Risk of Company     There have been 4744 visitors to this websiteThere have been 4744 visitors to this websiteThere have been 4744 visitors to this websiteThere have been 4744 visitors to this website 

1. Risks
   In general, the investment in a new market such as Lao PDR where has been newly created the Lao Securities Exchange can have many other risks than a general new market in addition with the issues and problems concerned the Company such as quality of assets, quality of management, the ability to create cash flow, the financial security, laws, rules and regulations that controlled the electricity energy market. The investment has many risks. The Company will meet many factors of risks from the electricity energy situation, the business competitiveness and the change of economic situation in the country as well as abroad. Important risks can be divided into 2 categories: internal and external risks. They are as follows: 

 

1.1. Internal Risks

1.1.1. Risks from limited history of business operations of the Company

 

   From the day of creation of the Company, 15th December 2010 to now, is a very short period to accomplish the business operation of the Company; the current assets of the Company used for electricity generation are the assets of Electricity du Laos that have been fully used for generating electricity in many working years. The company expects that they will function well as already after the transfer of ownership from

Electricity du Laos to the EDL-Generation Public Company. But the Company cannot guarantee that these assets that currently used for electricity generating will continue to

function in the current level of capacity or in the level that EDL has reached the results. Therefore the Company cannot guarantee the incomes or profits planned from the business operations of the Company. However the Company receives the transfer of qualified personnel/workers of EDL in accordance with the agreement between the company and EDL. Counted on the experiences of transferred qualified personnel of EDL, and the continuous use of these personnel for the works that they had accomplished, the Company believes that the short period of doing business operation of the Company does not have any effects in doing business on the use of its assets for generating electricity.

1.1.2. Risks from the dependence of the Supports and the Purchasing of Electricity of Electricity du Laos (EDL)

   The State Enterprise of Electricity du Laos is the biggest shareholder of the Company. It occupied 99.99 of the Company issued shares. After the initial public offering the EDL will conserve about 75% of company issued shares and will continuously control the Company although the Company has its board of Directors. But EDL can control the Company and its board of Directors by alone EDL or together with small number of Company shareholders by directing the Company to do its policies in agreement with the other shareholders of the Company.

 

1.1.3. Risks from the Operation of Business Activities

- Risks from Concession Agreement: In accordance with the Lao law on electricity the period of the concession for production assets is 30 years, and it can be extended in the period of ten years. Therefore the principal incomes of the Company such as selling generated electricity to EDL in accordance with the Electricity Trading Agreement between the Company and EDL is limited by the period of concession.

-  Risks from the results that the Company cannot reach the planned profits from the investment: the Company has the responsibilities to managing and monitoring projects in effective and appropriate manner in order to reach the goals and objectives targeted. Therefore the company should have the measures to decrease the forecasted risks.

-  Risk from one principal customer: the Company believes that the incomes risks are very small because EDL is the responsible to guarantee the procurement of electricity in Lao PDR. In addition EDL is a state enterprise and the financial situation of EDL is very strong. However in case that EDL has problems, and as the Company is based on the sole customer, EDL, can make effects on the incomes of the Company, and this incomes will be decreased dramatically.

- Risks from the function of hydropower Plant (dams) such as the damage of hydropower Plant and machines, the effectiveness of the hydropower Plant (dams) (i.e. they cannot continue to generate electricity and transmit the electricity as planned), the

lack of water for electricity generating (i.e. in some season, there are no enable water in the dam to generate electricity because of the inadequate environment), the possibility that the insurances cannot largely cover the events that will be born such as security, health and environment (in case if the Company meets the damages that is not covered by the insurance, business, financial situation and the results of business operation will be dramatically effected).

1.1.4. Capacity to recruit talent/qualified human resources/Staff

   The Company expected to recruit its talent and high qualified human resources, especially from EDL by proposing salary and interest that are competitive in labor market. However the Company does not guarantee that it can attract or retain these

kinds of personnel.

1.1.5. Investment Risks on Additional Projects

The principal business activities of the company are the purchasing/buying, ownership and using of assets for generating electricity that are developed and constructed by EDL. The investment of additional projects can be as investment of the construction large hydropower Plant (dams) with high technology. These constructions and the functions of the hydropower Plant can be high cost and can make many risks

to the Company.

 

1.1.6. Risks of the transfer of Assets that are used in the production of

   Electricity du Laos to the Company The Company believes that EDL will transfer/sell all assets that generate electricity and that are in the phase of the construction and in the phase of planning (that EDL is the alone ownership) and that are under the IPP project that EDL is the shareholder and that are in the phase of construction and in the phase of planning with the price on account or nearly by. The current resolution of the Standing of the National Assembly Committee (parliament) expresses only the current policies on assets that are used to generate electricity. There are no guarantees that these policies will be implemented in the future, and therefore

there are no guarantees that the Company can purchase the EDL assets that generate electricity in the future.

1.1.7. Risks from the differences of regulations on disclosing data and accounts

   The standards of disclosing data and account in Lao PDR are not somewhat strict in comparison with the market of developed country such as Hong Kong, Singapore and the countries that are member of OECD. The disclosing of data/account of Lao public company (data printing and dissemination) is limited in comparison with other public

company in abroad.

1.1.8. Risks from the Standards of Company Management

   The standards of public company management in Lao PDR are very different from others countries especially the standards concerning the independence of Board of Directors and of Committee of auditing, and standards of internal and external reporting.

2. Externals Risks

2.1. Risks from the exchange rate

   The Company has the risks from the exchange rate. In the business operations many descriptions are done with Lao Kip (LAK). However the company buys the spare parts and equipments in US dollars and foreign currencies. Therefore the move of exchange rate in each time will make effects to the business operation of the Company.

 2.2. Risks from the Uncertain/Unreliable of Rules and Regulations related to the Electricity Sector in Lao PDR

   Lao PDR currently does not have complete laws, rules and regulations concerned the Electricity Generating Company. In the future the Lao Government can change laws, rules and regulations on electricity industry that can make effects to the business operations of the Company.

2.3. Risks from the Competition of Projects Development in the future

   The Company will meet the competition in the sector by implementing its investment strategies and the development of new sources of electricity in Lao PDR. The main competitors of the Company can have more capital resources and more experiences than the Company itself in the development or in the capital contribution to hydropower Plant (dams).

2.4. Risks from the Political and Economic factors of Lao PDR

   The accomplishment of business activities of the Company depend on the political and economic and legal frameworks situation of the Lao PDR. These aspects are very important such as economic crisis, Government policies on the price of electricity, compensation system, exchange rate management, policies on taxations and others that can create direct effects to the business operation of the Company, the financial situation of company, the results (profits or losses) of the business operation and the channels for business operations of the Company.