Prepared by Baker Tilly Corporate Advisory Services...
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(Translat ion)
Opinions of the Independent Financial Advisor
on the Acquisition and Disposal of Assets in Connection with the
Entry into Transactions with the Infrastructure Fund for Information
Technology Services Infrastructure Business of Internet Thailand
Public Company Limited
Present to
The Shareholders of Internet Thailand Public Company Limited
Prepared by
Baker Tilly Corporate Advisory Services (Thailand) Company Limited
18 January 2019
Level 21/1 Sathorn City Tower, 175 South Sathorn Road
Thung Mahamek, Sathorn, Bangkok 10120
Tel: 02 679 5400 Fax: 02 679 5401
Opinions of the Independent Financial Advisor
2
Table of Contents
Abbreviations .......................................................................................................................................................................... 3
Executive Summary ............................................................................................................................................................. 12
1 Nature and Details of the Transaction ................................................................................................................... 18
1.1 The General Characteristics and the Category of the Transaction ........................................................ 18
1.2 Date of the Transaction ................................................................................................................................... 20
1.3 Relevant Parties and Nature of Relationship .............................................................................................. 21
1.4 Size of the Transaction .................................................................................................................................... 23
1.5 Details of the Assets to be Acquired or Disposed ..................................................................................... 24
1.6 Summary of Related Agreements ................................................................................................................. 34
2 Reasonableness of the Transaction........................................................................................................................ 64
2.1 Objectives and Necessity of the Transaction ............................................................................................. 64
2.2 Advantages and Disadvantages from Entry into the Transaction .......................................................... 65
2.3 Risk from Entry into the Transaction of the Acquisition and Disposal of Assets ................................ 71
3 Sources of Funds in the Acquisition of Assets Transaction............................................................................... 76
4 The Fairness of Price and Conditions of the Transaction .................................................................................. 76
4.1 Fairness of the Price ......................................................................................................................................... 76
4.2 Appropriateness of the Conditions Precedent of the Transaction ........................................................ 97
Summary of the Opinions of the Independent Financial Advisor ............................................................................ 99
Appendix 1: Economic and Industry Overview .......................................................................................................... 104
Appendix 3: Financial Projection of the Long Term Lease Transaction .............................................................. 127
Appendix 4: Financial projection of Operating Sublease Transaction .................................................................. 128
Appendix 5: Financial Projection of Units Subscription Transaction .................................................................... 129
Appendix 6: Valuation by Independent Appraisers .................................................................................................. 131
Appendix 7: Profile and Experience of Merlin Solutions International Company Limited .............................. 133
Appendix 8: Co-location Service Rental in Retail Price and Wholesale Price by Merlin’s Solutions
International Company Limited .................................................................................................................................... 134
Appendix 9: Cash inflows from the Conditions in the Transaction Documents and expenses that may Arise
from the Risks of the Transactions ............................................................................................................................... 135
Opinions of the Independent Financial Advisor
3
Abbreviations “Company” or “INET” Internet Thailand Public Company Limited
“The Fund” or “IDCIF” Internet Data Center Infrastructure Fund (in the process of preparing
documents to apply for the approval of Fund establishment from the
SEC)
“SCG” Siam Cement (Kaeng Khoi) Company Limited
“Disposal of Assets
Transaction”
1) The Company enters into rent buildings (with component parts) of
the INET-IDC3 Project Phase 1 (Data Center Building, Utility Building,
Connecting Path Way and Customer Center Building) and leases
equipment but not including high technology equipment, for the
period of approximately 2 6 years (ended at 3 1 December 2 0 4 5 ) .
(“Long Term Lease Transaction”)
2) The Company enters into the undertaking agreement between the
Company as the grantor and the Fund as the grantee to insure that
the Company will perform their duties obligated to the Fund
(“Undertaking Transaction”)
“Acquisition of Assets
Transaction”
1) The Company enters into a sublease buildings (with component
parts) of the INET-IDC3 Project Phase 1 (Data Center Building, Utility
Building, Connecting Path Way and Customer Center Building) and to
lease equipment but not including those high technology equipment
from the Fund which lease term is approximately 9 years including
the renewal of the agreement but not exceeding 31 December 2045
or approximately 26 years. (“Operating Sublease Transaction”)
2) The Company and/or its subsidiaries subscribe the investment units
of the Fund in the amount not exceeding one third (or not exceeding
33.33%) of total issued and offered investment units in the Initial
Public Offering of the Fund. The size of the transaction is not
exceeding THB 800 to 950 M (“Units Subscription Transaction”)
“High technology
equipment”
The core network used as the internet connection from outside to
servers which consists of 1. Core switch – the main device used to
connect internal network 2. Module – the device converted fiber signal
to transmit to other devices 3. Cisco ACI – to manage internet system 4.
Fiber optic line - to connect internet circuit domestically and
internationally 5. Firewall – to prevent internet attack
“Transaction” The Acquisition and Disposal of Assets Transaction
“INET-IDC1” The INET Information Technology Data Center 1, Bangkok Thai Tower,
Rangnam Road
Opinions of the Independent Financial Advisor
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“INET-IDC2” The INET Information Technology Data Center 2, Thai Summit Tower,
New Petchaburi Road
“INET-IDC3 Project” The INET Information Technology Data Center 3 Project, the title deed
no. 2877, the 16, the dealing file no. 93, moo 6, Tub Kwang Subdistrict,
Kaeng Khoi District, Saraburi Province
“15 Business” 15 Business Advisory Limited
“AA” American Appraisal (Thailand) Company Limited
“Acquisition or Disposal of
Assets Notifications”
1) Notification of the Capital Market Supervisory Board No. TorChor.
20/2551 Re: Rules on Entering into Material Transactions Deemed as
Acquisition or Disposal of Assets (as amended)
2) Notification of the Stock Exchange of Thailand Re: Disclosure of
Information and Other Acts of Listed Companies Concerning the
Acquisition and Disposition of Assets 2004 (as amended)
“BBLAM” BBL Asset Management Co., Ltd.
“CAT” CAT Telecom Public Company Limited
“CS Loxinfo” CS Loxinfo Public Company Limited
“DCF” Discounted Cash Flow Approach
“EBITDA” Earnings Before Interest, Tax, Depreciation, and Amortization
“FA” or “BBL” Bangkok Bank Public Company Limited
“IFA” or “BTCAS” Baker Tilly Corporate Advisory Services (Thailand) Co., Ltd.
“KIRZ” KIRZ Company Limited
“Merlin's” Merlin's Solutions International Company Limited
“MLR” Minimum Lending Rate
“NPV” Net Present Value
“NTT” NTT Communications (Thailand) Co., Ltd.
“PEA” Provincial Electricity Authority
“PPI” Producer Price Index
“SEC” The Securities and Exchange Commission
“SET” The Stock Exchange of Thailand
“Switch” SWITCH, INC. (US Company operating in Data Center Supernap)
“TCC Technology” T.C.C. Technology Company Limited
“True Corporation” True Corporation Public Company Limited
“WACC” Weighted Average Cost of Capital
Opinions of the Independent Financial Advisor
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18 January 2019
Subject Opinions of the Independent Financial Advisor on the Acquisition and Disposal of Assets in
Connection with the Entry into Transactions with the Infrastructure Fund for Information
Technology Services Infrastructure Business of Internet Thailand Public Company Limited
To The Shareholders of Internet Thailand Public Company Limited
Attachment: 1) Economic and Industry Overview
2) Information of Internet Thailand Public Company Limited
3) Financial Projection of the Long Term Lease Transaction
4) Financial projection of Operating Sublease Transaction
5) Financial Projection of Units Subscription Transaction
6) Valuation by Independent Appraisers
7) Profile and Experience of Merlin's Solutions International Co., Ltd.
8) Retail and Wholesale Price of the Co – Location’s rental by Merlin’s
9) Cash inflows from the Conditions in the Transaction Documents and Expenses
that may Arise from the Risks of the Transactions
Reference: 1) Resolutions of the Board of Directors’ meetings concerning the Acquisition and Disposal of
Assets in Connection with the Entry into Transactions with the Infrastructure Fund for
Information Technology Services Infrastructure Business of Internet Thailand Public
Company Limited No. 11/2018 on 21 December 2018
2) Information Memorandum concerning the Acquisition and Disposal of Assets in Connection
with the Entry into Transactions with the Infrastructure Fund for Information Technology
Services Infrastructure Business of Internet Thailand Public Company on 21 December
2018
3) Investment Analysis prepared by Merlin Solutions International Company Limited as of 30
October 2018
4) Summary of valuation report and replacement value of INET-IDC 3 Project phase 1 and
supporting documents prepared by American Appraisal (Thailand) Co., Ltd. on 17
December 2018 and appraised on 1 July 2019
5) Summary of valuation report and supporting documents prepared by15 Business Advisory
Limited on 18 December 2018 and appraised on 1 July 2019
6) Summary of the essence of relevant agreements which are Land Lease Agreement,
Supplemental Memorandum of Land Lease Agreement, Building Lease Agreement,
Equipment Lease Agreement, Sublease Agreement and Operating Agreement Contract
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7) Audited financial statements of the Company as of 31 December 2015, 31 December 2016,
31 December 2017 and reviewed financial statements as of 30 September 2018
8) Company Affidavit, Memorandum of Association and other information and documents,
including interview with the management of the Company and concerned officials
9) Annual Registration Statement (Form 56-1) of Internet Thailand Public Company Limited
for the year 2017
10) Annual Report of Internet Thailand Public Company Limited for the year 2015, 2016 and
2017
Opinions of the Independent Financial Advisor
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Internet Thailand Public Company Limited (“INET” or the “Company”) is a one-stop service
provider of ICT infrastructure. The Company’s buisnesses can be divided into 3 parts which are
1. Cloud Service - Services that incorporate the use of computer resources and internet networks.
the Company has been offering cloud services in the form of public cloud for enterprises.
2. Internet Access - Provides internet access services for businesses covering all provinces which
enable users to access nationwide internet networks.
3. Co – Location - A server depository service for organizations that seek for security and stability
by depositing their equipment at the provided area. The organization can additionally use the
Company’s cloud service or internet access.
Currently, the Company has 3 data center site (INET-IDC) with necessary devices to operate the
said businesses which are Bangkok Thai Tower (INET-IDC1), Thai Summit Tower (INET-IDC2) and Kaeng Khoi,
Saraburi province (INET-IDC3 Project).
In 2016, the Company has invested in INET-IDC3 Project, located on the title deed no. 2877, the
16, the dealing file no. 93, moo 6, Tub Kwang subdistrict, Kaeng Khoi district, Saraburi province (“INET-IDC3
Project”) to support the growth of cloud service. The 3 sites can be connected to each other at high speed
and with high stability. There are 4 phases of INET-IDC3 Project to be invested. Currently, phase 1 has been
providing services to the customer and the Company has plan to invest in other phases of INET-IDC3
consistently.
The land which is the location of INET-IDC3 Project is the ownership of The Siam Cement (Kaeng
Khoi) Co., Ltd. (“SCG”). The Company has entered to the Land Lease Agreement with SCG for the period of
30 years from 1 January 2016 to 31 December 2045 (Details in 1.6.1. Summary of the Essence of the Land
Lease Agreement).
Afterwards, the Company has plan to establish the Infrastructure Fund for Internet Data Center
Infrastructure Fund (“the Fund” or “IDCIF”) for fund raising purpose which now in the process of preparing
documents to apply for the approval of fund establishment from the SEC. The Company wishes to subscribe
investment units of the Fund in the amount not exceeding one - third (or not exceeding 33.33%) of total
issued and offered investment units in the Initial Public Offering of the Fund. After the fund establishment
and fund raising is completed, the Company will rent out buildings (with component parts) of the INET-
IDC3 Project Phase 1 and equipment but not including high technology equipment to the Fund (the high
technology equipment consists of 1. Core switch – the main device used to connect internal network 2.
Module – the device converted fiber signal to transmit to other devices 3. Cisco ACI – to manage internet
system 4. Fiber optic line - to connect internet circuit domestically and internationally 5. Firewall – to
prevent internet attack) for the period of 26 years ended at 31 December 2045 (Details in 1.6.3 Summary
of the essence of Building Lease Agreement and 1.6.4 Summary of the essence of Device Lease Agreement).
Opinions of the Independent Financial Advisor
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Subsequently, the Company will sublease buildings (with component parts) of the INET-IDC3
Project Phase 1 and equipment back from the Fund which the sublease term is approximately 9 years
including the renewal of the agreement but not exceeding 31 December 2045 (Details in 1.6.5 Summary of
the essence of Operating Agreement Contract). The Fund structure and the relevant agreements to the
Transaction is as follows:
From entering to the above Transaction, the Company will receive cash from the Long Term Lease
Transaction from the Fund establishment to repay loan or debt, invest in other phases of INET-IDC3 while
still have buildings and equipment used for its core business.
The Company has future business plan for the emergence of the digital economy. They continue
to develop various cloud service platforms in Thailand with a local data storage to fulfill the variety of IT-
related need of organizations, with the aim to facilitate organizations to enhance their competitiveness and
adaptability to the digital economy such as:
- IoT platform (Internet of Things) is the device connected to the internet, so that the users can
command or control the device through the internet, such as turning on – off household
electricity
- Software as a services (SaaS) which users will receive software services on Cloud system, where
service providers will be responsible for everything from network, server, hardware through a
design of software development
- Data analytic platform is to analyze and process the big data by the technology to help in
business or other purposes
Opinions of the Independent Financial Advisor
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- E-Transaction is the transaction perform through electronics such as buying – selling products
through the internet, transferring money through the network system, etc.
As such, the development of the Data Center is necessary to support the business growth of the
Company. Therefore, the Meeting of Board of Directors of the Company No. 11/2018 dated 21 December
2018 has the resolution to approve the Company to enter into a transaction with Infrastructure Fund (“the
Fund”), in which is now in the process of preparing documents to apply for the approval of Fund
establishment from the SEC for fund raising purpose for the information technology services infrastructure
business. The entering into the transactions comprise of the Disposal of Assets Transaction (the Long Term
Lease Transaction and the Undertaking Transaction) and the Acquisition of Assets Transaction (the Operating
Sublease Transaction and the Units Subscription Transaction) with details as follows:
The Disposal of Assets Transaction consists of the approval to rent buildings (with component parts)
of the INET-IDC3 Project Phase 1 (Data Center Building, Utility Building, and Connecting Path Way), to rent
Customer Center Building, and to rent equipment but not including high technology equipment, for the
period of approximately 26 years (ended at 31 December 2045) in which the aforementioned assets are
used in the INET-IDC3 Project Phase 1 and Customer Center Building to the Fund (the “Long Term Lease
Transaction”). and the approval to enter into the undertaking agreement between the Company as the
grantor and the Fund as the grantee to insure that the Company will perform their duties obligated to the
Fund (the “Undertaking Transaction”).
The size of the Long Term Lease Transaction is approximately THB 2,400 – 2,850 M which is
approximately 51% - 60.6% which is considered to be as the Disposal of Assets Transaction Type 1 by
calculating from total value of compensation from the Long Term Lease Transaction compared with total
assets from the latest reviewed consolidated financial statements as of 30 September 2018 of the Company
as stipulated in the Acquisition or Disposal Assets Notifications. The Undertaking Transaction is a part of the
Long Term Lease Transaction as it is to ensure that the Company will comply with its duties, the Company
will not receive any remuneration for entering into the Undertaking Transaction from the Fund.
The Acquisition of Assets Transaction consists of the approval to sublease buildings (with
component parts) of the INET-IDC3 Project Phase 1 (Data Center Building, Utility Building, and Connecting
Path Way), to sublease Customer Center Building, and to sublease equipment from the Fund which sublease
term is approximately 9 years including the renewal of the agreement but not exceeding 31 December
2045 or approximately 26 years from the date enter into the transaction, (shall be collectively referred to
as the “Operating Sublease Transaction”) under the Operating Sublease Agreement to use the
aforementioned assets to operate INET-IDC3 Project Phase 1 and other relevant operations, and the
approval subscribe investment units of the Fund in the amount not exceeding one third (or not exceeding
33.33 %) of total issued and offered investment units in the Initial Public Offering of the Fund (the “Units
Subscription Transaction”). In this regard, the Company will use a bridge loan from a financial institution as
Opinions of the Independent Financial Advisor
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sources of fund to subscribe for the investment units and will, subsequently, repay such bridge loan with
the proceed received from the Long Term Lease Transaction with the Fund.
The size of the Operating Sublease Transaction is approximately THB 2,274 - 7,666 M by considering
the Operating Sublease Transaction of the Company for approximately 9 years including the renewal of the
agreement but not exceeding 31 December 2045 or approximately 26 years from the date enter into the
transaction. The size of the Units Subscription Transaction which the investment portion of the Company
in the units of the Fund in the amount not exceeding one third of total issued and offered investment units
in the Initial Public Offering of the Fund that not exceeding THB 800 - 950 M which is subject to the Fund
size at THB 2,400 – 2,850 M, as well as other Acquisition of Assets Transactions within the past 6 months,
the highest acquisition of assets transaction size is equivalent to approximately 65.3% - 183.41% which is
categorized as the Acquisition of Assets Transactions Type 1 by comparing total value of compensation for
the Operating Sublease Transaction and the Units Subscription Transaction, and comparing with the Total
Assets of the latest reviewed consolidated financial as of 30 September 2018 of the Company as stipulated
in the Acquisition or Disposal Assets Notifications.
By entering into the Acquisition and Disposal of Assets Transaction Type 1 as stipulated in the
Acquisition or Disposal Assets Notifications, the Company has duties to disclose information on the
acquisition and disposal of assets to the SET, to appoint the IFA to provide opinions relating to the
acquisition and disposal of assets of the Company to the shareholders of the Company including preparing
any other necessary documents as required by the regulated authorities and to convene the shareholders’
meeting to consider approving to enter the acquisition and disposal of assets transaction of the Company.
In this regard, the approval requires no less than Three-Fourths of the total number of votes of shareholders
attending and casting votes at the meeting but exclude those shareholders who have conflicts of interest.
Furthermore, the approval of acquisition and disposal of assets transaction, the contract and the
signing the document which is related to the Fund transaction, the Long Term Lease Transaction, the
Undertaking Transaction, the Operating Lease Transaction, the Units Subscription Transaction, and/or other
related transaction, including assign and delegate the authority related to the transaction, shall be deemed
to be related agenda iterms, and conditional upon each other. Therefore, if any of those agenda items is
not approved by the shareholders’ meeting, the other related agenda iterms will not be proposed to the
meeting for consideration and shall be deemed to be canceled.
Based on the above regulations, the Company’s Directors have appointed Baker Tilly Corporate
Advisory Services (Thailand) Co., Ltd. (“IFA” or “BTCAS”), which is an independent financial advisor approved
by the SEC and is independent of the Company, and the Fund, to render opinion to the Company’s
shareholders on the acquisition and disposal of assets in connection with the entry into transactions with
the Infrastructure Fund for information technology services infrastructure business of Internet Thailand
Public Company Limited.
Opinions of the Independent Financial Advisor
11
In preparing this report, the IFA has taken into consideration the information and documents available
publicly, the information on industry analysis and forecast, the information and documents obtained from
the Company, the financial information of the Company, the investment analysis, the summary of valuation
report of the independent appraisers, including the management interview of the Company. The IFA may
not certify the accuracy or completeness of the information obtained.
In this regard, the opinion of the IFA bases on the economic environment and the information
prevailing at the time of preparing this report only, therefore, any significant change in these factors could
have an impact on our opinion. In preparing this report to render the opinion, the IFA has considered all
information thoroughly and reasonably in line with professional standards and has given all rationales based
on the fair and impartial information and analysis by paying regard primarily to the interest of the
shareholders.
Opinions of the Independent Financial Advisor
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Executive Summary
Internet Thailand Public Company Limited (the “Company”) has convened the Board of Directors’
Meeting No. 11/2018 dated 21 December 2018 and has the resolution to approve the Company to enter
into the acquisition and disposal of assets transaction with the Fund, in which is now in the process of
preparing documents to apply for the approval of Fund establishment from the SEC for fund raising purpose
for the information technology services infrastructure business. The entering into the transactions between
the Company and the Fund comprise of the Disposal of Assets Transaction and the Acquisition of Assets
Transaction.
