use in vehicles and industrial applications, primarily under the Mobil and Esso umbrella brands, and to a lesser degree as unbranded products. Our lubricant products are either imported or blended domestically through a third party blender. The products are sold to licensed distributors and service stations as well as to consumers directly. 2. Revenue Structure Our sales revenue comprises of sales from Downstram Segment and Petrochemical Segment The following table set forth our sales revenue for each of our refined petroleum products and aromatics and other chemical products for periods indicated. Year Ended December 31, 2005 2006 2007 Sales % of Total Sales % of Total Sales % of Total Sales Sales Sales (in million of Baht, except for percentage) Downstream Segment: Light products LPG 4,639 2.7 4,683 2.4 4,072 2.0 Gasoline(1) 50,695 29.2 53,788 27.5 57,339 28.7 Total light products 55,334 31.9 58,471 29.9 61,411 30.7 Middle distillates Jet fuel/kerosene 12,846 7.4 15,478 7.9 14,806 7.4 Diesel 69,124 39.8 77,138 39.5 81,334 40.7 Total middle distillates 81,970 47.2 92,616 47.4 96,140 48.1 Heavy products Fuel oil 13,159 7.6 15,699 8.0 13,347 6.7 Asphalt 1,348 0.8 1,828 0.9 1,877 0.9 Total heavy products 14,507 8.4 17,527 9.0 15,224 7.6 Lubricants Lube and grease . 3,443 2.0 3,637 1.9 3,459 1.7 Others(2) 4,660 2.7 4,412 2.3 4,388 2.2 Net income from services(3) 458 0.3 452 0.2 476 0.2 Total Downstream Segment Sales 160,371 92.3 177,115 90.7 181,098 90.6 Petrochemical Segment: Paraxylene 12,607 7.3 17,339 8.9 15,999 8.0 Benzene concentrate 679 0.4 845 0.4 1,235 0.6 Solvents - - - - 941 0.5 Plasticizers - - - - 553 0.3 Others(4) - - 6 - 78 0.0 Total Petrochemical 13,287 7.7 18,190 9.3 18,806 9.4 Segment Sales Total sales 173,658 100.0 195,305 100.0 199,904 100.0 (1) Gasoline also includes sales of naphtha and reformate. (2) Others includes mainly sales of crude oil which we purchased from an affiliate but decided not to use and therefore resold to another affiliate before processing. It also includes goods sold at convenience stores. (3) Net income from services comprises mainly franchise fees from dealers, product handling and storage fees from aviation customers, and rental income from Tesco. (4) Others includes mainly sales of butyl and other petrochemicals. 3. Target Customers and Distribution Channels We market and sell our refined petroleum products and lubricants through three separate channels, depending on the product: commercial, retail and export. A significant proportion of our non-retail product sales, including all of our exports, are made to or through ExxonMobil affiliates, which provide us with marketing and sales support under various service agreements. Our retail fuel products and certain lubricants are marketed through Esso branded service stations. 3.1 Refined Petroleum Products and Lubricants The following table sets forth our sales volumes for our refined petroleum products (excluding internal feedstocks) by channels for the periods indicated. Year Ended December 31, 2005 2006 2007 % of % of % of Total Total Total Sales Sales Sales Sales Sales Sales Volume Volume Volume Volume Volume Volume (in thousands of barrels, except percentages) Commercial ................................ 30,335 54.2 29,539 54.3 29,801 55.9 Retail(1) ................................ 16,288 29.1 17,823 32.8 18,168 34.1 Export........... 9,332 16.7 7,033 12.9 5,335 10.0 Total ........... 55,955 100.0 54,395 100.0 53,304 100.0 (1) Includes lubricant sales of 2, 2 and 3 thousand barrels in 2005, 2006 and 2007, respectively. (a) Commercial Sales of our refined petroleum products through our commercial channel consist of sales to industrial end users and wholesalers, as well as customers in the aviation and marine industries. Sales to industrial and wholesale customers consist mainly of LPG, diesel, fuel oil and lubricant products. Lubricant products are sold primarily for use in Thailand in vehicles and industrial applications, primarily under the Mobil and Esso umbrella brands, as well as in unbranded form. Products sold to customers in the marine industry consist mainly of fuel oil, while products sold to customers in the aviation industry consist of jet fuel to airlines. We supply jet fuel via pipeline to approximately 20 international and domestic airlines at the two commercial airports located in Bangkok. From time to time, we enter into a variety of short term product sales agreements that are for periods of up to one year. However, we do not have any long-term product offtake agreements for our refined petroleum products or lubricants. (b) Retail We are one of six major retail fuel brands in Thailand, with a network of 583 Esso branded service stations throughout Thailand as of December 31, 2007. Our network of Esso branded service stations includes stations operated by our subsidiary, TCC, and third-party dealers: The following table sets forth the breakdown of the different types of service stations as of the dates indicated. As of December 31, 2005 2006 2007 % of % of % of No. of Total No. of Total No. of Total Esso branded service stations Stations Stations Stations Stations Stations Stations TCC-operated ............. 160 25.1 163 27.0 160 27.4 Dealer operated ............................. 478 74.9 440 73.0 423 72.6 Total service stations .... 638 100.0 603 100.0 583 100.0 The total number of our service stations decreased in the last three years as we terminated dealer agreements relating to underperforming service stations due to the competitive retail fuel market which resulted in lower retail margins. The following table sets forth the average volume of retail fuel sales per service station by type of service station for each of the periods indicated. Year Ended December 31, 2005 2005 2005 (in thousands of liters) TCC-operated................................................ 4,367 5,144 5,520 Dealer operated ............................................ 3,955 4,534 4,739 Total service stations ................................ 