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4. Factors and major influences that may affect the Company's performance or financial status in the future Product Quality Improvement Project (PQI) Major factors that affected the performance were the marketing margin and gross refining margin. For the marketing margin, as the oil prices has fluctuated, the retail oil price could be adjusted at a slower rate than its actual cost. For the refining margin, given that a simple refinery having a high proportion of fuel oil production of which the price is always lower than crude price, the Company's gross refining margin was capped to a certain level depending on the fuel oil price. Thus, the Company has to attain the long-term resolution for converting fuel oil production to more value added product to enhance gross refining margin to be at the same level of the industry's. Therefore, the Company has adopted the Product Quality Improvement project (PQI) by installing the hydro-cracking unit as well as other associated units; these will reduce proportion of fuel oil production to the near level of other local and foreign refineries, and hence become a complex refinery. The Company expects that the project will be started up in the first quarter of 2009 and will consequently result increasing in EBITDA from average Baht 2,000-4,000 million per year to approximately Baht 6,000-8,000 million after its completion which is subjected to oil price. The project cost (included contingency reserve) is the total of Baht 15,369 million or equivalent to USD 378 million. Concerning to achievement, the Company has appointed CTCI Overseas Corporation Limited and CTCI (Thailand) Co., Ltd. to be contractors of the PQI under fixed price, date certain, and performance guaranteed arrangement. The Company had achieved its financial closure for the project's sources of funds since May 16, 2006. As of October 2008, the overall project progress was 97.6%. Confidentially, the Company has closely supervised and made utmost cooperation with the contractors to achieve the plant commissioning by January 2009. Foreign Exchange Another factor which may have impact on the Company's performance is the foreign exchange volatility (mostly Baht/USD). The Company pays for the feedstock in US dollar term and sells its product on US dollar-linked basis, and subsequently records transactions as trade payable and trade receivable respectively. Since the Company's assets are greater than liabilities', the appreciation of Thai Baht will cause the shrink in net assets and vise versa. However, the Company has had the policy to level the differences of US dollar assets and liabilities whenever it becomes appropriated. In the mean time, the Company has partly mitigated this kind of risk by utilizing some market financial instrument. Following the Company has completed the loan refinancing, it can be attained more financial ability and flexibility to manage this forex risk. Loan Refinancing. On July 2, 2008, the Company has successfully reached the refinancing of 23,734 Million Baht with four local and two international banks. The refinancing comprises of the long-term loan of Baht 16,500 Million covering refinancing the previous KTB and PQI loans, funding for EURO IV and other energy related projects, as well as the short-term loan facility of Baht 7,234 Million as a normal working capital. Following the refinance, the Company has to pay the prepayment and cancellation fee for the total of Baht 174 Million which was realized as an expense in this quarter. In addition, the fee for obtaining refinance of Baht 128 Million was accounted as amortizing expense on the Company's Balance Sheet replacing the existing amortizing fee of Baht 68 million of the refinanced loan. Yet, there are several benefits from the refinancing shown as follows: 1. The increase of the Company's financial capability for future investment on top of raising flexibility for normal operation due to the repayment schedule has been extended from 7 to 9 years with back-ended profile repayment to make lower repayment amount during the next 5 years. 2. The saving from lower interest rate as interest basis was changed to, THBFIX link, which is lower compared to the previous one - MLR link; however, still there is risk of the case that THBFIX moves to the higher level than MLR. 3. The Company's financial risk management capability has been significantly improved in view of the fact that the THBFIX allows the Company to perform both Interest Rate Swap and Cross Currency Swap at appropriated rates. 4. As the basis of unsecured loan along with appropriated terms and conditions, the Company has more financial flexibility to support any future investment or any additional funding to broaden business opportunities. Diesel Price Discount The resolutions of the Board of Directors meeting No.6/2008, held on May 29, 2008, approved the granting the diesel price discount to 3 specific groups: public transportation, fishery, and farmers, to alleviate their suffer from the high oil price and to maintain domestic consumptions, which will benefit the Company's long term production, in the rate of no more than 3 Baht per liter within 6 months (June-November 2008) with the capped amount of Baht 261 million. However, in case that the Company suffers loses or is in default of its debt payment obligation and/or in breach of contract with the creditors under the loan agreements, debentures, or debt instruments at any time within the 6- month period, the Company preserves to discontinue this alleviation program. As of the third quarter end, the Company has granted the discount for the total of Baht 9 million.