The Disposal of Assets Transaction consists of 1. The Long Term Lease Transaction which the
Company rents out buildings and leases out equipment used in the INET-IDC3 Project Phase 1, but not
including equipment that change rapidly by technology (“high technology equipment”), to the Fund for
the period of approximately 26 years (ended at 31 December 2045) with the transaction size approximately
THB 2,400 – 2,850 M. The transaction will be in accordance with terms and conditions stipulated in the
Building (with Component Parts) Lease Agreement, the Equipment Lease Agreement and/or other relevant
agreements and 2. The Undertaking Transaction according to the Undertaking Agreement between the
Company and the Fund.
The Acquisition of Assets Transaction consists of 1. The Operating Sublease Transaction which the
Company sublease buildings and lease equipment used in the INET-IDC3 Project Phase 1 from the Fund.
The lease term is approximately 9 years including the renewal of the agreement but not exceeding 31
December 2045 or approximately 26 years with the transaction size approximately THB 2 ,274 – 7,666 M
and 2. The Units Subscription Transaction which the Company and/or its subsidiaries subscribe the
investment units of the Fund in the amount not exceeding one third (or not exceeding 33.33%) of total
issued and offered investment units in the Initial Public Offering of the Fund. The transaction size is not
exceeding THB 800 – 950 M. The both transactions will be in accordance with terms and conditions
stipulated in the Operating Sublease Agreement, the Undertaking Agreement and/or other relevant
agreements.
The aforesaid Disposal of Assets Transaction and the Acquisition of Assets Transaction have the
transaction size of more than or equal to 50% of the total assets as stipulated by the Acquisition or Disposal
of Assets Notifications. Therefore, the approval requires no less than Three-Fourths of the total number of
votes of shareholders attending and casting votes at the meeting but exclude those shareholders who have
conflicts of interest.
Based on the above regulations, the Company’s Directors have appointed Baker Tilly Corporate
Advisory Services (Thailand) Co., Ltd. (“IFA” or “BTCAS”), which is an independent financial advisor approved
Opinions of the Independent Financial Advisor
13
by the SEC and is independent of the Company and the Fund, to render opinion to the Company’s
shareholders on the acquisition and disposal of assets as abovementioned.
The IFA is of the opinion that the entry into the Transaction is reasonable. The Company will use
cash from the long term lease from the establishment of the Fund to expand the business and repay debt
for better financial structure. The Company will also transfer the capital expenditure (CAPEX) to the Fund
for the assets age over 9 years while still have rights to use the buildings and equipment for its main
business operation. Moreover, the Company will receivce dividend from investing in units of the Fund.
The IFA has considered the fair value of the assets that the Company enters to the Long Term
Lease Transaction, the Operating Sublease Transaction and the Units Subscription Transaction via the
discounted cash flow approach (DCF) by the IFA. The fair value of the assets are summarized in the table
below:
1. Summary of The Disposal of Assets Transaction
1.1 Fair Value of The Disposal of Assets Transaction (The Long Term Lease Transaction)
Valuation Approach Fair Value of the Assets
(THB M)
Appropriateness of
Approach
Discounted Cash Flow Approach (DCF) by the IFA 2,248.59 Appropriate
Value of cash inflow that the Company will receive from the Long Term Lease Transactions
(between THB 2,400 – 2,850 M, depends on the final offering price of the Fund's investment units
determined by the method of surveying the demand for investment units of institutional investors (Book
Building) and depends on many factors such as the conditions of the capital market at that time) is greater
than the fair value of the assets appraised by the IFA of THB 2,248.59 M. This makes net present value of
the Long Term Lease Transaction positive by between THB 151.41 – 601.41 M. Thus, the IFA is of the
opinion that entering into the Long Term Lease Transaction with the Fund is appropriate.
2. Summary of the Fairness of the Price of the Accquisition of Assets Transaction
2.1 Fair value of the Accquisition of Assets Transaction (The Operating Sublease
Transaction)
Valuation Approach
Fair Value of the Sublease
Agreement
(THB M)
Appropriateness of
Approach
Discounted Cash Flow Approach (DCF) by the IFA 2,248.59 Appropriate
Based on the valuation by the IFA, the present value of net cash outflow throughout the operating
sublease period of 26.5 years equals to THB 2,248.59 M.
Opinions of the Independent Financial Advisor
14
Moreover, the IFA has appraised the present value of the profit from the assets after entering into
the Operating Sublease Transaction for 26.5 years equals to THB 2,503.41 M which more than the present
value of the cash outflow throughout the projection period. This makes net present value of the Operating
Sublease Transaction positive by THB 254.82 M. Thus, the IFA is of the opinion that entering into the
Operating Sublease Transaction with the Fund is appropriate.
2.2 Fair value of the Accquisition of Assets Transaction (the Units Subscription Transaction)
Valuation Approach Fair Value of the Assets
(THB M)
Appropriateness of
Approach
Discounted Cash Flow Approach (DCF) by the IFA 978.52 Appropriate
Based on the valuation by the IFA, the present value of the expected dividend from the investment
units of the Fund is THB 978.52 M which is higher than the size of the invesement (between THB 800 - 950
M depends on the final offering price of the Fund's investment units determined by the method of surveying
the demand for investment units of institutional investors (Book Building) and depends on many factors
such as the conditions of the capital market at that time). This makes net present value of the Units
Subscription Transaction positive by between THB 28.52 – 178.52 M. Thus, the IFA is of the opinion that
entering into the Units Subscription Transaction with the Fund is appropriate.
In Addition, the Long Term Lease Transaction, the Operating Sublease Transaction, and the Unit
Subscription Transaction are related and are conditions for each other. According to the Transaction
Documents, the documents require the Company to to bear various related expenses and also having
expenses that may arise from the risk of the transaction which affect to the net present value of the Disposal
of Assets Transaction (the Long Term Lease Transaction) and the net present value of the Accquisition of
Assets Transaction (the Operating Sublease Transaction, and the Unit Subscription Transaction) as follows
Summary of the net present value of the Disposal of Assets Transaction and the Accquisition of Assets
Transaction
Summary of the net present value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction
List
Transaction Size
(THB M)
2,400 2,850
Net Present Value from the Long Term Lease Transaction /1 151.41 601.41
Net Present Value from the Operating Sublease Transaction /2 254.82 254.82
Net Present Value from the Unit Subscription Transaction 178.52 28.52
Total Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction before Adjustments 584.75 884.75
Opinions of the Independent Financial Advisor
15
Present Value of Cash Inflows and Cash Outflows Follow the Conditions in the Transaction Documents
(Adjustments)
List
Transaction Size
(THB M)
2,400 2,850
1) Cash in from land rental in advance/3 10.75 10.75
2) Cash in from Advanced Taxes Redemption/3 2.35 2.35
3) Cash in from Rental Guarantee/4 80.57 80.57
4) Cash out from land rental in advance/3 (36.30) (36.30)
5) Cash out from Advanced Taxes Redemption/3 (9.24) (9.24)
6) Cash out from Rental Guarantee/4 (184.27) (184.27)
7) Cash out from Additional Investment in Rack (6.65) (6.65)
8) Cash out from Fund setup cost (64.10) (69.80)
Total Net Present Value of Cash Inflows and Cash Outflows Follow the
Conditions in the Transaction Documents (Adjustments) (206.88) (212.58)
Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction after Adjustments 377.87 672.17
Source: /1 Summary of the Draft Building Lease Agreement and Summary of the Draft Equipment Lease Agreement /2 Summary of the Draft Sublease Agreement /3 Summary of the Supplemental Memorandum of Land Lease Agreement /4 Summary of the Draft Sublease Agreement /5 Summary of the Draft Operating Agreement
Therefore, the net present value of the Disposal of Assets Transaction and the Accquisition of Assets
Transaction after adjustments is between THB 377.87 - 672.17 M (Base Case Scenario). However, the IFA
has considered the tax burden and the Company’s risks which are 1) corporate income tax arising from
profits from selling assets, 2) the risk of not receive Vat Loan repayment, and 3) the Risk that the Company
Tax Benefits from the BOI be Canceled. The IFA then calculate the present value of tax burden and the
Company’s risks that may arise from entering into the transactions as follows:
Present Value of Tax Burden and the Company’s Risks that may Arise from Entering into the
Transactions (Worst Case Scenario)
List
Transaction Size
(THB M)
2,400 2,850
1) Cash out from Corporate Income Tax Arising from Profits from Selling Assets (107.01) (136.34)
2) Cash out from the Risk of not Receive Vat Loan Repayment (127.72) (151.66)
3) Cash out from the Risk that the Company Tax Benefits from the BOI be
Canceled
(22.86) (22.86)
Opinions of the Independent Financial Advisor
16
Present Value of Tax Burden and the Company’s Risks that may Arise from Entering into the
Transactions (Worst Case Scenario)
Total Present Value of Tax Burden and the Company’s Risks that may
Arise from Entering into the Transactions
(257.58) (310.86)
Summary of Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction
120.28 361.30
The IFA has calculated the net present value of the Disposal of Assets Transaction and the Accquisition of
Assets Transaction from entering into the transactions which is between THB 275.58 – 310.86 M. Under the
assumption that all the cases of burden and risks occur, the the net present value of the Disposal of Assets
Transaction and the Accquisition of Assets Transaction from entering into the transactions will be decreased
to THB 120.28 – 361.30 M which still remain positive.
Therefore, the shareholders should approve the transaction for the acquisition and disposal of
assets of the Company. However, the decision as to vote in favor of the said transactions depends principally
on the shareholders’ individual judgement. The shareholders are recommended to additionally study the
information in all documents enclosed with the notice of the shareholders’ meeting so as to use judgement
and discretion for proper voting decision.
The IFA, hereby certifies that we have considered and analyzed all information and expressed
opinion thoroughly and fairly in line with professional standards by paying regard primarily to the interest
of the shareholders. In providing our opinion, we have taken into consideration the information and
documents available publicly, the information on industry analysis and forecast, the information and
documents obtained from the Company and the management interview of the Company. The IFA may not
certify the accuracy or completeness of the information obtained. Moreover, the opinion rendered herein
to the shareholders is the opinion according to appropriateness of the acquisition and disposal of assets of
the Company based on the information and the economic environment prevailing at the time of preparing
this report only, therefore, any significant change in these factors could have an impact on our opinion.
Opinions of the Independent Financial Advisor
17
Opinion of Independent Financial Advisor on the Acquisition and
Disposal of Assets in Connection with the Entry into Transactions with
the Infrastructure Fund for Information Technology Services
Infrastructure Business of Internet Thailand Public Company Limited
The Meeting of Board of Directors of the Company No. 11/2018 dated 21 December 2018 has the
resolution to approve the Company to enter into a transaction with the Fund, in which is now in the process
of preparing documents to apply for the approval of Fund establishment from the SEC for fund raising
purpose for the information technology services infrastructure business. The entering into the transactions
comprise of the Disposal of Assets Transaction (the Long Term Lease Transaction and the Undertaking
Transaction) and the Acquisition of Assets Transaction (the Operating Sublease Transaction and the Units
Subscription Transaction) with details as follows:
The Disposal of Assets Transaction:
- Approved the Company to rent buildings (with component parts) of the INET-IDC3 Project
Phase 1 (Data Center Building, Utility Building, and Connecting Path Way), to rent Customer
Center Building, and to rent equipment but not including high technology equipment, for the
period of approximately 26 years (ended at 31 December 2045) in which the aforementioned
assets are used in the INET-IDC3 Project Phase 1 and Customer Center Building to the Fund
(shall be collectively referred to as the “Long Term Lease Transaction”).
- Approved the Company to enter into the undertaking agreement between the Company as
the grantor and the Fund as the grantee to insure that the Company will perform their duties
obligated to the Fund (the “Undertaking Transaction”).
The Acquisition of Assets Transaction:
- Approved the Company to sublease buildings (with component parts) of the INET-IDC3 Project
Phase 1 (Data Center Building, Utility Building, and Connecting Path Way), to sublease Customer
Center Building, and to sublease equipment from the Fund which sublease term is
approximately 9 years including the renewal of the agreement but not exceeding 31 December
2045 or approximately 26 years from the date enter into the transaction, (shall be collectively
referred to as the “Operating Sublease Transaction”) under the Operating Sublease Agreement
to use the aforementioned assets to operate INET-IDC3 Project Phase 1 and other relevant
operations.
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- Approved the Company to subscribe investment units of the Fund in the amount not
exceeding one third (or not exceeding 33.33 percent) of total issued and offered investment
units in the Initial Public Offering of the Fund (the “Units Subscription Transaction”) In this
regard, the Company will use a bridge loan from a financial institution as sources of fund to
subscribe for the investment units and will, subsequently, repay such bridge loan with the
proceed received from the Long Term Lease Transaction with the Fund.
1 Nature and Details of the Transaction
1.1 The General Characteristics and the Category of the Transaction
1.1.1 The Disposal of Assets Transaction
The Long Term Lease Transaction
Subsequent to the completion of the offering of the investment units of the Fund, the Asset
Management will register the group of invested asset which is proceeds received from the offering, as the
Fund with the SEC. Subsequently, the Fund will utilize such proceed to pay for the rent under the Long
Term Lease Transaction (and relevant expenses) in a lump sum to the Company in order that the Fund will
take the long term leasehold right by entering into the Long Term Lease Agreement with the Company. In
this regard, details of the Long Term Lease Transaction will be stipulated in the Long Term Lease Agreement.
The value of the aforesaid Transaction will be approximately THB 2,400 – 2,850 M. for the period
of approximately 26 years (ended at 31 December 2045). The final rental will be subject to an agreement
of the related contracting parties. However, the considerations (the final rental) in which the Company will
receive from the entry into the Long Term Lease Agreement will be subject to the final offering price of
the investment units of the Fund which will be indicated by bookbuilding and other factors such as market
conditions and financial products offered at that time. In addition, the considerations (the final rental) will
be mutually agreed by the Company and the Fund. The Fund will pay in a lump sum after the conditions
precedent as prescribed in the Long Term Lease Agreement are completed or waived.
The Undertaking Transaction
The Company agrees to carry out the below matters in order to ensure its compliance of the duties
in order for the smooth of the information technology services business. The Company has agreed to carry
out the critical activities as following, for example:
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(a) Invest in investment units of the Fund (whether by the Company and/or its subsidiaries) and
maintain the units holding in the proportion as mutually agreed.
(b) Operate the business of the Company and comply with the Long Term Lease Agreement as
well as other agreements related to Data Center services.
(c) Grant to the Fund to borrow money for paying Value Added Tax (VAT) arising from the IFF
Transaction.
(d) Other undertaking matters and abstention as concluded in the Undertaking Agreement.
1.1.2 The Acquisition of Assets Transaction
The Operating Sublease Transaction
The Company will enter into the operating sublease by subleasing buildings (with component parts)
and equipment from the Fund (See more details in 1.5 “Details of Assets to be Acquired or Disposed”).
The size of the Operating Sublease Transaction is approximately THB 2,274 to 7,666 M with the lease term
of approximately 9 years including the renewal of the agreement but not exceeding 31 December 2045
under the terms and conditions stipulated in the Operating Sublease Agreement.
The Units Subscription Transaction
Subsequent to the Fund registration with the SEC, the Company and/or its subsidiaries to subscribe
investment units will subscribe the investment units of the Fund at the amount of not exceeding one third
(or not exceeding 33.33%) of the total issued and offered investment units in the Initial Public Offering of
the Fund. In this regard, the Company will use a bridge loan from a financial institution as sources of fund
to subscribe for the investment units and will, subsequently, repay such bridge loan with the proceed
received from the Long Term Lease Transaction with the Fund.
The units subscription price will be subject to the final offering price of the investment units of the
Fund which will be indicated by bookbuilding and other factors such as capital market conditions and other
financial products offered at that time, provided that the calculation will be based on the assumption that
the size of the Fund will be approximately THB 2,400 – 2,850 M. The subscription amount that the Company
and/or its subsidiary has to pay to the Fund is not exceeding approximately THB 800 – 950 M based on the
Fund size.
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1.2 Date of the Transaction
1.2.1 The Disposal of Assets Transaction
The Long Term Lease Transaction and the Undertaking Transaction will take place after the
conditions precedent specified in the Long Term Lease Agreement and other relevant agreement(s) (any
agreement or agreements) have been satisfied or waived. The Company expects that the Long Term Lease
Transaction will occur in 2019.
1.2.2 The Acquisition of Assets Transaction
Operating Sublease Transaction
The Operating Sublease Transaction will take place after the conditions precedent specified in the
Operating Sublease Agreement and other relevant agreement(s) (any agreement or agreements) have been
satisfied or waived. The Company expects that the Operating Sublease Transaction will occur in 2019.
Units Subscription Transaction
The Units Subscription Transaction will take place within units subscription period which will be
announced later by the Asset Management Company after the filing application for the approval of the
establishment of the Fund has been approved by the SEC. The Asset Management Company will
subsequently announce the units subscription period. The Company expects that the Units Subscription
Transaction will occur in 2019.
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1.3 Relevant Parties and Nature of Relationship
The Disposal of Assets Transaction
The Long Term Lease Transaction
Lessor: Internet Thailand Public Company Limited (“the Company” or “INET”)
Lessee: Internet Data Center Infrastructure Fund (“the Fund”)
The Undertaking Transaction
Grantor: the Company
Grantee: the Fund
The Acquisition of Assets Transaction
Operating Sublease Transaction
Sub-Lessor: the Fund
Sub-Lessee: the Company
Units Subscription Transaction
Subscriber: the Company
Issuer: the Fund
Nature of Their Relationship:
1. Currently, the Fund has not been set up and has no relationship with the Company. However
the Company and/or its subsidiaries to subscribe investment units have the plan to subscribe
the newly issued investment units at the amount of not exceeding one third (or not exceeding
33.33%) of the total issued and offered investment units in the Initial Public Offering of the
Fund.
2. After the Fund has been registered with the SEC, the Company and/or its subsidiaries will hold
not exceeding one third (or not exceeding 33.33%) of the total issued and offered investment
units in the Initial Public Offering of the Fund.
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The Structure of the Fund
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1.4 Size of the Transaction
The Disposal of Assets Transaction
Long Term Lease Transaction
The size of the Long Term Lease Transaction will be approximately THB 2 ,40 0 – 2,850 M. The
calculation of transaction size according to the Acquisition or Disposal of Assets Notification is approximately
51.0% - 60.6% of the total assets of the Company, based on the total value of compensation compared
with total assets value of the Company from reviewed consolidated financial statements as of 30
September 2018. The calculation is as follows:
Transaction Size = Value of the Long Term Lease Transaction x 100
Total Assets of the Company
= THB 2,400 – 2,850 M x 100
THB 4,704.91 M
= 51.0 – 60.6%
Nevertheless, the Long Term Lease Transaction are not considered as connected transaction
pursuant to the Notification of Capital Market Supervisory Board No. Tor Chor. 21/2551 re: Rules on
Connected Transactions.
The Undertaking Transaction
Since the Undertaking Transaction is a part of the Long Term Lease Transaction as it is to ensure
that the Company will comply with its duties, thus, the Company will not receive any consideration for
entering into the Undertaking Transaction from the Fund.