4,058 4,699 4,954 We had an approximately 17.6% market share in Thailand in terms of diesel and gasoline retail throughput in 2007, based on data published by the Department of Energy Business of the Ministry of Energy. Our retail fuel products comprise diesel and three grades of gasoline, namely, unleaded gasoline 95, unleaded gasoline 91 and gasohol 95. Beginning in February 2008, all service stations in Thailand were required to sell 2% biofuel-blended diesel. In February 2008, we began to sell this product at our service stations to comply with the relevant regulation. We also plan to sell gasohol 91 at our network of service stations from June 1, 2008. We have also franchised "Tiger Mart" convenience stores at some Esso branded service stations. We also strive to increase sales of retail fuel at Esso branded service stations. We also seek to increase non-fuel revenue through various strategies, including the following: - Convenience Stores As of December 31, 2007, 102 Tiger Mart stores were operated by TCC and 148 Tiger Mart stores were operated by dealers at dealer sites. For Tiger Mart stores that are operated by dealers, we receive variable fees based on sales revenue at each store. We make ongoing efforts to upgrade and enhance these stores, focusing on low-cost, high potential return projects consistent with our disciplined investment approach. - Alliances We have a cooperative agreement with Ek-Chai Distribution System Company Limited to locate Tesco Lotus Express stores at Esso branded service stations in Thailand. Under the agreement, Tesco Lotus Express stores that are located at service stations in Thailand are required to be exclusively located at Esso branded service stations. As of December 31, 2007, there were 54 Tesco Lotus Express stores at Esso branded service stations. We receive variable fees collected from Tesco Lotus Express based on sales revenue. We also have a number of alliance partners that provide complementary services to automobile users. Such partners include B-Quik Service Co., Ltd, which provides automobile repair services, and Carlac (Thai-German) Company Limited, a provider of car-care, including car wash services. We receive fees from these parties, which may be fixed and/or variable. (c) Export Substantially all of our products that are exported are sold to or through EMAPPL under a contract dated May 28, 2001 and EMS&S under a contract dated October 1, 2000. See "Related Party Transactions" Product and Feedstock Purchase and Sale Agreements." In 2007, we exported primarily fuel oil and gasoline. 3.2 Aromatics and Other Chemical Products Our aromatics and other chemical products are sold to commercial customers domestically or exported. The following table sets forth our domestic and export sales volumes for our aromatics and other chemical products for the periods indicated. Year Ended December 31, 2005 2006 2007 % of % of % of Total Total Total Aromatics and Other Chemical Sales Sales Sales Sales Sales Sales Products Volume Volume Volume Volume Volume Volume (in thousands of barrels, except percentages) Domestic ................................................ 338 88.7 420 93.8 465 96.7 Export .................................................... 43 11.3 28 6.2 16 3.3 Total ................................................... 381 100.0 448 100.0 481 100.0 Paraxylene is sold primarily to PTA manufacturers in Thailand as the raw material for producing polyester film, packaging resin and fabrics. We have entered into three long term product sale agreements for the sale of paraxylene to domestic PTA manufacturers, which account for a substantial majority of our paraxylene production. For paraxylene that is not sold to domestic customers to fulfill contractual quantities, we may export or adjust our product slate to produce other products that offer better margins, depending on the economics of producing and selling paraxylene which is based on the amount of feedstock that is available from our refinery, the market prices of external feedstock and the market prices of paraxylene. All of our solvent and plasticizer products are sold domestically. 4. Sources of Supply 1. Crude Oil Supply The main feedstock used in our refinery production process is crude oil. We are capable of processing a wide range of crude oil, including Middle Eastern, Far Eastern and West African. As our refinery has upgrading and conversion units, we are able to use a higher proportion of heavy sour crude from the Middle East, which has a higher sulfur content and is less costly than light sweet crude, to produce a product slate that matches customer demand. In addition, through the use of ExxonMobil's global crude procurement network and the application of advanced molecular fingerprinting and modeling technologies, we are able to more precisely source, select and blend crudes with properties that will further maximize our margins. Our crude oil slate is determined after we decide on our product slates with input from sales and marketing personnel, based on our assessment of customer demand and projected prices for the various products that we can produce, typically around three months in advance of expected order. We then input the original and any updated information, including price information, into a sophisticated optimization modeling software system, which takes into account our production constraints, to determine the optimal purchase of crude oil. We source and purchase crude oil from or through ExxonMobil affiliates on credit terms that we believe are in line with market practice. We typically receive invoices by the fourth working day of the calendar month following the issue of the bill of lading and are required to pay the invoices by the end of that month. Crude oil sourced from the Asia-Pacific region is purchased from or through EMAPPL, while all other imported crude is purchased from or through EMS&S. The following table sets forth the volume of crude oil purchased by region of origin and the respective proportions from each region for the periods indicated. Year Ended December 31, 2005 2006 2007 (more)