Energy Industry

FINC D41 - Finance II

Energy Industry

Prepared by

Atiwat Phulsawad D540004

Paisan Intanate D540030

Patra Pattaramaetakul D540037

Tanawat Sutuntivorakoon D540059

Submitted to

Prof. Pattanaporn Chatjuthamad

and

Prof. Piman Limpaphayom

Energy Industry

Objective:

This report is prepared in order to calculate and analyze firms’ weighted average cost of capital (WACC) in the energy industry. WACC is used to evaluate the project feasibility for capital budgeting decisions. In this report we will show our assumptions and methodologies for calculating WACC for the four major companies in energy industry in Thailand. These companies are Thai Oil Public Company Limited (TOP), IRPC Public Company Limited (IRPC), ESSO (Thailand) Public Company Limited (ESSO), and Bangchak Petroleum Public Company Limited (BCP).

Moreover, the divisional WACC is calculated for the companies with various types of business divisions. These calculations were based on the financial data from 2011 because these figures were the most recent and complete financial data available. These results are analyzed and compared through various contributing components including the capital structure and its components, cost of debt, cost of equity, and tax rate. In addition, the factors that influence the WACC results are also evaluated in order to fully comprehend derivation and implications of each company’s WACC.

Thai Oil Public Company Limited (TOP)

Thai Oil Public Company Limited was founded in 1961 and is headquartered in Bangkok, Thailand. The Company is a refiner and supplier of refined petroleum products, which operates the complex refineries in Chonburi province. It also operates in related business e.g. production of paraxylene and lube base oil and other related business.

Long-term loan

The long-term loans for TOP are consisted of a loan that has a period of 5 years with an interest rate not exceeding the maximum of a six-month fixed deposit market rate plus a certain margin (+1) (THBFIX 6M) which is accounted for about 11,084 millions baht in total.

Note* (TOP is an AA- rating which consider to high