The Acquisition of Assets Transaction
Operating Sublease Transaction
The Company will enter into the operating sublease from the Fund with the value of transaction
does not exceed approximately THB 2,274 to 7,666 M (Calculated from leasing fee of subleasing buildings
with component part and equipment of approximately 9 – 26 years). According to the Acquisition or Disposal
of Assets Notification, the calculation of transaction size based on the total value of compensation is not
exceeding 48.3% - 162.9% of the total assets of the Company from reviewed consolidated financial
statements as of 30 September 2018. The calculation is as follows:
Opinions of the Independent Financial Advisor
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Transaction Size = Estimated Paid Amount x 100
= THB 2,274 to 7,666 M x 100
= 48.3% – 162.9% Total Assets of the Company THB 4,704.9 M
Units Subscription Transaction
Subsequent to the Fund registration with the SEC, the Company and/or its subsidiaries to subscribe
investment units will subscribe the investment units of the Fund at the amount of not exceeding one third
(or not exceeding 33.33%) of the total issued and offered investment units in the Initial Public Offering of
the Fund. It is provided that the calculation will be based on the assumption that the size of the Fund will
be approximately THB 2,400 – 2,850 M. The subscription amount that the Company and/or its subsidiary
has to pay to the Fund is not exceeding approximately THB 800 – 950 M based on the Fund size. According
to the Acquisition or Disposal of Assets Notification, the calculation of transaction size based on the total
value of compensation is not exceeding approximately 17.0% - 20.2% of the total assets of the Company
from reviewed consolidated financial statements as of 30 September 2018. The calculation is as follows:
Transaction Size = Estimated Paid Amount x 100
= THB 800 - 950 M x 100
= 17.0% – 20.2% Total Assets of the Company THB 4,704.91 M
1.5 Details of the Assets to be Acquired or Disposed
1.5.1 The Disposal of Assets Transaction
Long Term Lease Transaction
The Company and the Fund will enter into the Long Term Lease Agreement provided that the
Company will rent to the Fund buildings (with component parts) of the INET-IDC3 Project Phase 1 (Data
Center Building, Utility Building, and Connecting Path Way), Customer Center Building, and equipment
related to Data Center services but not including high technology equipment. In this regard, the period of
the Long Term Lease Agreement is not exceeding 31 December 2045 or approximately 26 years from the
date enter into the transaction. Details of the assets to be disposed according to the Long Term Lease
Agreement are shown below:
No Transaction Assets
1 Lease buildings and component parts
including other utility systems affixed
in the building or in such area
(1) Data Center Building
(2) Utility Building
(3) Customer Center Building
(4) Other Related Civil Work which are
assembly work for the building
structures or project areas such as
construction preparation etc.
(5) Electricity System
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No Transaction Assets
(6) Cooling System
(7) Fire Prevention System
(8) Water Leaks Detector System
(9) Fuel Supply System
(10) Network Cabling System
(11) Related System such as ethernet switch
(the device that connects internet from
server to internet network), emergency
exit and telephone and data system
(12) Security System
2 Lease equipment for providing
service
Racks
Undertaking Transaction
After the completion of registration of the Fund with the SEC, the Company and the Fund will
enter into the Undertaking Agreement in order to undertake that the Company will perform its duties
properly for the smooth and complete of the data center services. Material terms in the undertaking
agreement are shown below:
1. Invest in investment units of the Fund (whether by the Company and/or its subsidiaries) and
maintain the units holding in the proportion as mutually agreed.
2. Operate the business of the Company and comply with the Long Term Lease Agreement as
well as other agreements related to Data Center services.
3. Grant to the Fund to borrow money for paying Value Added Tax (VAT) arising from the IFF
Transaction.
4. Other undertaking matters and abstention as concluded in the Undertaking Agreement.
1.5.2 The Acquisition of Assets Transaction
Operating Sublease Transaction
The Company and the Fund will enter the Operating Sublease Agreement provided that the
Company will sublease buildings (with component parts) of the INET-IDC3 Project Phase 1 (Data Center
Building, Utility Building, and Connecting Path Way), sublease Customer Center Building, and sublease
equipment related to Data Center services from the Fund for its business operation and other relevant
operations. In this regard, the period of the Operating Sublease Agreement is approximately 9 years and the
Company can make renewal of the Agreement but not exceeding 31 December 2045 or approximately 26
Opinions of the Independent Financial Advisor
26
years from the date enter into the transaction according to the details and conditions as prescribed in the
Operating Sublease Agreement. Details of the Acquisition of Assets Transaction according to the Operating
Sublease Agreement are shown below:
No Transaction Assets
1. Buildings (with component
parts) and equipment for
providing service
(1) Data Center Building
(2) Utility Building
(3) Customer Center Building
(4) Other Related Civil Work which are
assembly work for the building
structures or project areas such as
construction preparation etc.
(5) Racks
(6) Electricity System
(7) Cooling System
(8) Fire Prevention System
(9) Water Leaks Detector System
(10) Fuel Supply System
(11) Network Cabling System
(12) Related System such as ethernet
switch (the device that connects
internet from server to internet
network), emergency exit and
telephone and data system
(13) Security System
Units Subscription Transaction
The Fund will be established as an infrastructure fund with the key objective to invest in
infrastructure assets which have potential growth in long term. The Fund will offer the investment units to
investors in general and the Fund will distribute dividends and return capital to the investors constantly
according to the Fund’s performance. The details will be as stipulated in the prospectus of the Fund which
will be further prepared.
After the completion of registration of the Fund with the SEC, the Company and/or its subsidiaries
will enter into the Units Subscription Transaction as the value will not be exceeding one third (or not
exceeding 33.33%) of the total initial issued and offered of investment units in the Initial Public Offering at
approximately THB 800 - 950 M based on the size of the Fund at approximately THB 2,400 – 2,850 M.
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1.5.3 Characteristics and Details of Assets to be Acquired and Disposed
1.5.3.1 Characteristics of Building and Construction
The INET-IDC3 Project is located in Kaeng Khoi district, Saraburi province. It was built in 2017 to
support the expansion of business and also connect with the existing two INET data centers which are
Thai Summit Tower and Bangkok Thai Tower by the Software-Defined Network. In October 2017, the
Company has received the Uptime Tier III Certification of Design Documents (TCDD) for INET-IDC3 Building
1, which is the certification of design document with global standard..
Details of the INET-IDC Project Phase 1 buildings related to the entry into transaction are as
follows:
No. Assets Area (sq.m.)
1 Customer Center Building 1,264
2 Data Center Building 1,912
3 Utility Building 1,920
4 Restroom Building 115
5 Covered Roof and Guard Building 225
6 Garbage Building 5
7 Water Pump Building and Water Tank 30
8 Corridor 227
Total 5,698
Source: Summary of valuation report and replacement value of INET-IDC3 Project
phase 1 and supporting documents prepared by AA on 17 December 2018 and
appraised on 1 July 2019
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Exterior and Interior Image of the INET-IDC3 Project
1
2 3
4 5 6
7 8
9 10
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Picture Details
No. Details
1 Administrative Building (Customer Center)
2 Reception Hall inside Administrative Building (Customer Center)
3 Monitor Room
4 Auditorium
5 Business Continuity Plan
6 Business Continuity Plan (with bed)
7 Data Hall
8 Ready-to-use Rack
9,10 Rail Separating Power Cable, UTP Cable, and Fiber Optic to Prevent
Noise
11 Transformer Supplying Low Voltage to Data Hall
12 Generator Room to Supply Electricity to Data Hall
13,16 Air Cool Chiller
14 UPS to Supply Electricity Data Hall
15 Battery Room for UPS
Source: INET-IDC3 photos prepared by the Company and site visit of IFA
11 12 13
14 15 16
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1.5.3.2 Location
The INET-IDC3 Project Phase 1 is located on the title deed no. 2877, the 16, the dealing file no.
93, moo 6, Tub Kwang subdistrict, Kaeng Khoi district, Saraburi province with rental area of approximately
12,987 sq.m. The ownership of land belongs to SCG and such land has never been affected by a serious
disaster.
The building of the INET-IDC3 Project phase 2 has been built and the Company has plan to install
network device completely within Q1/2019. However, the building of the INET-IDC3 Project phase 3 and 4
has been built but have not installed any device. Therefore, the Company will not rent INET-IDC3 phase 2,
3, and 4 out to the Fund in this transaction. In the future, if other phases of INET-IDC3 Project begin to
operate, there will be no competition issue in finding customers because the Company is the sublessee of
INET-IDC3 Project phase 1 and is the owner INET-IDC3 Project (other phases). The Company can manage
the rack rental to customers for the most benefits to the Company.
CUSTOMER CENTER
UTILITY
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Source: INET-IDC3 Site Layout prepared by the Company
1.5.3.3 Operating Performance of Assets
The INET-IDC3 Project Phase 1 was constructed completely in 2017 and commenced operations
since March 2018 onwards. As of 9 December 2018, there are 262 installed racks with the occupancy rate
approximately 55% (when comparing with total racks need to be installed for 492 racks). The details of
installed racks and additional racks need to be installed are as follows:
the rack occupancy rate was approximately 60% as shown in the table below:
Network Cloud Customers Co-Location
Customers Total
Number of racks 26 48 188 262
Number of racks to be
installed before the
Transaction with the
Fund
34 196 230
Total 60 432 492
Source: Rental contract of INET-IDC3 phase 1 customers and the Company
Normally, the rack rental contract to customers is an annual contract (1 year, 3 years, or 5 years)
which 1 rack may consists only one customer or more, depending on customers’ need. Rack has useful life
approximately 30 years according to Investment Analysis prepared by Merlin’s.
1.5.3.4 Remaining Years of Retail Rental Agreement
The summary of remaining retail rental agreement period of INET-IDC3 phase 1 which is calculated
on the monthly service fee received from the lessee of approximately THB 5.24 M as of 1 January 2019 is
as follows:
Maturity Year of Rental Agreement Percentage of
Revenue per Month
Within 2019 17.30
Within 2020 4.70
Within 2021 8.12
Within 2022 69.88
Total 100.00 Remark: the contract between the Company and customers is an annual contract (1 year,
3 years, or 5 years)
Source: contracts between the Company and customers of INET-IDC3 Project Phase 1
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Upon the maturity of the customers’ contract, the Company’s salesperson will visit customer to
negotiate price and conditions for the next contract.
However, the customers choose the service of INET-IDC3 Project phase 1 with the Company
because of the stability quality, safety, and location. The Company allows customers to conduct system
testing, install server, including install other necessary devices for their business’s nature for about 1 month
prior to execution. If customers want to change the data center’s service provider, there may be expenses
and risks during the system migration.
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1.5.3.5 Detail of lessee of the INET-IDC3 Project Phase 1
The diagram below sets out detail of proportion of the lessee classified by business type as follow:
Source: Rental contract between the Company and customers of INET-IDC3 phase1 as of 9 December 2018
Remark: The total revenue used in the calculation is the revenue per month under the rental agreement.
Finance & Securities,
53.27%
Technology,
14.08%
Hospitality, 1.91%
Logistics, 4.92%
Energy & Utilities,
24.04%
Commerce, 0.86% Others, 0.92%
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1.6 Summary of Related Agreements
1.6.1 Summary of the Land Lease Agreement
SCG leases out the land which is the location of INET IDC3 project to INET (“Land Lease
Agreement”) and the lease is registered with the related Land Office. The essence of the Land Lease
Agreement is concluded as follows:
Lessor The Siam Cement (Kaeng Khoi) Co., Ltd. (“SCG”)
Lessee Internet Thailand Pubblic Company Limited (“INET”)
Agreement Date 17 September 2015
Property The land which is the location of INET IDC3 project located on the Title Deed No. 2877, Parcel No.
16, Parcel File No. 93, Village No. 8, Tub Kwang Subdistrict, Kaeng Khoi District, Saraburi Province with
the leased area of 19 Rai 2 Ngan 20 square wah (Leased Land).
Lease Term The lease term is 30 years commenced on 1 January 2016 to 31 December 2045 . Prior to the
expiration of lease term, if the Lessee requires continuing leasing, he has to inform The Lessor in
writing for 60 days in advance.
The Lessee’s Duty 1. In case of The Lessor’s properties are dilapidated damaged resulting from the Lessee’s actions,
the Lessee is responsible to repair and rectify such properties.
2. The Lessee shall inform The Lessor within not less than 1 5 business days in advance before
drilling The Lessor’s land for the purposes of explore and/or building construction and basic
public utilities relating to the Computer Center.
3. The Lessee shall be responsible to maintain cleanness and tidiness of leased area of The Lessor
in accordance with The Lessor’s suggestions.
4. The Lessee shall be responsible in maintaining the cleanness of the buildings and utilities of his
own with his expense.
5. The Lessee shall solely bear the lease registration fee, incurred taxes such as duty stamp,
withholding tax, label tax, building and land tax of the leased area including the fees of
applications submitted to the public sector as well as water, electricity and telephone and other
charges. The Lessee shall pay income tax of building and land tax for the entire leasing term of
this Land Lease Agreement.
6. During the leasing term, the Lessee consent to allow The Lessor to all the time access and inspect
the lease area.
7. The Lessee shall not allow other persons to commit sublease or allot his area ownership to other
persons unless such actions are authorized in writing by The Lessor.
8. The Lessee promises that the leased area shall be carefully used without causing dangers,
troubles, annoyances or other effects to the environments and peoples living in neighbour
communities or any persons. The Lessee shall conduct the measures to prevent spreading,
leakage and contamination of chemicals or construction materials to the land, water resources
and air. In case of the Lessee is notified or claimed that he caused aforementioned troubles or
effects, the lessee shall promptly investigate the fact to determine the causes of such troubles.
If it is found that it’s resulted from the Lessee or his agents or dependents, the Lessee shall
promptly rectify and the Lessee agrees to bear whole incurred expenses.
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9. After the termination of this Lease Agreement, the Lessee shall demolish, rectify the buildings
and remove entire installed equipment within 90 days commenced from receiving the written
notice from The Lessor. The Lessee shall rectify the leased area to be available as agreed with
The Lessor with his own expense.
The Lessor’s Duty The Lessor consent to allow the Lessee’s staff to inspect and conduct maintenance of equipment
installed by the Lessee in the leased area for entire 24 hours. Such staff shall strictly comply with
all regulations regarding security designated by the Lessor.
1.6.2 Summary of the Supplemental Memorandum of Land Lease Agreement
SCG and INET entered into the Supplemental Memorandum of Land Lease Agreement
(Memorandum) to amend the Land Lease Agreement which is already registered to the related Land Office.
The essences are concluded as follows:
Paties 1. SCG as the Lessor
2. INET as the Lessee
3. BBL Asset Management Co., Ltd. as the fund manager of the Fund as the Beneficiary
Agreement Date 2 October2018
Arrangements 1. The Lessor agrees that the Lessee is able to lease out and/or sublease and/or mortgage and/or
transfer the ownership of the buildings and constructions he owns to (1) the Fund and/or (2)
persons designated by the Fund who are expert in management of Data Center, shall not be the
entrepreneur of cement manufacturing – construction products and/or petrochemical industry
and/or paper manufacturing and/or packaging paper and packaging and/or the company belongs
to SCG Group, including are capable of good corporate governance equally to the Good Corporate
Governance defined by the Stock Exchange of Thailand.
2. The Lessee agrees to pay the rental as specified in the Land Lease Agreement for the entire
remaining lease term to The Lessor in the same day which the Fund pays the rental of properties
to the Lessee but not exceed 15 days commenced from the day which the Fund possesses or
leases the buildings or constructions owned by the Lessee depending on which comes first.
3. In the case that the Lessee breaches the Land Lease Agreement or commits rehabilitation or
becomes bankrupt or in liquidation or insolvency as defined by the Laws or is unable to conduct
the business of Data Center Provider or defaults or commits misconduct in any duties or
arrangements under agreements between the Lessee and the Fund or in the case that the Lessee
is released from the lease with the Fund, The Lessor and the Lessee agrees to transfer the right
of leasing pursuant to the Land Lease Agreement to the Fund or enters into the new Land Lease
Agreement with the Fund for the remaining leasing term of the existing Land Lease Agreement
(as the case may be). The new Land Lease Agreement shall contain the matters identical to the
previous Land Lease Agreement except (a) the regulations regarding rental payment which the
Fund is not required to pay the rental or any additional charges to the Lessee if the Lessee has
already received the entire designated rental under the Land Lease Agreement (b) the regulations
regarding the termination of Land Lease Agreement before the expiration which is not resulted
from the Lessee’s mistake and The Lessor is not required to return such advance rental to the
Opinions of the Independent Financial Advisor
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Fund and (c) the regulations regarding lease term which shall be in line with the remaining lease
term under the previous Land Lease Agreement, the details are specified in the Memorandum.
In the case that the Fund fails to provide the Data Center Provider within 5 years commenced
from the date of lease right transfer registration or the effective date of new Land Lease
Agreement (as the case may be), The Lessor is entitled to terminate new Land Lease Agreement
without returning the advance rental to the Fund.
4. The Lessor agrees that the Lessee, the Fund and/or the persons designated by the Fund and/or
the customer of Data Center including the dependents of whole such persons, are entitled to
utilize on The Lessor’s land as the pass way between the Lessee’s land and the leased land for
the purposes of running business or obtaining services relating to Data Center without any
expense.
The Lessee and The Lessor agree that the Fund is entitled to benefit as entirely specified in this
Memorandum.
1.6.3 Summary of the Draft Building Lease Agreement
The Fund will enter into the Building Lease Agreement with INET (INET Building Lease Agreement).
The essences are concluded as follows:
Lessor INET
Lessee The Fund
Expected
Agreement Date
Within 2019
Leased Property Buildings and integral parts of building and system works which are the location of Project INET – IDC
3 Phase 1 (Data Center Building and utilities Building including skywalk connected to Customer Center
building and Customer Center building located on partial land which INET leased from SCG under
the Land Lease Agreement. The details of leased buildings are specified in Annex of this Agreement
(Leased Buildings)
Lease Term The estimated lease term is 26 years commenced from the date of successful investment to 31
December 2045 (which is the same date with the expiration date of land lease under the Land Lease
Agreement).
The Date of
Successful
Investment
The date which these following conditions are entirely satisfied.
• INET has completely conducted forming securities on related properties for the benefits of the
Fund.
Leasae Registration The Parties agree to register this Lease Agreement with the officer at relevant Land Office within 45
days commenced from the date of the Fund’s successful investment and sign this Agreement. INET
agrees to bear the payment of taxes, fees, expenses relevant to the registration of the building lease
pursuant to this INET Building Lease Agreement.
Rental and Payment
Conditions
• The rental of leased buildings for the entire lease term shall be in accordance with the details
specified in this Agreement.
• The Fund agrees to pay the rental when precedent conditions are in accordance with the details
specified in the INET Building Lease Agreement by the means mutually agreed by INET and the
Fund.
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37
• INET consent the Fund to deduct the withholding tax from INET’s corporate income tax for the
payment of the rental as this clause, however, as the rate and term designated in applicable
laws.
Right and Duty of
the Lessee
For the entire lease term, the Fund agree to conduct whatever specified in the Agreement which
include (but not limited to) this actions:
1. Rental payment and service charge of power sub-station which are due to INET as specified in
this Agreement.
2. The Lessee is entitled to benefit from leased buildings as the details specified in this Agreement
by utilizing the leased buildings to conduct the business of Data Center by allowing the persons
conducting Data Center business to sublease or utilize.
3. Avoid to form obligations on leased buildings except the allowed cases under transaction
documents and/or as consented by INET.
4. Be responsible in the expenses regarding demolition of leased buildings or renovate the leased
area to be available as agreed with SCG. When the term of Land Lease Agreement is expired,
within 90 days commenced from the date INET is informed from SCG in writing to demolish the
buildings as the Land Lease Agreement, INET shall inform the Fund within 7 days commenced
from the date that INET is informed by SCG in writing. The Fund is entitled to receive the scrap
value from the demolition of such buildings.
5. Repair, adjust and maintain the leased buildings with the Lessee’s expenses for the full lease
term.
6. Agree to bear the building and land tax including other taxes charged on the leased buildings for
the whole lease term (if any). As defined in the applicable laws, whether currently or further in
force, INET shall bear the label tax for the plates made or benefited by INET [exist on the date
of this Agreement]
7. Agree to keep cleanness and tidiness of leased buildings.
8. Agree to be responsible in maintain the whole buildings and utilities of the Lessee with his own
expenses.
9. During the lease term, the Lessee consent that the Lessor is entitled to inspect the leased
buildings by noticing the Lessee not less than 3 business days in advance [however, such
inspection shall not disturb or obstruct the use of Data Center in the leased buildings].
10. The Lessee agrees to carefully use the leased buildings without causing danger, trouble,
annoyance or other effects to environment and peoples living in neighbour communities or any
other persons. The Lessee shall conduct the measures to prevent spreading, leakage and
contamination of chemicals or construction materials to the land, water resources and air.
In case of the Lessee is notified or claimed that he caused aforementioned troubles or effects,
he shall promptly investigate the fact to determine the causes of such troubles. If it is found that
it’s resulted from the Lessee or his agents or dependents, the Lessee shall promptly rectify and
the Lessee agrees to bear whole incurred expenses.
In case that INET still be the sub-Lessee under the Sublease Agreement, INET, as the sub-Lessee,
shall have the duties identical to the Fund as specified in Clause [5] to [10] above. If INET fails to
conduct such duties, it shall not mean that the Fund breaches this Building Lease Agreement.
Right and Duty of
the Lessor
For the full lease term, INET agrees to conduct (include but not limited to) the following actions:
Opinions of the Independent Financial Advisor
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1. INET has ownership of leased buildings and on the date of this Agreement, there is no obligation
upon such leased buildings except the service agreement between INET and its customers for
the services of Data Center provided in leased buildings.
2. Agrees to permit the Fund to sublease the leased buildings or allow access to the services of
Data Center or related services to other persons.
3. Agrees to comply with Land Lease Agreement and Memorandum for the full term of land lease
pursuant to the Lease Agreement and agree to not apply the right of terminating Land Lease
Agreement and Memorandum prior to the expiration of lease term of Land Lease Agreement.
In addition, INET agrees to not amend any conditions or regulations in Land Lease Agreement
and Memorandum unless the prior written consent is provided by the Fund.
4. Agrees to not dispose, distribute, transfer, lease out or build any obligations on the leased
buildings except the lease out pursuant to this INET Building Lease Agreement or other cases
specified valid under [the transaction documents] and/or as the prior written consent is provided
by the Fund.
5. Agrees to provide power sub-station service and facilitate in other relevant parts for the entire
lease term to the Fund and/or the persons sublease or use the buildings from the Fund. INET
agree to charge for power sub-station service for the first year (2019) in the amount of 1 million
THB which shall be calculated in pro rata basis commenced from the date of successful
investment. However, such service charge shall be increased in the rate of 2.5% per year on the
1 January of each next year.
6. In case of the Fund requires to modify or conduct any actions to the leased buildings, INET agrees
to provide assistance, cooperation, facilitation, coordination or submission of application to public
entities and conduct any actions which include the action as specified in the Land Lease
Agreement with SCG to enable the Fun and/or the person transferred by the Fund to conduct
such actions.
7. Upon the termination of Sublease Agreement between the Fund and INET, in any circumstances,
INET agrees to cooperate and assist as well as promptly conduct any necessary actions which
include (but not limited to) connection of work or data system and accessibility to relevant
devices to enable new subLessee and/or a designated person of the Fund beginning the
operations of Data Center to continually and smoothly provide services to the customers as the
Fund informs INET in writing.
9. Allows the Fund and/or the persons designated by the Fund and/or the customers of Data Center
including the dependents of such persons to use the land or pass the land INET leases from SCG
under the Land Lease Agreement and/or the land owned by INET in the area close to the Project
INET – IDC3 Phase 1 to conduct business or receive services relevant to Data Center without any
expenses.
10. Maintain the certification of standards obtained by INET (by INET’s expenses) to be not lower
than the standard obtained by INET on the date of this Agreement which include but not limited
to any other future standards which the Fund deems appropriate to enable well business of Data
Center services and be competitive to other business competitors.
Insurance 1. Insurance
• For the entire lease term, the Lessor and the Lessee shall cause the joint insurance in leased
buildings for Property All Risk Insurance with face amount covering whole property values
(include building foundation of 100%) in the Full Replacement Cost basis which refers to the
Opinions of the Independent Financial Advisor
39
Valuer company to be sufficient to replace the value of leased buildings in case of their
breakdowns or damages. The value assessed by the Valuer shall be approved by The
Securities and Exchange Commission in the last valuation period before the renewal of
insurance policy. The Fund shall bear the insurance premium and be the beneficiary.
• For the entire lease term, the Lessor and the Lessee shall cause the joint insurance relating
to the leased buildings for Public Liability Insurance and the Fund shall bear the insurance
premium.
• For the entire lease term, the Lessee shall cause Business Interruption Insurance. The Fund
shall be the beneficiary and shall bear the insurance premium.
2. Payment of damage from insurance
• Case of Partial Loss
In case of petty damages which the damage value is less than [ ] million THB, the Fund shall
determine whether the claims the Fund receives from the insurance company shall be used
for rectifying the leased buildings or hiring other persons to conduct the rectification or not. If
the Fund agrees in rectification as above, INET shall cooperate in such rectification including
provide consulting to the Fund or help to provide the persons conducting rectification as
deemed appropriate.
• Case of Total Loss
In case that damage value exceed [ ] million THB, if the Fund (as discussed with independent
technical consultant of the Fund) deems to rectify the damages of leased buildings, the Fund
shall spend the claims received from the insurance company to rectify the leased buildings
and INET shall assist in such rectification including provide services to the Fund or help to
provide the persons conducting rectification as deemed appropriate. However, the Fund agrees
to bear the difference in case of the rectification value is greater than the claims. Nonetheless,
if such damage is resulted from the mistakes of INET, the Fund is entitled to claim for the
difference from INET. In case of the Fund deems that the damage is plenty and the rectification
and reconstruction are not appropriate, the Fund is entitled to receive whole claims from the
insurance company and INET is not required to return the advance rental for the remaining
lease term.
• In any circumstances, the Fund is entitled to claim for any damages in accordance with any
Agreements or laws from INET if such damages are resulted from the actions, omission to take
action, regardless of intentionally or unintentionally or the negligence of INET.
Guarantee and
Warranty of the
Lessor
On the date of this Agreement, the Lessor agrees to provide guarantees and warranties to the Lessee
as follows:
• The Lessor is a public company juristic person which is completely established and existed under
the applicable laws.
• The Lessor has ownership of leased buildings on the date of this Agreement without any
obligation upon these leased buildings except the service agreement between INET and its
customers for the services of Data Center in leased buildings.
• The Lessor has the legal power to enter into the Agreement, to comply with the Agreement, to
prepare documents and to commit any other actions as specified in this Agreement as well as
actions involving to this Agreement and such actions are not conflicted to the Memorandum of
Association and Articles of Association of the Lessor.
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• The way the Lessor enters into this Agreement or performs in accordance with any commitments
in this Agreement shall not conflict or violate regulations, conditions, promises or guarantees
which the Lessor made or will make with other persons.
• The Lessor completely and correctly obtained licenses relevant and necessary to construction
and usage of the buildings to conduct the business of Data Center and such licenses are
completely effective on the date of this Agreement.
• The Lessor obtained the telecommunication business license which is relevant or necessary for
conducting the business running on the date of this Agreement and the building lease shall not
cause the cancellation, revocation or suspension of such license.
• The Lessor is not bankrupt or under the process of rehabilitation or the order of liquidation or
receiving or insolvent as defined by laws on the date in this Agreement.
• Other guarantees and warranties.
Guarantee and
Warranty of the
Lessee
On the date of this Agreement, the Lessee agrees to provide guarantees and warranties to the Lessor
as follows:
• The Lessee is an Infrastructure Fund which is completely established and existed under the
applicable laws.
• The Lessee has the legal power to enter into the Agreement, to comply with the Agreement, to
prepare documents and to commit any other actions as specified in this Agreement as well as
actions involving to this Agreement and such actions are not conflicted to the mutual fund
management project and prospectus.
• The way the Lessee enters into this Agreement or performs in accordance with any commitments
in this Agreement shall not conflict or violate regulations, conditions, or guarantees which the
Lessee made or will make with other persons.
Causes of the
Termination of this
Agreement
• The lease under the INET Building Lease Agreement is unable to be cancelled or terminated
unless it is in line with the cases specified as follows. The Parties shall comply with the
Consequences of the Termination of this Agreement specified in this Agreement.
i. The Parties agree in writing.
ii. Upon the expiration of the term specified in this Agreement.
iii. The land which is the location of leased buildings is expropriated pursuant to the declaration
or the law regarding expropriation or other laws and the Fund deems that such event
significantly affects to the operation of the Fund and such event is unable to be remedied
or relieved by any actions.
iv. In the case of Partial Loss or Total Loss and the Fund deems it is not appropriate to rectify.
v. INET breaches any clause of the Agreement or fails to comply with its duties or arrangements
under the transaction documents and does not remedy within 30 days commenced from
the date of receiving notice from the Fund.
vi. INET breaches the Land Lease Agreement made with SCG which causes SCG to apply the
right of termination.
vii. In case of INET has resolution or begins to submit the petition to the court or any other
entities to rehabilitate its business or to make INET becomes bankrupt (regardless of the
beginning has been conducted by INET or other persons) or INET receives the order for
liquidation or in the case that the court or any entities provide order to rehabilitate the
INET’s business, make INET becomes bankrupt or liquidate INET or in the case that INET is
insolvent as defined by laws or in the case that INET winds up or has the resolution to wind
Opinions of the Independent Financial Advisor
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up or close the business or receiving order as the whole or partial which is significant to its
business.
viii. The occurrence of any event*** which the Fund reasonably deems it affects to the capability
of INET to perform its duties under this Agreement.
ix. Apart of the case in clause 4, when the force majeure which affect to the Party affected is
unable to perform its duties under this Agreement and such force majeure still exists in [60]
consecutive days. For the advantage of this Agreement, “Force Majeure” shall means any
event occurs, results in disaster and nobody is able to prevent, even the person affected or
closely to be affected has reasonable carefulness expected from such person in such
behaviour, such as fire, earthquake, storm, flood, lightning, war, military blockade, riot, civil
disorder, terrorism, order from public sector or any other situations which are not under the
suitable control of the party affected from such force majeure.
x. In case of SCG misconducts or fails to comply with the arrangements of Land Lease
Agreement between SCG and INET which affects to the Fund is unable to continue leasing
the INET’s buildings as this Agreement.
xi. In case of termination of the Fund as the details specified in mutual fund management
project and prospectus and the Fund inform INET in writing.
Consequences of
the Termination of
this Agreement
• In the case which causes of the termination of this Agreement occurs, the Parties agree to
conduct as follows:
1. In the events specified in 1 and 2 of causes of the termination of this Agreement, it shall be
regarded as this Agreement is terminated and the Parties is not entitled to claim for damages,
expenses or amount or any other returns from the other Party unless otherwise agreed.
2. In the events specified in 3 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice. The Fund is entitled to receive
expropriation amount in the part of properties leased by the Fund. However, in the case
that INET receives such amount from relevant entities, INET shall promptly transfer such
amount to the Fund.
3. In the events specified in 4 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice and the Fund is entitled to
receive claims from the insurance company and INET is not required to return the advance
rental for the remaining lease term [unless such damages are resulted from the actions or
omission to take the actions, regardless of intentionally or by negligence of INET]
4. In the events specified in 5 , 6 and 7 of causes of the termination of this Agreement, the
Fund is entitled to terminate this Agreement by giving written notice and INET shall return
the rental which is paid by the Fund to INET and compensation to the Fund as the valued
price which refers of Income Approach on the date of termination of this Agreement as the
term remaining in this Agreement. The Fund and INET shall appoint the Valuer which is
approved by Securities and Exchange Commission (“SEC”), one person for each Party, and
agree to use average value from valuations of both Valuers to be such compensation within
1 5 days commenced from the date the termination notice from the Fund is received and
INET shall bear the expenses and/or the fee incurred from appointing such 2 Valuers.
5. In the events specified in 9 of causes of the termination of this Agreement, the Party affected
from the force majeure is entitled to terminate this Agreement by giving written notice. In
the case which the Fund is the Party affected by such force majeure, INET shall return the
Opinions of the Independent Financial Advisor
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rental of buildings which paid by the Fund to the INET in the proportion of remaining
sublease term (calculated by Straight Line Method) within 1 5 days commenced from the
date the notice of termination from the Fund is received.
6. In the events specified in 1 0 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice. However, INET shall claim for
the damages or compensations from SCG which are resulted from breach of Land Lease
Agreement or conduct other actions as the Fund deems appropriate (at the Fund’s expense)
and deliver such amount to the Fund.
7. In the events specified in 1 1 of causes of the termination of this Agreement, the Fund is
entitled to transfer the right of lease to the third persons (as the conditions stipulated in
Memorandum) or the Fund is entitled to terminate this Agreement by giving written notice
and INET is unable to claim for any damages from the Fund
• Upon the termination of this Agreement, the Parties are not released from the right to claim for
any expenses and/or damages which are occurred before the termination, expenses and
damages due to the termination of this Agreement and/or any damages required by laws.
Liability in
Indemnification
• INET agrees to be liable to indemnify any damages which the Fund and Management Company
(including their employees, directors, staff, and representatives) incurred the damages, loss the
right of claim, taxes, duty stamps, actual liabilities and costs and expenses which are reasonably
relevant including expense for legal operations, attorney’s fee and other advance amounts due
to the breach of arrangements or Agreement or INET’s guarantees under this Agreement or
arrangements of actions unless there are the mistakes resulted from gross negligence or
intentional misconduct by the Fund, Management Company or the Agent of the Fund or
Management Company, however, without restriction of any other rights of the Fund pursuant to
this Agreement or any applicable laws.
Transfer of Rights
and Duties
• INET is not entitled to transfer its rights and duties unless the Fund provides written consent in
advance.
• INET agrees to provide consent to the Fund in transferring its rights and duties under this
Agreement to the third person upon the termination of the Fund before the expiration of this
Agreement.
Settlement of
Disputes
• By the arbitration procedures referring to the regulations of Thai Arbitration Institute, Office of the
Judiciary.
• The arbitration procedures shall be conducted in Bangkok, Thailand, the language shall be Thai
and the location of the trials shall be in Bangkok, Thailand.
Applicable Laws • Thai laws
Remark: The signed copy of INET Building Lease Agreement may differ from the Summary of the Essences but the essences are not
different.
* Transaction documents are the Supplemental Memorandum of Land Lease Agreement, the Building Lease Agreement, the
Equipment Lease Agreement, sublease agreement and the undertaking agreement.
** The value of the damage will be based on the property value assessed by the cost method assessed by an independent
appraiser each year.
*** The IFA interviewed BBLAM about definition of “The occurrence of any event” as per clause 8 in the Causes of the
Termination of this Agreement such as in the event that the Fund is aware that there will be an incident before INET will
begin filing a petition with the court for the rehabilitation of INET (event before clause 7 in the Causes of the Termination of
this Agreement). Such event may cause by continuous retained loss of INET until its equity was negative. If there is loss in
any period, the Company’s management will set up plan revise business plan to improve the Company’s performance.
Opinions of the Independent Financial Advisor
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From the above summary agreement, there is the condition that the Company is not able to cancel
or terminate the Building Lease Agreement unless any event, which the Fund reasonably deems it affects
to the capability of the Company to perform its duties under this Agreement, occurs. Such condition may
affect the Company’s operation. If the afforemention event occurs in future, the counterparty need to
negotiate about reasonableness of the event.
Moreover, when the force majeure which is not fault of the counterparty but risk to the
counterparty occurs, the counterparty mae be affected. In the case which the Fund is the Party affected
by such force majeure, the Company shall return the rental of buildings which paid by the Fund in the
proportion of remaining sublease term (calculated by Straight Line Method). However, if the force majeure
is protected by the insurance, the Company will not return the rental of building to the Fund.
In case of termination of the Fund as the details specified in mutual fund management project and
prospectus, the Fund is entitled to transfer the right of lease to the third persons (as the conditions
stipulated in Memorandum) or the Fund is entitled to terminate this Agreement by giving written notice
and the Company is unable to claim for any damages from the Fund. The Company does not have to
return the rental of buildings which paid by the Fund. In addition, the transfer of the right of lease to the
third party persons will comply with the same condition. If the third party persons do not allow the
Company to be the sublessee, the Company can use the other phases of INET-IDC3 as well as data center
in other area which developed in future.
1.6.4 Summary of the Draft Equipment Lease Agreement
The Fund will enter into the Equipment Lease Agreement with INET (INET Equipment Lease
Agreement). The essences of Equipment Lease Agreement are concluded as follows:
Lessor INET
Lessee The Fund
Expected
Agreement Date
Within 2019
Leased Property The racks and other connection equipments relevant to the use in Project INET IDC 3 Phase 1 but
not include core network****. However, the details are in line with the list of leased equipments
specified in the Annex of this Agreement (Leased Equipments).
Lease Term The estimated lease term is 2 6 years commenced from the date of successful investment to 3 1
December 2045 (which is the date of expiration of INET Building lease term).
Rental and Payment
Conditions
• The rental of leased equipments for the entire lease term shall be in line with what specified in
this Agreement (the rate is VAT excluded).
• The Fund agrees to pay the rental for leased equipments to INET when the precedent conditions
are already in line with what specified in INET Building Lease Agreement. INET consent the Fund
to deduct the withholding tax on the corporate income tax of INET as the payment of rental
according to this clause, however, in the rate and term specified in applicable laws.
Opinions of the Independent Financial Advisor
44
Rights and Duties of
the Lessee
For the entire lease term, the Fund agree to conduct whatever specified in the Agreement which
include (but not limited to) this actions:
1. Rental payment which is due to INET as specified in this Agreement (if any).
2. The Lessee is entitled to benefit from leased buildings as the details specified in this Agreement
by utilizing the leased equipments to conduct the business of Data Center by allowing the
persons conducting Data Center business to sublease or utilize.
3. Avoid forming obligations on leased equipments except the allowed cases under transaction
documents.
4. Be responsible in the expenses regarding maintenance of leased equipments (OPEX) including
the expenses relating to reparation, adjustment and/or replacement of leased equipments which
are deteriorated by its normal useful life to be functional (CAPEX). The ownership of new
replaced equipments shall be of the Fund. However, the details are in line with the list specified
in the Annex of this Agreement
Rights and Duties of
the Lessor
For the full lease term, INET agrees to conduct (include but not limited to) the following actions:
1. INET has ownership of leased equipments on the date of this Agreement, and there is no
obligation upon such leased equipments except the service agreement between INET and its
customers.
2. Agrees to permit the Fund to sublease the leased equipments or allow usage to other persons.
3. Agrees to comply with Land Lease Agreement with SCG and Amendment for the full term of
land lease pursuant to the Lease Agreement and agree to not apply the right of terminating
Land Lease Agreement made with SCG and Memorandum prior to the expiration of lease term
of Land Lease Agreement made with SCG. In addition, INET agrees to not amend any conditions
or regulations in Land Lease Agreement made with SCG and Amendment unless the prior written
consent is provided by the Fund.
4. Agrees to not dispose, distribute, transfer, lease out or build any obligations on the leased
equipments except the lease out pursuant to this INET Equipment Lease Agreement or other
cases specified valid under [the transaction documents] and/or as the prior written consent is
provided by the Fund.
5. Agrees to be responsible in any taxes, fines or added amount which is charged by The Board of
Investment or other relevant entities due to INET misconduct in the conditions in received
Promotion Certificate.
6. Upon the termination of Sublease Agreement between the Fund and INET, in any circumstances,
INET agrees to cooperate and assist as well as promptly conduct any necessary actions which
include (but not limited to) connection of work or data system and accessibility to relevant
equipments to enable new sublessee and/or a designated person of the Fund beginning the
operations of Data Center to continually and smoothly provide services to the customers as the
Fund informs INET in writing.
Insurance
1. Insurance
• For the entire lease term, the Lessor and the Lessee shall cause the joint insurance in leased
equipments for Property All Risk Insurance with face amount covering whole property values
(include building foundation of 100%) in the Full Replacement Cost basis which refers to the
Valuer company to be sufficient to replace the value of leased equipments in case of their
breakdowns or damages. The value assessed by the Valuer shall be approved by The Securities
and Exchange Commission in the last valuation period before the renewal of insurance policy.
Opinions of the Independent Financial Advisor
45
The Fund shall bear the insurance premium and be the beneficiary. However, the Fund shall
bear the insurance premium only particularly in leased equipments.
• For the entire lease term, the Lessor and the Lessee shall cause the joint insurance relating to
the leased equipments for Public Liability Insurance and the Fund shall bear the insurance
premium.
• For the entire lease term, the Lessee shall cause Business Interruption Insurance. The Fund
shall be the beneficiary and shall bear the insurance premium.
2. Payment of damage from insurance
• Case of partial loss
In case of petty damages which the damage value is less than [•]**million THB, the Fund shall
determine whether the claims the Fund receives from the insurance company shall be used
for reparing the leased equipments or hiring other persons to conduct the reparation or not.
If the Fund agrees in reparation as above, INET shall cooperate in such reparation including
provide consulting to the Fund or help to provide the persons conducting reparation as
deemed appropriate.
• Case of total loss
In case that damage value exceeds [•]**million THB, if the Fund (as discussed with independent
technical consultant of the Fund) deems to repair the damages of leased equipments, the
Fund shall spend the claims received from the insurance company to repair the leased
equipments and INET shall assist in such reparation including provide services to the Fund or
help to provide the persons conducting reparation as deemed appropriate. However, the Fund
agrees to bear the difference in case of the reparation value is greater than the claims.
Nonetheless, if such damage is resulted from the mistakes of INET, the Fund is entitled to
claim for the difference from INET. In case of the Fund deems that the damage is plenty and
the reparation is not appropriate, the Fund is entitled to receive whole claims from the
insurance company and INET is not required to return the advance rental for the remaining
lease term.
• In any circumstances, the Fund is entitled to claim for any damages in accordance with any
Agreements or laws from INET if such damages are resulted from the actions, omission to take
action, regardless of intentionally or unintentionally or the negligence of INET.
Guarantee and
Warranty of the
Lessor
On the date of this Agreement, the Lessor agrees to provide guarantees and warranties to the Lessee
as follows:
• The Lessor is a public company juristic person which is completely established and existed under
the applicable laws.
• The Lessor has ownership of leased equipments on the date of this Agreement without any
obligation upon these leased equipments except the service agreement between INET and its
customers for the services of leased equipments.
• The Lessor has the legal power to enter into the Agreement, to comply with the Agreement, to
prepare documents and to commit any other actions as specified in this Agreement as well as
actions involving to this Agreement and such actions are not conflicted to the Memorandum of
Association and Articles of Association of the Lessor.
• The way the Lessor enters into this Agreement or performs in accordance with any commitments
in this Agreement shall not conflict or violate regulations, conditions, promises or guarantees
which the Lessor made or will make with other persons.
Opinions of the Independent Financial Advisor
46
• The Lessor obtained the telecommunication business license which is relevant or necessary for
conducting the business running on the date of this Agreement and the equipment lease shall
not cause the cancellation, revocation or suspension of such license.
• The Lessor is not bankrupt or under the process of rehabilitation or the order of liquidation or
receiving or insolvent as defined by laws on the date in this Agreement.
• Other guarantees and warranties.
Guarantee and
Warranty of the
Lessee
On the date of this Agreement, the Lessee agrees to provide guarantees and warranties to the Lessor
as follows:
• The Lessee is an Infrastructure Fund which is completely established and existed under the
applicable laws.
• The Lessee has the legal power to enter into the Agreement, to comply with the Agreement, to
prepare documents and to commit any other actions as specified in this Agreement as well as
actions involving to this Agreement and such actions are not conflicted to the mutual fund
management project and prospectus.
• The way the Lessee enters into this Agreement or performs in accordance with any commitments
in this Agreement shall not conflict or violate regulations, conditions, or guarantees which the
Lessee made or will make with other persons.
Causes of the
Termination of this
Agreement
• The lease under the INET Equipment Lease Agreement is unable to be cancelled or terminated
unless it is in line with the cases specified as follows. The Parties shall comply with the
Consequences of the Termination of this Agreement specified in this Agreement.
1. The Parties agree in writing.
2. Upon the expiration of the term specified in this Agreement.
3. The land which is the location of leased buildings is expropriated pursuant to the declaration
or the law regarding expropriation or other laws and the Fund deems that such event
significantly affects to the operation of the Fund and such event is unable to be remedied
or relieved by any actions.
4. In the case of Partial Loss or Total Loss and the Fund deems it is not appropriate to rectify.
5. INET breaches any clause of the Agreement or fails to comply with its duties or arrangements
under the transaction documents and does not remedy within 30 days commenced from
the date of receiving notice from the Fund.
6. INET breaches the Land Lease Agreement made with SCG which causes SCG to apply the
right of termination.
7. In case of INET has resolution or begins to submit the petition to the court or any other
entities to rehabilitate its business or to make INET becomes bankrupt (regardless of the
beginning has been conducted by INET or other persons) or INET receives the order for
liquidation or in the case that the court or any entities provide order to rehabilitate the
INET’s business, make INET becomes bankrupt or liquidate INET or in the case that INET is
insolvent as defined by laws or in the case that INET winds up or has the resolution to wind
up or close the business or receiving order as the whole or partial which is significant to its
business.
8. The occurrence of any event*** which the Fund reasonably deems it affects to the capability
of INET to perform its duties under this Agreement.
9. Apart of the event identified in cluse 4, the force majeure which affect to the Party affected
is unable to perform its duties under this Agreement and such force majeure still exists in
Opinions of the Independent Financial Advisor
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60 consecutive days. For the advantage of this Agreement, “Force Majeure” shall means any
event occurs, results in disaster and nobody is able to prevent, even the person affected or
closely to be affected has reasonable carefulness expected from such person in such
behaviour, such as fire, earthquake, storm, flood, lightning, war, military blockade, riot, civil
disorder, terrorism, order from public sector or any other situations which are not under the
suitable control of the party affected from such force majeure.
10. In case of SCG misconducts or fails to comply with the arrangements of Land Lease
Agreement between SCG and INET which affects to the Fund is unable to continue leasing
the INET’s buildings as this Agreement.
11. In case of termination of the Fund as the details specified in mutual fund management
project and prospectus and the Fund inform INET in writing.
Consequences of
the Termination of
this Agreement
• In the case which causes of the termination of this Agreement occurs, the Parties agree to
conduct as follows:
1. In the events specified in 1 and 2 of causes of the termination of this Agreement, it shall be
regarded as this Agreement is terminated and the Parties is not entitled to claim for damages,
expenses or amount or any other returns from the other Party unless otherwise agreed.
2. In the events specified in 3 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice. The Fund is entitled to receive
expropriation amount in the part of properties leased by the Fund. However, in the case
that INET receives such amount from relevant entities, INET shall promptly transfer such
amount to the Fund.
3. In the events specified in 4 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice and the Fund is entitled to
receive claims from the insurance company and INET is not required to return the advance
rental for the remaining lease term [unless such damages are resulted from the actions or
omission to take the actions, regardless of intentionally or by negligence of INET]
4. In the events specified in 5, 6 and 7 of causes of the termination of this Agreement, the Fund
is entitled to terminate this Agreement by giving written notice and INET shall return the
rental which is paid by the Fund to INET and compensation to the Fund as the valued price
which refers of Income Approach on the date of termination of this Agreement as the term
remaining in this Agreement. The Fund and INET shall appoint the Valuer which is approved
by Securities and Exchange Commission (“SEC”), one person for each Party, and agree to use
average value from valuations of both Valuers to be such compensation within 15 days
commenced from the date the termination notice from the Fund is received and INET shall
bear the expenses and/or the fee incurred from appointing such 2 Valuers.
5. In the events specified in 9 of causes of the termination of this Agreement, the Party affected
from the force majeure is entitled to terminate this Agreement by giving written notice. In
the case which the Fund is the Party affected by such force majeure, INET shall return the
rental of buildings which paid by the Fund to the INET in the proportion of remaining
sublease term (calculated by Straight Line Method) within 15 days commenced from the
date the notice of termination from the Fund is received.
6. In the events specified in 10 of causes of the termination of this Agreement, the Fund is
entitled to terminate this Agreement by giving written notice. However, INET shall claim for
the damages or compensations from SCG which are resulted from breach of Land Lease
Opinions of the Independent Financial Advisor
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Agreement or conduct other actions as the Fund deems appropriate (at the Fund’s expense)
and deliver such amount to the Fund.
7. In the events specified in 11 of causes of the termination of this Agreement, the Fund is
entitled to transfer the right of lease to the third persons (as the conditions stipulated in
Memorandum) or the Fund is entitled to terminate this Agreement by giving written notice
and INET is unable to claim for any damages from the Fund
• Upon the termination of this Agreement, the Parties are not released from the right to claim for
any expenses and/or damages which are occurred before the termination, expenses and
damages due to the termination of this Agreement and/or any damages required by laws.
Liability in
Indemnification
• INET agrees to be liable to indemnify any damages which the Fund and Management Company
(including their employees, directors, staff, and representatives) incurred the damages, loss the
right of claim, taxes, duty stamps, actual liabilities and costs and expenses which are reasonably
relevant including expense for legal operations, attorney’s fee and other advance amounts due
to the breach of arrangements or Agreement or INET’s guarantees under this Agreement or
arrangements of actions unless there are the mistakes resulted from gross negligence or
intentional misconduct by the Fund, Management Company or the Agent of the Fund or
Management Company, however, without restriction of any other rights of the Fund pursuant to
this Agreement or any applicable laws.
Transfer of Rights
and Duties
• INET is not entitled to transfer its rights and duties unless the Fund provides written consent in
advance.
• INET agrees to provide consent to the Fund in transferring its rights and duties under this
Agreement to the third person upon the termination of the Fund before the expiration of this
Agreement.
Settlement of
Disputes
• By the arbitration procedures referring to the regulations of Thai Arbitration Institute, Office of the
Judiciary.
• The arbitration procedures shall be conducted in Bangkok, Thailand, the language shall be Thai
and the location of the trials shall be in Bangkok, Thailand.
Applicable Laws • Thai Laws
Remark: The signed copy of INET Equipment Lease Agreement may differ from the Summary of the Essences but the essences are not
different.
* Transaction documents are the Supplemental Memorandum of Land Lease Agreement, the Building Lease Agreement, the
Equipment Lease Agreement, sublease agreement and the undertaking agreement.
** The value of the damage will be based on the property value assessed by the cost method assessed by an independent
appraiser each year.
*** The IFA interviewed BBLAM about definition of “The occurrence of any event” as per clause 8 in the Causes of the
Termination of this Agreement such as in the event that the Fund is aware that there will be an incident before INET will
begin filing a petition with the court for the rehabilitation of INET (event before clause 7 in the Causes of the Termination of
this Agreement). Such event may cause by continuous retained loss of INET until its equity was negative. If there is loss in
any period, the Company’s management will set up plan revise business plan to improve the Company’s performance.
****The Fund cannot gain benefit from the leased equipment without high technology equipments installation. Now and after
entering to the transaction, the high technology equipments still belong to the Company.
Opinions of the Independent Financial Advisor
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From the above summary agreement, there is the condition that the Company agrees to be liable
to indemnify any damages which the Fund and Management Company (including their employees, directors,
staff, and representatives) incurred the damages, loss the right of claim, taxes, duty stamps, actual liabilities
and costs and expenses which are reasonably relevant including expense for legal operations, attorney’s
fee and other advance amounts due to the breach of arrangements or Agreement or INET’s guarantees
under this Agreement or arrangements of actions unless there are the mistakes resulted from serious
negligence or intentional misconduct by the Fund, Management Company or the Agent of the Fund or
Management Company. In this regard, there is no definition of “serious negligence”. Therefore when the
event occurs in future, the countyparty need to negotiate about severity of the event.
From IFA’s preliminary analysis, the gross negligence may caused by the Fund staffs who visit INET-
IDC3 phase 1 project and result INET-IDC3 phase 1 project cannot be operated for long period. However
such event has little chance of occurrence.
Moreover, when the force majeure which is not fault of the counterparty but risk to the
counterparty occurs, the counterparty mae be affected. In the case which the Fund is the Party affected
by such force majeure, the Company shall return the rental of buildings which paid by the Fund in the
proportion of remaining sublease term (calculated by Straight Line Method). However, if the force majeure
is protected by the insurance, the Company will not return the rental of building to the Fund.
In case of termination of the Fund as the details specified in mutual fund management project and
prospectus, the Fund is entitled to transfer the right of lease to the third persons (as the conditions
stipulated in Memorandum) or the Fund is entitled to terminate this Agreement by giving written notice
and the Company is unable to claim for any damages from the Fund. The Company does not have to
return the rental of buildings which paid by the Fund. In addition, the transfer of the right of lease to the
third party persons will comply with the same condition. If the third party persons do not allow the
Company to be the sublessee, the Company can use the other phases of INET-IDC3 as well as data center
in other area which developed in future.
Opinions of the Independent Financial Advisor
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1.6.5 Summary of the Draft Sublease Agreement
INET will execute a sublease agreement with the fund (Sublease agreement) with following subject
matters of the sublease agreement
Sublessor The Fund
Sublessee INET
Expected Agreement
Date
Within 2019
Subleased property 1. Customer Center and relevant work systems located on the land subleased from SCG
according to land lease agreement (Subleased Customer Center Building)
2. Building and appendixes and work system about services of INET - IDC 3 Phase 1 Project
(including Data Center building and Utillities building as well as walkway with Customer Center
building) located on the land the tenant subleases from SCG according to land lease
agreement (Subleased Customer Center Building in clause 1 and subleased data center in
clause 2 are collectively referred as to “all subleased building”)
3. Rack and other connection equipments which exclude high-technology equipment (Core
Network). The details are subject to list of equipment in the enclosure attached to this
agreement (subleased equipment)
The subleased property in clause 1, 2 and 3 are collectively referred as to Subleased property
Sublease Term Sublease is due on 31 December 2028
Sublease renewal • The Fund will announce for those interested in submitting a proposal associated with subleasing
the subleased property with the Fund and considering agreement renewal with the sublessee in
following events
1) In case of a new sublessee proposing a proposal with the Fund. The Fund will hire a technical
consultant to consider terms and conditions of the proposer if they are suitable and feasible.
the Fund will make written notice to the sublessee that there are other persons wishing to
sublease the property in lieu of the sublessee as well as main conditions of such sublease
(Notice). The sublessee is granted rights to make a decision before others whether the
sublessee desires to renew the sublease of property subleased with the Fund with same or
better offers of third parties proposing to the Fund or with other offers generally considered
whether it is Right to Match. The sublessee shall make a written reply to the Fund within
(30) days from the date of receipt of such notice (reply letter).
(A) In case the sublessee declines new offers.
In the event the sublessee declines the offers according to the notice or fails to deliver
a reply letter within the specified time, the Fund has rights to allow others to sublease
the property according to the offers identified in the notice. However, in the event
customers of the sublessee are not due for service contracts as of the termination date
of the sublease agreement, the Fund will apply best effort to negotiate with the new
sublessee in lieu of the sublessee to provide services for customers of the sublessee or
take any actions for original customers of the sublessee to be least affected.
(B) In case the sublessee accepts new offers
In the event the sublessee delivers a reply letter to the Fund within specified time that it
agrees to renew the sublease agreement with the Fund according to same or better offers
Opinions of the Independent Financial Advisor
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than third parties proposing to the Fund or other offers generally considered by the Fund
as better, both parties shall execute the new sublease agreement with subject matters
according to new offers that the sublessee sends a reply letter back to the Fund. It is
subjected to same conditions for the parts not covered or revised in new offers (including
agreements that the Fund has rights to allow the sublessee to renew the sublease
agreement with the Fund when such sublease agreement is due). Nevertheless, both parties
shall sign in the new sublease agreement and register rental according to applicable laws
before the due of current sublease agreement.
2) In case nobody submits a proposal to rent operation from the Fund, the Fund will send a
notice to the sublessee to continue subletting the subleased property for another 9 calendar
years. Nevertheless, obligations according to the new sublease agreement will be subjected
to the same conditions as identified in this sublease agreement (including agreements the
Fund has rights to allow the sublessee to renew the sublease agreement with the Fund until
such sublease agreement is due). Determination of sublease rental for the 10th calendar
year (or in the first calendar year of the new sublease agreement) shall be subjected to the
following methods.
(A) The Fund will hire a technical consultant to analyze and provide related information
and identify the scope of subleased property rental rate in the range of market price as of
the 8th calendar year of the sublease agreement (“Market Price Scope”)
(B) The sublease rate in the 10th calendar year ( or the first calendar year of new sublease
agreement) will be equal to “reference price” adjusted with “ PPI Rate”
Where
“Reference price” means
(1) In case the sublease price in the 8th calendar year according to current sublease
agreement under the market price scope. The “reference price” is equal to such
sublease price.
(2) In case the sublease price in the 8th calendar year according to current sublease
agreement is higher than the highest price of market price scope, the“ reference
price” will be equal to the highest market price.
(3) If sublease price in the 8th calendar year according to current sublease agreement
is lower than the lowest market price, “reference price” is equal to the lowest
market price.
“ PPI Rate” ‘means rate of changes in producer price index ( PPI) as announced by the
Ministry of Commerce in the period before the beginning of the renewal of the agreement.
However, it must not exceed 3.5% per annum and fall shorter than 1.5% per annum
(C) Sublease price in following years of new sublease agreement will be adjusted according to
the same criteria identified in current sublease agreement for sublease rate adjustment of
subleased customer center building, subleased data center building and subleased
equipment as identified herein.
However, the signatories are required to sign in the new sublease agreement and register
rental according to applicable laws before the due date of the current sublease agreement.
• Detail, condition process and processing time are indentified in the related agreement.
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• The Fund has rights to define whether to grant rights to the sublessee to sublet subleased
property again. Duration of next subleasing is not over 9 years ending not over 31 December
2045 according to terms and conditions identified above.
Sublease registration The signatories agree to take this agreement for rental registration ( for all subleased building) with
an authorized officer at the relevant land office within [ 4 5 ] days from the date of signing this
agreement. The sublessee shall be responsible for payment of taxes, fees, and expenses in relation
with sublease of subleased lands and buildings according to the agreement.
Sublease price and
term of sublease
price payment
• Sublease price of the Sublease Customer Center is THB 320,000.00 per month (Sublease price
of the Sublease Customer Center) in the 0-calendar year or the first agreement year (2019).
The price is adjusted on every 1st of January at rate of 3% per year for the following years.
• Sublease price of the Sublease Data Center and sublese equipment are THB 36,000.00 per rack
per month in the first year (2019) for 492 racks ( Sublease price of the Sublease Data Center
and sublese equipment). Such rate excludes value-added tax. However, sublease price of the
Sublease Data Center and sublese equipment will be increased as at the first working day of
January every year. The raise is done by change rate of a producer price index (PPI) as
announced by the Ministry of Commerce for December of the latest year compared with
December of past years. It must not exceed 3.5% per annum and not fall shorter than 1.5%
per annum/ year. Nevertheless, if producer price index (PPI) for December of the latest years
is announced in delay, sublease price of the Sublease Data Center and sublese equipment for
next calendar year (before announcement of producer price index ( PPI) of December in the
latest year) will be calculated from change rate at 1.5% per annum until the producer price
index ( PPI) of December in the latest year is announced then adjust sublease price of the
Sublease Data Center and sublese equipment for that year according to above criteria and the
sublease shall pay differentials between sublease cost before the announcement of a
producer price index ( PPI) of December in the latest year and raised sublease cost according
to above criteria to the Fund.
Sublease cost for subleased Customer Center building and subleased Data Center Building and
sublease equipment are collectively called as (sublease cost).
• Sublease cost is paid on a monthly basis within the [15th ] of every month (Sublease cost due
date). In case such day corresponds with holidays of either party, the sublessee agrees to make
sublease cost payment to the Fund within last working day before sublease cost due date by
transferring money to a bank account identified by the Fund or paying in other methods as
the fund and the sublessee mutually agree in writing.
• Electricity service cost is 30 % of electricity cost charged by Provincial Electricity Authority from
INET in only the part of INET IDC 3 Phase 1 Project in each month ( electricity service cost)
[Nevertheelss, such rate excludes value-added tax]. Electricity service cost is paid on a monthly
basis within [15] from the date the Fund delivers an invoice to the sublessee (Electricity service
cost due date). In case such day corresponds to a holiday of either party, the sublessee agrees
to pay electricity service cost to the fund within the prior working day by transferring money
to a bank account identified by the Fund or paying in other methods as the fund and the
sublessee mutually agree in writing.
• Duties of the sublessee to pay sublease cost, electricity service cost or settle other debts or
comply with any obligations of the sublessee with the Fund under the sublease agreement
are final, irrevocable and unconditional ( including reparation, maintenance or change of
Opinions of the Independent Financial Advisor
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subleased property). They are independent of duties or obligations of the sublessee under
other agreements. The sublessee will make payment for sublease cost, electricity service cost
and other debts without any setoff except the cases identified in this sublease agreement.
Rights and duties of
the sublessee
Throughout the sublease term, the sublessee agrees to take any actions including (but not limited
to) the following
1. Pay sublease cost, electricity cost and any amount payable to the Fund as identified in this
agreement (if any)
2. Utilize the subleased property for data center business operation and for normal business
operation without causing any damages, losses or degenerations except the case of normal wear
and tear of such subleased property.
3. Not to cause any obligations on the subleased property except other cases identified under
(transaction documents)
4. Not to sublease or allow other persons to use the subleased property without prior written
notice from the Bank unless having permission to do so as identified in (transaction documents)
5. Be responsible for signboard tax, housing and land tax, revenue tax as well as other taxes charged
on the subleased property throughout the sublease term (if any) according to applicable laws
whether it is currently or potentially enforced.
6. Repair, modify and maintain the subleased property throughout the sublease term. The
sublessee agrees to be responsible for all expenses for Preventive Maintenance of the subleased
property including expenses or replacement of subleased equipment or spare parts with useful
age not over 9 years that are degenerated or expired during the throughout the term for normal
operations (OPEX). The ownership on such property belongs to the Fund.
7. Comply with ap[pplicable laws relating to the business operation of the sublessee including (but
not limited to telecommunication business) and provide obtainment and maintenance of all
necessary licenses for the business operation of the sublessee as specified by law. It includes
related telecommunication operation license.
8. Abide by terms and conditions of the licenses and regulations in relation with business operation
of the sublessee including (but not limited to telecommunication business) and notify the Fund
immediately if receiving a notice or an order from legal sectors due to non-compliance with the
agreements and terms in the license or regulations that may affect validity of the license or
cause withdrawal of the license.
9. Maintain standard certification received by the sublessee (with expenses of the sublessee) not
to be inferior to standards the sublessor receives as of agreement date.
10. Allow the Fund or its representatives to inspect the subleased property any time as considered
proper. The Fund shall make a prior notice for three (3) working days except an emergency case
that the Fund has no need to make a prior notice. However, such inspection shall not disturb
or obstruct the sublessee and/or operations of the sublessee.
11. When requested in writing by the Fund, the sublessee shall provide and deliver instruments or
documents and take any actions as properly requested by the fund in order to make subleasing
of subleased property valid and enforceable.
12. Provide data about the subleased property to be inspected by the Fund when properly
requested by the Fund.
13. Deposit rental guarantee as follows (A) Guarantee for sublease Customer Center Building in the
amount of THB 1,920,000.00 and (B) guarantee for subleased Data Center Building and sublease
Opinions of the Independent Financial Advisor
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equipment in the amount of THB 106,272,000.00. The amount in clause ( A) and (B) is equal to
first 6-month sublease cost of this agreement as the guarantee of performance of the sublessee
in accordance with the agreement (rental guarantee). The sublessee shall deliver such rental
guarantee to the Fund (including value-added tax) within [5 ] working days from the date of
sublease registration. However, such rental guarantee can be in forms of cash within [5] working
days from the start of the 4th calendar year of this agreement. The sublessee shall deposit more
rental guarantee so that total rental guarantee is equal to sublease cost for first [ 6 ] months of
the 4th calendar year of this agreement and within [5 ] working days from the start of the 7th
calendar year of this agreement. The sublessee shall deposit more rental guarantee so that total
rental agreement is equal to sublease cost for first [ 6 ] months of the 7th calendar year of this
agreement.
14. Keep the subleased property clean and orderly throughout the sublease term.
15. Do not change, modify, construction or renovate the subleased property unless having a prior
written consent from the Fund.
16. Inform the Fund in writing immediately when an event affecting the capability of the sublessee
to operate a business and/or affecting the capability of the sublessee to comply with this
agreement occurs and/or when disputes in relation with the subleased property according to
the agreement happen.
17. Agree to be responsible for maintaining the subleased property and public utility of the
sublessee with its own expenses.
18. The sublessee agrees to utilize the subleased property with cautiousness without causing
dangers, disturbance or other effects on the environment and residents of nearby communities
or other persons. The sublessee shall operate works to prevent diffusion, leakage or
contamination of chemicals or construction materials into soil, water sources, and air.
In case the sublessee is notified or complaint that it causes troubles or impacts according to the
previous paragraph, the sublessee shall operate to examine facts to realize the cause of such
problems. If such causes are originated by the sublessee, its representatives or affiliates, the
sublessee shall take immediate action provided that the sublessee agrees to be responsible for
all expenses.
19. Agree to cooperate with and facilitate the Fund as requested in case the Fund announces to
find any persons interested in submitting a proposal for subleasing in the 8th calendar year of
the agreement.
20. In the event the sublessee is no longer the tenant with any reasons, the sublessee agrees to
remove Core Network and/ or take any other necessary actions for new sublessee to utilize the
subleased property immediately within (60) days from the date this sublease agreement ends.
21. Agree to consent and cooperate to facilitate the fund in transferring rights and duties according
to this agreement to the third party in the event of Fund dissolution before the sublease due
term including the execution of debt conversion agreement with the third party.
Rights and duties of
the sublessor
Throughout the sublease term, the Fund agrees to take any actions included (but not limited to)
the following
1. Not to cause any obligations on subleased properties unless the sublease agreement or other
cases identified to do under (transaction documents*)
2. Responsible for expense relating to modification and/or repair to replace subleased properties
with useful age more than 9 which are normal depreciated of such properties so that the
Opinions of the Independent Financial Advisor
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properties can be continuingly used ( CAPEX). The ownership of such properties belongs to the
Fund.
3. Allow the sublessee to pass the necessary part of the subleased Customer Center Building for
benefits of ID3 project operation in other phases as long as it does not cause any damages to
the fund/ and or subleased property.
Insurance 1. Insurance
• Throughout the sublease term, the sublessor and the sublessee will provide mutual
insurance for subleased agreement to guarantee risks with properties ( Property All Risks
Insurance) with sum insured covering all property values (including building foundation
(100%) with Full Replacement Cost). It is referred from a property appraisal company so that
the coverage is sufficient for replacement of all subleased property value in case the
subleased property is dilapidated or damaged. Values of subleased property are appraised
by a property appraisal company approved by SEC in the latest round of appraisal before
insurance policy renewal. The sublessee shall be responsible for the insurance premium and
the fund will be the beneficiary.
• Throughout the sublease term, the sublessor and the sublessee shall provide mutual
insurance in relation with subleased properties to guarantee risks from physical injury and
damages to third party’s properties (Public Liability Insurance). The sublessee shall be
responsible for such insurance premiums.
2. Damage payment from an insurance claim
• In case of partial loss
In case of partial loss with damage value lower than [•]** million Baht, the Fund will consider
whether to give indemnity the Fund receives from an insurance company to the sublessee to
repair subleased property or hire other persons to do a repair. If the Fund approves that such
repair should be done, the sublessee shall cooperate in such repair and give advice to the
Fund or repair operators as considered proper.
• In case of Total Loss
In case of damages with value more than [•]** million Baht, if the Fund ( after discussion with
an independent technical advisor of the Fund) agrees that such damages with subleased
property should be repaired, the Fund will give indemnity the Fund receives from the insurance
company to the sublessee to repair such subleased property. Nevertheless, the Fund agrees
to be responsible for a differential in case the repair cost is higher than received indemnity.
However, if such damages are caused by a fault of the sublessee, the Fund has rights to claim
such differentials from the sublessee.
In the event the Fund agrees that damages are serious, and they should not be repaired or
rebuilt, the Fund will have rights to receive indemnity from the insurance company and the
Fund agrees to return advance sublease amount to the sublessee for remaining sublease
duration. Nevertheless, the sublessee shall pay outstanding rental completely and it is deemed
that the agreement is terminated provided that the sublessee has no rights to claim damages
from the Fund.
• In any cases, the Fund still has rights to claim damages according to laws or agreements
from the sublessee if such damages are caused by actions, omissions, intentionally or
negligently, of the sublessee.
Opinions of the Independent Financial Advisor
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Representation and
warranty of sublessor
On the agreement date, the sublessor agrees to represent and warrant to the sublessee as follows
• The sublessor is an infrastructure fund completely established and maintained under relevant
security laws.
• The sublessor has authorities to execute the agreement, comply with the agreement, provide
documentation and take any actions identified herein as well as actions in relation to the
agreement. Such actions are not against mutual fund and prospectus management project.
• The fact the sublessor enters into this agreement or complies with any obligations herein is not
contrary to or violating requirements, terms or representations made or to be made by the
sublessor with third parties.
Representation and
warranty of sublessee
• On the agreement date, the sublessee agrees to represent and warrant to the sublessor as
follows
• The sublessee is a juristic person of a public company limited established and sustained
completely under applicable laws.
• The sublessee has authorities to execute an agreement, comply with the agreement, provide
documentation and take any actions as identified herein along with actions connected with the
agreement. Such actions are not against the memorandum of association and regulations of the
sublessee.
• The sublessee enters into this agreement or complies with obligations in order not to be contrary
to or violate requirements, terms or representations done or to be done by the sublessee in
agreement with third parties.
• The sublessee is not in the middle of contractual or agreement breach or default with any
persons.
• The sublessee is permitted relating to and necessary for data center operation correctly and
completely. Such license is still valid as of the date of agreement execution.
• The sublessee is not a bankrupt, insolvent or under business rehabilitation or does not receive
an order for liquidation or receivership as specified by laws on agreement date.
Cause of agreement
termination
• Sublease under the sublease agreement cannot be canceled or terminated unless
1. The signatories make a written agreement.
2. When the sublease is due as specified herein and the sublessee does not wish to renew
the agreement.
3. The land where all subleased buildings are located is expropriated according to laws or
notices associated with expropriation or other laws. The Fund agrees that such event may
affect operations of the Fund significantly and it cannot be remedied or corrected or taken
any action to mitigate such impacts.
4. In case of total loss that the Fund agrees that it is extreme damage that should not be
repaired.
5. The sublessee is in default of any provisions or fails to perform duties or agreements under
(transaction document) and it is not corrected within 30 days from the date being notified
by the Fund.
6. In case the sublessee has a resolution or starts operation to submit an application to a
court or other sectors to request for business rehabilitation of the sublessee or to make
the sublessee become a bankrupt ( whether the operation is initiated by the sublessee or
third party) or the sublessee receives an order of liquidation or in case any courts or sectors
have an order to rehabilitate the business of sublessee or to make the sublessee become
Opinions of the Independent Financial Advisor
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bankrupt or to liquidate account or in case the sublessee is insolvency as specified by law
or in case the sublessee closes down the business, has resolution to dissolve the business
or cease operations in whole or significant parts of the business.
7. Any event happens and the Fund agrees that it may affect capability of the sublessee in
performing obligations herein.
8. Apart of the identification in clause 4. When Force majeure occurs which incapacitates the
affected party to perform obligations herein and such force majeure sustains for (60)
consecutive days. For benefit of this agreement, “force majeure” means any events that
may happen or cause disasters and they cannot be prevented even though the victims or
potential victims are as cautious as expected from these persons in such circumstances.
The force majeure includes fire, earthquake, storm, flood, lightning, wars, military blockade,
riots, uprising, terrorist acts, orders by the government sectors or other circumstances
beyond the control of the signatories affected by such force majeure.
9. In the event of fund dissolution as detailed in the project of mutual fund management and
prospectus and the Fund has informed the sublessee of such dissolution in writing.
10. Land lease agreement with SCG, building rental agreement and/or equipment rental
agreement is terminated.
Result of Cause of
agreement
termination
• In case of the cause of agreement termination, both parties agree to do the following
1. In case of events identified in clause 1, 2 and 4 of the cause of agreement termination, it
is deemed that the agreement is terminated provided that each party has no rights to
claim damages, expenses or money or other returns from the other party unless agreed
otherwise. If no damages occur with the subleased property, the Fund agrees to refund
the sublease guarantee to the sublessee.
2. In case of events in clause 3 and 9 of the cause of termination, the Fund has rights to
terminate the agreement by make a written notice. If no damages occur with the subleased
property, the Fund agrees to refund the guarantee of such sublease to the sublessee.
3. In case of events in clause 5, 6, 7 and 10 of the cause of termination with faults of INET,
the Fund has rights to terminate the agreement by making a written notice. The sublessee
agrees that the Fund can expropriate guarantee of such sublease and charge penalty for
[•] and take any actions as notified by the Fund in relation with core network equipment
( including storage of Core network in any parts of all subleased building) . It agrees to
cooperate in any operations in a timely manner as specified by the Fund.
4. In case of events in clause 8 of the cause of termination, the affected party from force
majeure has rights to terminate the agreement by making a written notice. In case of no
damages occur with the subleased property, the Fund agrees to refund the guarantee of
sublease to the sublessee.
• In the event this agreement is terminated before the due, the sublessee agrees to operate as
informed by the Fund for services related to Core Network equipment (including storage of Core
network in any part of the subleased building) as well as cooperate in any operations in a timely
manner as specified by the Fund.
• In the event this agreement is terminated, the signatories do not lose rights to claim expenses
and/or damages before the termination date as well as expenses and damages arising from the
agreement termination and/or damages as specified by law.
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Damage liability • The sublessee agrees to be liable to any damages to the Fund and management company
(including staffs, directors, employees and representatives) as well as loss, claiming right, tax,
revenue stamp, all actual liabilities and costs and expenses in reasonable manners along with
expenses for legal operations, attorney fee and reserve money due to breach of agreements or
contracts or representations of the sublessee under this agreement or operation agreement
unless it is a serious offense or negligence or intentional act by the Fund, management company
or representatives of the Fund or management company. Nevertheless, it does not limit other
rights of the Fund herein or according to applicable laws
Right and duty
transfer
• The sublessee cannot transfer rights and duties under this agreement unless having written
consent from the Fund.
• The sublessee agrees to consent to the Fund in transferring rights and duties under this
agreement to the third party in case of fund cancellation before the due of this agreement. ***
Dispute settlement • By arbitration by virtue of regulations of Arbitration Institute, Justice Court Office
• The arbitration process is performed in Bangkok, Thailand. The proceedings are in Thai and the
proceeding venue will be in Bangkok, Thailand
Applicable law • Thai Law
Remark: The signed sublease agreement may be different from key summary but not be different in subject matters.
* Transaction documents are the Supplemental Memorandum of Land Lease Agreement, the Building Lease Agreement, the
Equipment Lease Agreement, sublease agreement and the undertaking agreement.
** The value of the damage will be based on the property value assessed by the cost method assessed by an independent
appraiser each year.
*** According to condition of transfer of right and duty, the Sublessee consents the Fund to transfer right and duty to third
party in case of termination of the Fund before the Sublease Agreement expires. INET will still be the sublessee and the
Undertaking Agreement will not be transfered.
From the above summary agreement, there is the condition that the Company agrees to be liable
to any damages to the Fund and management company (including staffs, directors, employees and
representatives) as well as loss, claiming right, tax, duty stamp, all actual liabilities and costs and expenses
in reasonable manners along with expenses for legal operations, attorney fee and reserve money due to
breach of agreements or contracts or representations of the sublessee under this agreement or operation
agreement unless it is a serious offense or serious negligence or intentional act by the Fund, management
company or representatives of the Fund or management company. In this regard, there is no definition of
“serious negligence”. Therefore when the event occurs in future, the countyparty need to negotiate about
severity of the event.
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1.6.6 Summary of the Draft Operating Agreement
INET will enter into a contract with the FUND (Operating Agreement Contract) with the essence
summary of operating agreement contract as follows:
Contractor INET
Promisor The Fund
Expected Agreement
Date
Within 2019
Agreement Term Throughout the duration of building and equipment lease agreement between INET and the Fund
under the INET building lease agreement.
Main Duties of
Contractor
Main Duties of INET including but not limited to the following issues
• INET will comply with the terms in [Transaction Documents*]
• If any INET’s creditor is entitled to claim against INET under any document or contract, INET
agrees to take any action to delay the time of such claim until all of INET’s duties under the
[Transaction Documents] are released.
• INET will submit financial statements, accounting statements or any information according to
the reasonable request by the FUND in order to use for monitoring the business and financial
status of the company.
• Until all INET’s duties under the [Transaction Documents] are released, INET shall maintain the
Interest Bearing Debt to not exceed 2 times of shareholder’s equity at any end of quarter.
• So that, according the definition and calculation details as specified in contract.
• In the event that the financial ratio is not as specified, INET cannot pay dividends or to
shareholders or incur additional liabilities, unless such liabilities are subordinated liabilities
than INET's debt to the Fund.
• Agree to be responsible for any tax, fine or surcharge as charged by The Board of Investment
or any other relevant agency due to INET has breached the conditions as specified in the
received Investment Promotion Certificate.
• [Register the servitude on footpaths, routes, electricity, water supply and utilities of servitude
property land, Title Deed No. 9977**, Parcel No. 112, Dealing File No. 1212, Thap Kwang Sub-
district, Kaeng Khoi District, Saraburi Province for the dominant property land, Title Deed No.
2877, Parcel No. 16, Dealing File No. 93, Thap Kwang Sub-district, Kaeng Khoi District, Saraburi
Province that leased the land from SCG according to the land lease agreement before the
date that the Fund successfully invested by such servitude to be effective throughout the
duration that SCG allows INET or the Fund to lease such land]. (to be used for another
entrance/exit of INET-IDC3 project)
• Comply with applicable laws related to the business operation of INET including (but not
limited to telecommunication) and shall supply and maintain all necessary licenses for the
business operation of INET as required by laws including relevant telecommunication license.
• Comply with the terms and conditions of the licenses and rules related to the business
operation of INET, including (but not limited to telecommunication) and inform the Fund
immediately if there is a notice or order from relevant legal entity due to non-compliance with
the terms and conditions of the licenses or relevant rules that may affect to the integrity of
the license or cause the license to be revoked.
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• Maintain the certification of various standards that INET received in order to prevent the
standard inferior than INET received on the date of entering into this contract.
• Allow the Fund and/or a person designated by the Fund and/or customers who are the
Information Operation Center’s users including all servants of such any person to use the land
or pass the land that INET leases from SCG under the land lease agreement and/or land owned
by INET where is near the INET-IDC 3 Phase 1 project for business operation or use services
related to the Information Operation Center without any expense.
• In the event that the Sublease Agreement for Operating between the Fund and INET is expired
in any case, INET agrees to cooperate and provide assistance as well as take any necessary
action without delay including (but not limited to) the connection of work systems or data
and access to various relevant devices in order to allow the new sub-lessee and/or a
designated person of the Fund to proceed the service providing of the Information Operation
Center to the users continuously and smoothly as the Fund has informed in writing.
• Inform the Fund in writing immediately if there is an event that affects to the contractor’s
ability to operate the business and/or affects to the contractor's ability to comply with the
transaction documents and/or in event of there is any relevant dispute.
• In case of there is an incident specified in the memorandum of understanding between SGC
and INET, INET agrees to take any action in order to the Fund can get assignment of the rights
and obligations under the land lease agreement with SCG or enter into a new land lease
agreement with SCG instead of INET to complete immediately.
Restraining Duties of
Promisor
• Unless get the prior consent in writing from the Fund, INET is restricted to take some operations
including the following actions:
1. New business operation other than the existing businesses, related businesses or supporting
business that are similar to the current INET business or changing the general nature of the
INET business that is performed on the date of entering into this contract. In this regard, this
duty applys only for INET not for INET’s subsidiaries.
2. Acquisition of business, shares (either new issued shares or existing shares) or taking over the
ownership of other juristic persons or a new juristic person establishment, either one or
several transactions within any 12-month with value not exceeding 5% of INET’s equity
according to INET’s consolidated financial statement and/or according to the conditions as
specified in the operating agreement contract.
3. Decrease registered capital (unless in the case of decreasing the par value which it does not
change the registered capital of INET)
4. Amendments, changes, waiver of rights or modifications on important conditions of
telecommunication licenses or any important conditions of the contract related to the
telecommunication business operation (as agreed by the parties) unless according as
required by applicable laws or such changes do not adversely affect to INET's business
operation.
5. Waiver of rights under the telecommunication license or termination of any important
contract related to telecommunication business operation (as agreed by the parties) which
is necessary for the business operation.
6. Lending or takes any action in order to being a creditor including guarantee or assumes
Liability and agree to pay for damages or incurs liabilities for the benefit of another person
or accept the debt assignment from other persons except in the following cases
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( 1) Subsidiary companies and joint venture companies borrow money at the end of any
quarter with total outstanding amount value not exceed 5% of equity of INET as per
INET’s separated financial statement.
( 2) INET’s account receivables incurred according to normal business on arms and length
basis and in accordance with normal trading.
7. Incurs collaterals or obligations on account receivables or INET’s assets (except in the case
of (a) collateral incurring under the finance lease agreement in the event that INET is a
lessee, (b) collaterals or obligations on total assets have the value not exceed 50 percent
of the book value of land, buildings, and devices at that time, based on the information on
the INET’s consolidated financial statements, (c) the collateral incurring according to or
permitted in the [transaction documents], (E) collateral or obligation on unnecessary assets
for INET's business as long as the collateral has been provided as a collateral for loans from
one or more commercial banks, or (f) any collateral as incurred by INET before the date of
the Fund successfully invested (under the condition that such loans will meet other terms
of this operating agreement contract)).
8. Factoring accounts or assets of INET (unless the disposal of assets in accordance with the
criteria of cash flow as specified or have done as normal business on arms’ length basis and
in accordance with normal trading).
9. Enter into transactions with other persons who are not on arms and length basis and in
accordance with normal trading.
10. Agrees to compromise or takes a compromise in any claim or dispute unless such
compromise does not significant adversely affects to INET's financial status.
11. Business disjointing or taking companies in the group to register in the Stock Exchange of
Thailand (Spin-off) according to the conditions of the Stock Exchange of Thailand or any
action in the same manner that significant adversely affect to the assets that the Fund leases
from INET.
12. Not operate other business except the data center business on the land leased from SCG
and shall not operate or take any action that may adversely affect to in any business or act
That may adversely affect the data center business in the area near the leased land, unless
the Fund will give prior consent in writing.
Right of First
Refusal/Right to
Match
• In the event that INET wants to rent or sell, transfer any property or device used for the projects
of INET IDC 3 in other phases or properties or device used for the INET projects which located
near the INETIDC 3 Phase 1 project that the Fund invests [or properties or devices used for core
business operation or for any INET’s project] INET must propose to the Fund to consider first. If
the Fund rejects INET therefore be able to propose to other persons with conditions that are
not better than the conditions as proposed to the Fund (Right of First Refusal) or in the case of
other persons propose better offers, INET agrees to take the offers to the Fund consider and
compare it again. If the Fund proposes an offer as equal or better, INET agrees to accept the
offer from the Fund (Right to Match).
• In the event that INET can renew the land lease agreement with SCG, INET agrees to the Fund
has the right to consider the renewal of building and device lease agreement first. If the Fund
refuses, INET therefore be able to propose to other persons for renting such buildings and
devices with conditions that are not better than the conditions proposed to the Fund (Right of
First Refusal).
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Support Agreement • INET agrees to provide any support and assistance related and associated to the operation of
the Fund and/or the person authorized by the Fund and/or other persons in the event that the
Fund agrees other persons to sublease operating according to the details and conditions as
specified in the sublease operating contract, instead of INET.
VAT Loan • In case the Fund need to borrow money from INET to settle VAT occurring from the Equipment
Lease Agreement according to law, INET will lend the Fund money amouting of equal to the
VAT with interest rate of [] per annum. The Fund will do the best effort to redeem the VAT
from Revenue Department. When the Fund obtain the VAT back from the Revenue Department,
the Fund will payback to INET immediately. If the Fund does not fully obtain the VAT from he
Revenue Department within 2 years from the investment success date, the Fund will not pay
interest to INET anymore. The Fund will pay only principal equaling to the amount obtaining
from the Revenue Department. INET will disclaim the rest amount which the Fund does obtain
from the Revenue Department. However, detail is as per related loan agreement.
Assignment INET will not transfer its own rights or obligations under the operating agreement contract.
Dispute Resolution • By the arbitration process by virtue of the rules of the Thailand Arbitration Institution, Office of
the Judiciary.
• Proceed arbitration process in Bangkok, Thailand with Thai language including the location of
proceeding will be in Bangkok, Thailand.
Law Thai Law
Remark: The operating agreement contract for signing may differ from the essence summary but will not differ in the essences of contract.
In case of the termination of the Fund, the Fund have to transfer right to the third party persons whlist the Operating
Agreement Contract expires.
* Transaction documents are the Supplemental Memorandum of Land Lease Agreement, the Building Lease Agreement, the
Equipment Lease Agreement, sublease agreement and the undertaking agreement.
** Title Deed No. 9977 (Located behind the land with title deed No. 2877) which owned by the Company will be developed
to be data center. Therefore, the Company agrees to register the servitude to the Fund to used as another entance/exit of
INET-IDC3 project without any fee. If INET is not the sublessee after the ninth year of the Sublease Agreement, a new sublessee
will use the land with titl deed No. 9977 as another entance/exit.
Additionlly, the Summary of Related Agreements are lease and lease back transaction. So, the IFA
summarises responsibleness of related expense as below;
No. Expense Responsible Party
1 The cost of demolishing the leased building or renovate the
rental area to be ready to use as agreed with SCG upon lease
term of the Land Lease Agreement
The Fund and the Fund has right to obtain
salvage value
2 Operating Expenditure (OPEX) such as battery and light bulb The Company as the sublessee
3 Expense relating to modification and/or repair to replace
subleased properties with useful age more than 9 which are
normal depreciated of such properties so that the properties
can be continuingly used (CAPEX)
The Fund
The will own the replacement properties.
4 Label tax, property tax, duty stamp and other taxs The Company
5 Insurance premium / beneficiary
- Property All Risks Insurance The assured: The Fund and the Company
Premium payer: The Company (the sublessee)
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No. Expense Responsible Party
Beneficiary: The Fund obtain benefit onlyportion
owned by the Fund.
- Public Liability Insurance The assured: The Fund and the Company
Premium payer: The Company (the sublessee)
Beneficiary: Public
- Business Interruption Insurance The assured: The Fund
Premium payer: The Fund
Beneficiary: The Fund
6 Rental and service fee of sub-station The Fund
7 Fund establishment expense The Company is responsible for consultant fee
and appraiser fee
The Fund is responsible for SEC and SET related
expense
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2 Reasonableness of the Transaction
2.1 Objectives and Necessity of the Transaction
The key purpose is that the Company will receive the rent in lump sum according to the long
term lease from the establishment of the Fund of approximately THB 2,400 – 2,850 M to create
benefits of shareholders in the future, such as repaying loan(s) to meet the condition of the current
loan agreements and restructuring the Company’s financial structure to reduce the debt to equity
ratio. The Company can also additionally invests in the business operation, such as investing in
equipment of other phases of INET-IDC3 Project, as well as working capital of the Company. The
Company will still have assets for the business operation by entering into the Operating Sublease
Agreement with the Fund. After entering into the Operating Sublease Agreement with the Fund, the
Company will utilize the assets from the operating sublease for Data Center to both existing and
future customers.
Moreover,The Company also has the plan to subscribe the newly issued investment units at
the amount of not exceeding one third (or not exceeding 33.33%) of the total issued and offered
investment units. Consequently, after the completion of the Units Subscription Transaction, the
Company and/or its subsidiaries will be the main unitholders of the Fund and receive benefit from
their investment units held proportionately to their investment in terms of dividend income and/or
capital deduction from the Fund, including the opportunity to have the capital gain of the investment
units if the future market price appreciated.
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2.2 Advantages and Disadvantages from Entry into the Transaction
Advantages from Entry into the Disposal of Assets Transaction
1) The Company will receive cash from the Long Term Lease Transaction
The Company will receive cash of approximately THB 2,400 – 2,850 M according to the
Long Term Lease Transaction. After deducting fund from which the Company will invest
in units of the Fund and other expenses related to the Transaction, the Company could
use the net cash flow to benefit its shareholders in the future. For instance, repaying its debts
for financial restructuring, investing in additional business operation, or using as a working
capital. Details are as follows:
(Unit: THB M)
Transaction Estimated cash flow from
entering into the transaction
Estimated Value of Asset Disposal 2,400 2,850
Deduct Investment in units of the Fund (not exceeding one third) (800) (950)
Deduct Fund Set Up Expense and advance land rental payment
to SCG
(100) (106)
Deduct Repaying Debts (1,300) (1,300)
Estimated Net Cash Flow for Additional Investment and Working
Capital
200 494
Remark: such data above is only the preliminary net cash flow estimation. The amount is subject to change depending on the Assets
Disposal value, the Fund investment units proportion and other expenses which are subject to the Fund size.
The debts repayment of THB 1,300 M are the loan which the Company borrowed from the
commercial bank to construct other phases of INET-IDC3 Project with the following conditions
1) interest rate of approximately 4.25% – 4.90% 2) repayment within 1 – 5 years or if the
Company disposes any of the asset including collateral building and/or the project to the
Fund, the Company will promptly bring all cash from the sale of such assets to repay loan to
the bank. As such, the Long Term Lease Transaction will allow the Company to comply with
the conditions in the existing loan agreement.
2) The Company has stronger financial structure
The estimated net cash flow is approximately THB 200 – 494 M will be used for the
additional investment in INET-IDC3 and the Company’s working capital. As of 30
September 2018, the Company’s current ratio was at 0.57 time which is considered low
Opinions of the Independent Financial Advisor
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liquidity. After the debts repayment, the current ratio (calculated as of 30 September
2018) will improve to approximately 1.15 – 1.49 times.
Moreover, the Company will have a stronger financial structure in overview because after
entering into the Transaction, the Company will use part of the net cash flow to repay its
debts from financial institutions. That would result in lower interest bearing debt to equity
ratio from 1.27 times to 0.26 – 0.29 time (as refers to the reviewed separated financial
statement as of 30 September 2018) depending on cash the Company receives from the
disposal of assets.
3) The Company transfers expense relating to modification and/or repair to replace
subleased properties with useful life more than 9 years to the Fund.
After the acquisition and disposal of assets transaction, the Company will be responsible
for the expenses regarding maintenance of leased equipments (OPEX) including the
expenses relating to reparation, adjustment and/or replacement of leased equipments
which are deteriorated by its normal useful life (less than 9 years) to be functional. The
Fund will be responsible for expense relating to modification and/or repair to replace
subleased properties with useful life more than 9 years. Thus, this would reduce the
burden of such expenses of the Company in the future that the Company can utilize its
existing resources to focus on investment, technology development and services, which
are an important part of the Company's business.
4) The Company will have potential to raise money to expand the business in the
future through the Fund
If this disposal of assets of the Company to the Fund is successful by raising fund
appropriately, the Company may raise fund through the Fund in the future for the data
center development. In addition, if the Company additionally invests in the same type of
assets that is sold to the Fund this time, the Fund may invest more in that assets and
lease back to the Company.
Advantages from Entry into the Acquisition of Assets Transaction (Operating Sublease
Transaction and Units Subscription Transaction)
1) The Company will have buildings and equipment used for its core business.
The core businesses of the Company are Cloud Solutions Services and Internet Access Services
which require buildings and equipment to operate the business. Therefore, entering into the
Operating Sublease Transaction will make the Company to operate its core business
continuously.
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2) The Company receives benefit from the units subscription
The Company plans to subscribe investment units of the Fund in the amount not exceeding
one third and or not exceeding 33.33% of total issued and offered investment units in the
Initial Public Offering of the Fund or approximately THB 800 to 950 M. The Company believes
that the investment in the Fund has a psychological effect on the success of the Fund
establishment. In addition, the Company will receive dividends from such units subscription
consistently which the internal rate of return (IRR) throughout the projection period (26.5 years)
is approximately 7%. The Company will also benefit from the tax exemption on such dividends
received (in case of holding investment units for not less than 3 months before and after a
dividend payment). The IRR is considered high when comparing with other types of investment
such as bank deposit, government bond, and debentures.
Disadvantages from Entry into the Disposal of Assets Transaction
1) The Company has restriction on the lease renewal of the Assets
At present, the Company can manage its assets to provide Data Center services to
customers throughout the remaining lease period of the Land Lease Agreement
(approximately 26 years). Also, the Company has an ownership rights of buildings and
equipment to operate such business. These results in continuous and consistent operating
income for 26 years.
However, after entering into the Long Term Lease Transaction and Operating Sublease
Transaction (Lease and lease back), the Company will have a sublease period of about 9
years. Although the Fund has the right to appoint the Company in renewing the Operating
Sublease Agreement, if there is any other person wishing to sublease before the expiry
date of the 8th year, the Company must submit the offer to the Fund same as or better
than a third party, so the lease term can be renewed. Thus, the entering into the
Transaction will restrict the lease renewal of the assets. (See more details in 1.6.5
“Summary of the Draft Sublease Agreement”)
2) The Company is obliged to pay all land rental fee in advance to SCG
According to the Land Lease Agreement (See more details in 1.6.1 “Summary of the Land
Lease Agreement”), the company shall pay land rental fee yearly to SCG with 5% increase in
rental growth every 3 years. At present, the remaining years of such agreement is about 26
years ended 31 December 2045. The Company agrees to pay all land rental fee for the
remaining 26 years in advance to SCG for THB 36.30 M at the same day as the Fund pays rental
Opinions of the Independent Financial Advisor
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fee for operation to the Company (See more details in 1.6.2 “Summary of the Supplemental
Memorandum of Land Lease Agreement”).
Moreover, in the case that the Company breaches the Land Lease Agreements or becomes
bankrupt or not being the sublessee of the Fund, SCG and the Company agree to transfer the
right of leasing pursuant to the Land Lease Agreement to the Fund. The Fund does not have
to pay any rental or additional payments to SCG.
3) The Company has restriction on the Draft Operating Agreement
To entering into this Transaction, the Company will enter into the Operating Agreement with
the Fund. Some conditions might mainly restrict business operation of thet Company as
follows:
• “If any the Company’s creditor is entitled to claim against the Company under any
document or contract, the Company agrees to take any action to delay the time of such
claim until all of the Company’s duties under the Transaction Documents are released”
Therefore, the Company is at risk of being affected by business operations from such
conditions, such as claims of the trade creditors.
• “the Company shall maintain the Interest Bearing Debt to not exceed 2 times of
shareholder’s equity at any end of quarter. In the event that the financial ratio is not as
specified, the Company cannot pay dividends to shareholders or incur additional liabilities,
unless such liabilities are subordinated liabilities than the Company 's debt to the Fund
(the subordinated liabilities are the liabilities incurred under the contract which agreed to
pay after the Company pay rental to the Fund such as subordinated debentures)”
However, such financial ratio as specified in the draft Operating Agreement is the general
condition based on the Company’s current loan agreement with the commercial banks.
After entering to the Transaction, the Company will obtain cash of approximately THB
2,400 – 2,850 M and repay debt of THB 1,300 M. Then, its interest bearing debt will be less
than 2 times. (approximately 0.26 – 0.54 times). Therefore, it will not breach of loan
agreement and the Operating Agreement Contract between the Company and the Fund.
In addition, the Company paid dividend to the shareholders consistently in the past 3
years (2016 – 2018) for THB 0.015, THB 0.0789 and THB 0.1259 respectively.
• “Unless get the prior consent in writing from the Fund, the Company is restricted to
operate the new business operation other than the existing businesses, related businesses
Opinions of the Independent Financial Advisor
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or supporting business that are similar to the the Company’s current business or changing
the general nature of the Company business that is performed on the date of entering
into this contract. In this regard, this duty applies only for the Company not for the
Company’s subsidiaries”
However, the condition of operating the new business applies only for non-related or non-
supporting or non-consistent the current business of INET. The said condition will not
violate the Company’ s business plan in information technology area. Morever, if INET
plans to enter into new business, INET can proceed through subsidiaries or joint venture
company.
The definition of the new business may be not clear, so the Company may have to
negotiate with the Fund in the future if there is a new project.
• “Unless get the prior consent in writing from the Fund, the Company is restricted to the
acquisition of business, shares (either new issued shares or existing shares) or taking over
the ownership of other juristic persons or a new juristic person establishment, either one
or several transactions within any 12-month with value not exceeding 5% of the
Company’s equity according to the Company’s consolidated financial statement and/or
according to the conditions as specified in the operating agreement contract”
The Company may be restricted in any investment in the future as they need the prior
consent in writing from the Fund. The written consent might come from the fund manager
or the resolution of the unitholders which causes delay of the investment in excess of 5%
(accumulated of period 12 months) of the Company’s equity or the unitholders of the
Fund may not approve the Company’s investment. According to the Company’s
consolidated financial statement as of 30 September 2018, 5% of the Company’s equity
equals to THB 91.04 M and the investment in associated company and the investment in
joint venture equals to THB 10.88 M or 0.60% of the Company’s equity.
• “The Company will submit financial statements, accounting statements or any information
according to the reasonable request by the Fund in order to use for monitoring the
business and financial status of the company”
As the Company is listed in the SET, the Company needs to submit the financial statements
and accounting information which is disclosed publicly. Other documents relating to the
operation plan that are not disclosed to the public, the Fund may request only parts
related to INET-IDC3 phase 1.
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• “The Company is restricted to compromise or takes a compromise in any claim or dispute
unless such compromise does not significant adversely affects to the Company 's financial
status.”
Therefore, the Company has to request for permission from the Fund.
• “The Company is restricted to business disjointing or taking companies in the group to
register in the SET (Spin-off) or any action in the same manner that significant adversely
affect to the assets that the Fund leases from the Company”
Therefore, the Company has to request for permission from the Fund.
• The Company is restricted to operate other business except the data center business on
the land leased from SCG and shall not operate or take any action that may adversely
affect to in any business or act that may adversely affect the data center business in the
area near the leased land.
However, the said condition is in line with the core purpose of the land lease between
the Company and SCG.
Disadvantages from Entry into the Acquisition of Assets Transaction
1) The Company is obliged to pay rental, electricity service, and other related expenses to
the Fund.
At present, the Company holds the ownership rights in buildings and equipment, so it has no
obligation to pay rental and electricity service to the Fund. In this regards, after entering into
the Operating Sublease Transaction, the Company will have an ongoing obligation to pay the
rental under the Sublease Agreement to the Fund for approximately 9 years including the
renewal of the agreement but not exceeding 31 December 2045 or approximately 26 years.
Furthermore, the Company has to use the electricity system of INET-IDC3 Project phase 1, so
the Company has an additional monthly electricity service expense to the Fund for 30% of
the rate charged by the PEA. Therefore, the Company has an obligation to pay rental and
electricity service expenses to the Fund as stated in the Sublease Agreement. However, the
Company charges electricity expense to the retail customers at a rate higher than 30%. So the
Company earns the margin.
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2) The Company is obliged to prepare cash as a deposit rental guarantee for subleased
building and equipment
To entering into the Operating Lease Transaction, the Company shall prepare cash equals to
the 6-month rental of the first year which consists of 1. guarantee for subleased Customer
Center Building in the amount of THB 1.92 M and 2. guarantee for subleased Data Center
Building and subleased equipment in the amount of THB 106.27 M. In addition, the Company
shall deposit more rental guarantee in the 4th and 7th calendar year so that the total rental
guarantee is equal to sublease cost for the first 6 months of that year as the guarantee of
performance of the sublessee in accordance with the Sublease Agreement. Therefore, the
Company loses its opportunity to use such money for other benefits while the Sublease
Agreement remains effective.
2.3 Risk from Entry into the Transaction of the Acquisition and Disposal of Assets
Risk from the Disposal of Assets Transaction:
1) Risk of not receiving fund from the disposal of assets if the fund raising is not successful
The Company expects to receive fund of approximately THB 2,400 – 2,850 M from the disposal
of assets which the Fund will need to raise funds sufficiently for investing in such assets.
Therefore, if the Fund fail to raise funds sufficiently for the Long Term Lease Transaction, it
could affect to the completion of entering into the transaction. As stated in the precedent
conditions, the Fund's units offering to the general investors must be completed and the Fund
receives funds sufficiently in order to enter into Long Term Lease Transactions. However, the
infrastructure fund is interested by the general investors and many infrastructure funds are
listed in the SET.
2) The Company may be canceled from the tax privileges from the Board of Investment
(BOI)
The Company has been exempt from taxes and duty for importing equipment to install in the
data center INET-IDC3 approximately THB 3.36 M which the Company has already got the full
tax refund in 2018. However, according to the BOI certificate no. 59-1041-1-00-2-0 of the data
center (effective from 28 June 2016), there are conditions stated that the Company must not
mortgage, sell, transfer, lease, or allow other people to use machinery that has got the import
duty exempted or reduced. The Company is in the process of discussing with the BOI regarding
the lease of building and equipment to the Fund which the Company has not yet received
the written consent from the BOI.
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Therefore, the properties leased to the Fund may cause the cancellation of such privilege. As
a result, the Company will have to pay tax of approximately THB 3.36 M with penalty charge
,and can not obtain any exemptions for 8 years of approximately of THB 31.26 M (or present
value of THB 19.50 M). However, if taking into account such tax impacts, the net present value
of cash flows entering to the Transactions will still be positive.
In this regard, in case BOI terminates right and privilege of taxation, if the Company pays the
taxation within 1 month from notice date, the Company need not to pay the penalty charge.
3) Risk that the Company may not get the repayment of the VAT loan from the Fund
Regarding the Equipment Lease Agreement, the Fund has to pay equipment rental fee to the
Company that results to occurrence of VAT. The Fund has responsibility to pay such VAT to
the Revenue Department immediately on the date of entering into the Transaction.
Nevertheless, the Fund has not have any income from operating. Thus the Fund has to seek
for source of fund to pay such VAT.
As specified in the Draft of Operating Agreement, for the Fund is able to raise funds successfully,
if the Fund wants to borrow money from the Company to pay such VAT occurring from the
equipment leased, the Company will agree to lend the Fund money in the amount equal to
the VAT paid to the Revenue Department. In this regard, the Fund will use its best efforts to
refund the VAT from the Revenue Department and repay to the Company at once the Fund
receive the refund VAT from the Revenue Department. On the other hand, if the Fund cannot
refund total of the VAT within 2 years from investment successful date, the Fund will not pay
interest to the Company anymore. The Fund will pay only principal in amount equal to the
VAT which has been already refunded from the Revenue Department. For the rest amout of
VAT loan, the Company will give up its right to request for the principal from the Fund. The
principal repayment period will be in accordance with the VAT refund period from the Revenue
Department. The principal repayment period is not determined but it will end with the leased
equipment period of approximately 26 years (31 December 2045).
Therefore, it is possible that the Company has risk to obtain debt repayment from the Fund
because uncertainty of the VAT refund period from the Revenue Department. Moreover, the
Company will get only interest on the principal in the first 2 years. From the Company’ s
management interview, the interest can be comparable with current government bond. In
addition, the rest amout of VAT loan which cannot be refunded, the Company will give up its
right to request for the principal from the Fund.
However, lending money to the Fund for the VAT of approximately THB 127.71 – 151.66 M,
depending on cash received from the Disposal of Assets Transaction (THB 2,400 M – 2,850 M),
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is a normal practice that sponsor gives financial support because the Fund will not have enough
money to pay VAT after payment of assets value to the Company. Additionally, accordind to
funds that are operating same business as the Fund, it appears that they totally refunded VAT
from the Revenue Department within 1 year from successful investment. In this regard, the
Company and BBLAM expect it is possible that the Fund can totally refund VAT from the
Revenue Department.
In case the Company cannot totally refund VAT from the Revenue Department (worst case
scenario), the net present value of cash flows entering to the Transactions will still be positive.
4) The Disposal Assets Transaction may not a True-Sale
For the Disposal Assets Transaction, if the Company cannot completely transfer risk and benefit
to buyer, it is not considered to be a true-sale transaction. The Company cannot recognize
profit from entering into the Disposal Assets Transaction ,and must record as non-current
liabilities.
Nevertheless, the Company is consulting an auditor. The auditor roughly viewed that the
Building Lease Agreement and the Equipment Lease Agreement are financial lease because
the Company transfers risk and benefit to the Fund and the Company does not involve in
property management anymore.
According to the Operating Agreement, the Company is only an operator who lease assets
from the Fund with rental period which cannot be considered to be most of assets useful life.
In addition, the lease fee is consistent with current market price, and the Fund does not rely
on the Company in term of assets maintenance because it is not complicated, and the assets
is not a specific assets until there are no other lessees in market as well as other lessees can
bring their own equipment to apply with the leased equipments. Therefore, it is strongly
possible that the Disposal Assets Transaction will be a true-sale transaction. The Company
receives the lease fee as per the Sublease Agreement for period of 27 years from the Fund.
Then, the Company will write off the assets from its statement and record difference between
cost of assets, related expense and received money to be “gain from financial lease”.
In this regard, the Company’s financial ratios (from reviewed financial statement as of 30
September 2018) in case of true-sale and no true-sale as follows:
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Consolidated Seperated
Transaction value (THB M) 2,400 2,850 2,400 2,850
Not True-sale
- Debt to Equity (D/E) 2.19 2.43 2.15 2.39
- Interest Bearing Debt to Equity (IBD/E) 0.56 0.56 0.54 0.54
True-sale
- Debt to Equity (D/E) 0.54 0.49 0.46 0.40
- Interest Bearing Debt to Equity (IBD/E) 0.35 0.31 0.29 0.26
After entering to the Disposal Assets Transaction, the Company will obtain cash of
approximately THB 2,400 – 2,850 M then the Company will repay its debt of THB 1,300 M.
Therefore, if the Disposal Assets Transaction is not true-sale, the Company will have to record
long-term liabilities of 2,400 – 2,850 M, resulting in D/E exceeding 2 times. However, the
financial ratio in the table above will not make the Company to breach loan agreement with
commercial banks and the Operating Agreement between the Company and the Fund because
loan agreement with commercial banks require the Company to keep IBD/E not exceeding 2
times as per separated financial statement and the Operating Agreement requires the Company
to keep IBD/E not exceeding 2 as per consolidated financial statement
5) The Company may have corporate income tax or special business tax liabilities from the
long-term lease transaction and the operating sub-lease transaction.
The Company has in the process of discussing with the Revenue Department on tax issues for
entering into the long-term lease transaction and the operating sub-lease transaction. It is
expected that the opinion of the Revenue Department could turn out to be one of the two
aspects as follows:
1. Such transaction is a typical sales and purchase of assets. The Company has to recognize
and amortize gain from entering the transaction throughout the lease period (approximately
26 years). The Company will incur corporate income tax liabilities whose present value ranging
between THB 107.01 – 136.34 M depending on the transaction size (THB 2,400 – 2,850 M).
However, although there is the effect from the tax liabilities, the net present value of the long-
term lease transaction is still positive.
2. The transaction is perceived as a loan from the Fund because the Company will receive
advance lease payment from the Fund for the lease term of circa 26 years and pay sub-lease
amount to the Fund on a monthly basis. Under this scenario, the Company will not have
corporate income tax liabilities but instead the Fund will incur special business tax liabilities
of 3.3% of the sub-lease amount received from the Company. The special business tax will
range from circa THB 64.33 M depending on the transaction size (THB 2,400 – 2,850 M).
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The Company informed that should the Fund have to pay special business tax, the Company
will pay the tax for the Fund. The said special business tax will be lower than the Company’s
income tax.
However, although there is the effect from the tax liabilities, the net present value of the
Transactions is still positive.
Risk from the Acquisition of Assets Transaction:
1) Risk from default of Operating Sublease Agreement
After entering into the Operating Sublease Transaction, the Company will have an ongoing
obligation to pay the rental expense to the Fund with increasing rate every year. If the
Company could not pay rental expense as stipulated in the Operating Sublease Agreement
which may result from the Company’s operating performance is not as expected, or having
other competitors with similar business enter to the market. This default could affect to the
Company and the Fund may terminate the agreement.
However, when considering the revenue structure of the Company (See more details in
Appendix 2 “Information of Internet Thailand Public Company Limited”), the major
revenues come from cloud solution services and internet access services that have the
growth potential in the future (See more details in Appendix 1 “Economic and Industry
Overview”). As such, there is a high possibility that the Company will be able to utilize its
current and future operating cash flow to pay all the monthly rental fee to the Fund.
2) Risk from the renewal of Operating Sublease Agreement at the maturity
Upon the maturity of 9th year from signing date of the Sublease Agreement, the Company may
have the risk of renewal of the agreement if any other third party wishes to sublease it. This
may affect the Company's ability to operate the business.
However, if any other third party wishes to sublease before the expiry date of the 8th year,
the Company shall be entitled to consider the renewal with the same offer or better than the
offer of the third party proposed to the Fund (Right to Match) (See more details in 1.6.5
“Summary of the Draft Sublease Agreements”). If the Company can not renew such Sublease
Agreement, they can still use buildings and equipment of other phases of INET-IDC3 project as
well as data centers in other areas where the Company plans to invest in the future.
Hence, there is possibility that the operating sublease can change from the Company to other
sublessee but there are restrictions on the building structures and equipment which was
specifically designed for the use of the Company. Other sublessee might have the data transfer
expense and also building and equipment adjustment expenses. Moreover, other sublessee
must invest in high technology equipment on their own because the Company only rent out
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buildings (with component parts) and equipment but not including high technology equipment
to the Fund.
3 Sources of Funds in the Acquisition of Assets Transaction
The Operating Sublease Transaction
Initially, the Company will use operating cash flow of the Company to pay for operating sublease
fee from the Operating Sublease Transaction.
The Units Subscription Transaction
Initially, the Company will use a bridge loan from a financial institution as source of fund to
subscribe the investment units subscription and will, subsequently, repay such bridge loan with the fund
received from the Long Term Lease Transaction with the Fund.
4 The Fairness of Price and Conditions of the Transaction
4.1 Fairness of the Price
4.1.1 Fair price of the Disposal of Assets Transaction
Long Term Lease Transaction
The IFA has considered the appropriateness of the transaction price by using 3 methods as follows:
1) Book Value Approach
2) The Appraisal by the independent appraiser
3) The Financial Projection by the IFA
4.1.1.1 Book Value Approach
To evaluate the book value of assets that the Company and the Fund will enter into the Long
Term Lease Agreement, the IFA referred to the book value of buildings (with component parts) of the INET-
IDC3 Project Phase 1 (the data center building, the utility building and Connecting Path Way and customer
center building) and lease equipment related to Data Center services but not including high technology
equipment. The book value stated in the financial statement of the Company as at 30 September 2018
,detailed as follows;
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No Transaction Assets Approximated Book Value as at
30 September 2018 (THB M)
1. Lease buildings and
component parts including
other utility systems affixed in
the building or in such area
(1) Data Center Building 214.45
(2) Utility Building
(3) Customer Center Building
(4) Other Related Civil Work
which are assembly work for
the building structures or
project areas such as
construction preparation etc.
(5) Electricity System 520.90
(6) Cooling System
(7) Fire Prevention System
(8) Water Leaks Detector System
(9) Fuel Supply System
(10) Network Cabling System
(11) Related System such as
ethernet switch emergency
exit and telephone and data
system
(12) Security System 17.17
2. Lease equipment for
providing service
Racks 5.97
Total 758..49
The Asset value which the Company and the Fund will enter into the Building Lease Agreement and the
Equipment Lease Agreement evaluated by Book Value Approach is THB 758.49 M.
4.1.1.2 The Appraisal by the Independent Appraiser
The IFA has considered the summary of valuation appraisal reports by the independent appraiser
approved by the SEC, American Appraisal (Thailand) Company Limited ("AA") and 15 Business Advisory
Limited (“15 Business”), which appraised for 1 July 2019 with the public purpose dated 17 December 2018
and 18 December 2018, respectively. The appraisers have appraised the assets by two approaches as
follows:
- Replacement Cost Evaluation on the replacement price of the assets by considering the cost
of the buyer to acquire or construct a new property in the manner of replacement.
- Income Approach Evaluation on the future financial benefits of the assets under the Long Term
Lease Agreements with the agreement term of 26 years and 6 months.
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Valuation Approach Appraisal Value
AA 15 Business
Replacement Cost THB 695 M THB 677.50 M
Income THB 2,699 M THB 2,534 M
Remark: Details of assumption is presented at Appendix 6: Valuation by Independent
Appraisers
The IFA is of the opinion that the replacement cost approach is not appropriate because this
approach does not concern the ability to generate future cash flows of the assets whereas the income
approach is appropriate because this approach consider the ability to generate future revenue of the assets
based on the summary of Draft Sublease Agreement. However, both appraisers’ assumptions are different
from the IFA such as rental growth rate and discount rate. The appraisers apply the range of 1.9% - 2.11%
for rental growth rate and 9.5% for discount rate, whereas the IFA applies the rate of 1.5% and 9.97%,
respectively. Therefore, the IFA does not take into account the appraisal values for the fairness of the
Disposal of Assets Transaction.
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4.1.1.3 The Financial Projection by The IFA
The IFA has prepared a financial projection to evaluate the Disposal of Assets by considering the
present value of free cashflow of the assets under the Draft Sublease Agreement between the Company
and the Fund (See more details in 1.6.5 “Summary of the Draft Sublease Agreement” ).This is because
under the Disposal of Assets Transaction the Company agrees to rent only Customer Center Building, and
to rent equipment but not including high technology equipment which is required to provide the could
solution services and internet access services.
The IFA has estimated the free cash flow of INET-IDC3 Project Phase 1 (assets under the Draft
Sublease Agreement, which not including high technology equipment) and then discount such free cash
flow by weighted average cost of capital (WACC) of the Company to determine the present value of the
assets’ free cash flow.
The Main Assumptions Used in the Financial Projection are as Follows:
Assumption Detail
Projection Period From 30 June 2018 to 31 December 2045, totaling 26.5 years based on the Land Lease
Agreement between the Company and SCG
Date of Fund
Establishment 30 June 2019
Ability to generate revenue under the Draft Sublease Agreement (not including high technology equipment)
Rack Rental Revenue
• Number of racks: 492 racks based on the summary of Draft Sublease Agreement
• Rack rental rate: THB 36,000 / rack / month based on the summary of Draft Sublease
Agreement, assessed by Merlin's Solutions International Company Limited which
comparable to the market price
• Rack rental growthrate: 1.5% / year based on the summary of Draft Sublease
Agreement
Customer Center Rental
Revenue
• Rental Rate: THB 0.32 M / Month based on summary of Draft Sublease Agreement
• Rental Rate Growth: 3% / Year based on summary of Draft Sublease Agreement
Revenue from Electricity
Charge
• Charge rate for electricity: 30% of the electricity charge charged by the PEA based on
the summary of Draft Operating Agreement
• Variable Electricity Charge: 1,723 units / rack / month based on actual historical
expense from the power bill filed by PEA for the month from January 2017 to July
2018
• Fixed Electricity Charge: 150,240 units / month based on actual historical expense from
the electricity bill filed by PEA for the month of January 2017
• Electricity Charge: THB 3.55 / unit based on average electricity sales price of PEA from
2008 to 2017
• Electricity Charge Growth Rate: 2.25% / year based on changing price rate of average
electricity sales price of PEA from 2008 to 2017
Expenses
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Assumption Detail
Substation Rental Expense
• Rental Expense : THB 1 M / year based on summary of the Draft Building Lease
Agreement
• Rental Growth rate : 2.5% / year based on summary of the Draft Building Lease
Agreement
Capital Expenditures
Based on Technical appraisal report by Merlin’s Solutions International Co., Ltd. estimated
from building
and equipment replacement value of INET-IDC3 phase 1 as follows:
• Year 2026: THB 3.14 M
• Year 2031: THB 139.08 M
• Year 2036: THB 18.46 M
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Discount Rate
The IFA used the weighted average cost of capital (WACC) as a discount rate to determine the
present value of free cash flow. The IFA calculates WACC by weighted average of the cost of interest-bearing
debt (Kd) and the cost of equity (Ke) are as follows.
WACC = Ke*E/(D+E) + Kd*(1-T)*D/(D+E)
Ke = Cost of equity
Kd = Cost of interest-bearing debt
T = Corporate income tax rate
E = Equity
D = Interest-bearing debt
The cost of capital (Ke) is derived from the Capital Asset Pricing Model (CAPM).
Ke = Rf + β(Rm – Rf)
Whereby
Risk Free Rate (Rf) is risk-free rate based on data of 30-year Thai government bond yield
as of 21 December 2018 which is the return from long-term investment eqivalent to the
financial projection period (source: The Thai Bond Market Association).
Beta (β) is a market risk measurement of the stock which is acoefficient of variation
between changes of SET Index and the Company’s stock price 3-year period as of 21
December 2018 (source: Bloomberg) because there was acontinuous trading volume.
Market Return (Rm) is the average rate of return on investment in the SET over the past
30 years until 30 November 2018 which is the return from long-term investment eqivalent
to the financial projection period (source: SET).
Detail of factors, assumptions and discount rate can be summarized as follows.
Factor Assumption
Risk free rate on government bond (Rf) 3.30%
Rate of return on investment in the SET (Rm) 13.11%
Market-based risk indicator of stock price (Beta) 1.00
Cost of equity (Ke) 13.42%
Cost of debt (Kd) 4.70%
Corporate Income Tax (T) 20.00%
Target equity to total assets ratio (We) /1 64.00%
Target debt to total assets ratio (Wd) /1 36.00%
WACC 9.97%
Remark : /1 The capital structure is based on the Company's target capital structure which will take
patial cash received from the entering into the Transaction to repay long-term debt.
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From the above assumptions, value of cash inflow that the Company will receive from the Long
Term Lease Transactions (between THB 2,400 – 2,850 M. depends on the final offering price of the Fund's
investment units determined by the method of surveying the demand for investment units of institutional
investors (Book Building) and depends on many factors such as the conditions of the capital market at that
time) is greater than the fair value of the assets of THB 2,248.59 M. Thus, the NPV form entering into the
Long Term Lease Transaction is positive, in the range between THB 151.41 – 601.41 M. Thus, the IFA is of
the opinion that entering into the Long Term Lease Transaction with the Fund is appropriate.
Sensitivity Analysis
The IFA has conducted a sensitivity analysis of the fair value of the assets by changing 2
assumptions, which are changing in Rack rental growth rate and growth rate of electricity charge referred
from summary of the Draft Sublease Agreement which are not exceeding 3.5% and not less than 1.5% per
year as follows:
Unit:
THB M
Rack Rental Growth Rate
Base Case (1.50%) 3.50%
Grow
th R
ate
of E
lect
ricity
Cha
rge
1.50
%
2,238.26 2,662.81
Base
Cas
e
2,248.59 2,673.13
3.50
%
2,268.27 2,692.81
The result of the sensitivity analysis by changing in Rack rental growth rate and the growth rate of
electricity charge will make the fair value for the Long Term Lease Transaction with the INET Infrastructure
Fund will be in the range between THB 2,238.26 – 2,692.81 M.
4.1.2 Fair value of the Acquisition of Assets Transaction
Operating Sublease Transaction
The IFA has considered the appropriateness of the Operating Sublease Transactions in 2 approaches
as follows:
1) Book Value Approach
2) The Financial Projection by The IFA
4.1.2.1 Book Value Appraoch
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To evaluate the book value of assets that the Company and the Fund will enter into the operating
sublease agreement, the IFA referred to the book value of buildings (with component parts) of the INET-IDC3
Project Phase 1 (the data center building, the utility building and connecting path way and customer center
building) and lease equipment related to Data Center services but not including high technology equipment.
The book value stated in the financial statements of the Company as at 30 September 2018 showed below:
No Transaction Assets Approximated Book Value as at
30 September 2018 (Million Baht)
1. Buildings (with
component parts) and
equipment for providing
service
(1) Data Center Building 214.45
(2) Utility Building
(3) Customer Center Building
(4) Other Related Civil Work which are
assembly work for the building structures or
project areas such as construction
preparation etc.
(5) Racks 5.97
(6) Electricity System 520.9
(7) Cooling System
(8) Fire Prevention System
(9) Water Leaks Detector System
(10) Fuel Supply System
(11) Network Cabling System such as
ethernet switch, emergency exit and
telephone and data system
(12) Other Related System such as
ethernet switch, emergency exit and
telephone and data system
(13) Security System 17.17
Total 758.49
The Asset value which the Company and the Fund will enter into the Sublease Agreement
evaluated by Book Value Approach is THB 758.49 M.
4.1.2.2 The Financial Projection by The IFA
The IFA has prepared a financial projection to evaluate the Acquisition of Assets for entering into
the Operating Sublease Transaction with the Fund. The IFA estimated cash outflow under the Sublease
Agreement and adjusted with cash inflow and outflow from entering into the transaction and then discount
the cash flow by weighted average cost of capital (WACC) of the Company to determine the present value
of net cash outflow.
The Main Assumptions Used in the Financial Projection are as Follows:
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Assumption Description
Projection Period From 30 June 2018 to 31 December 2045, totaling 26.5 years based on the Land Lease Agreement
between the Company and SCG
Date of Establishment 30 June 2019
Revenue that the Company received from the Fund
Rental Revenue from
Reserved Electricity
Generator Station
• Rental Revenue : THB 1 M / year based on summary of Draft Building Lease Agreement
• Rental increased rate : 2.5% / year based on summary of Draft Building Lease Agreement
Expenses that the Company paid to the Fund
Rental of Rack
• Number of racks: 492 racks based on summary of Draft Sublease Agreement
• Rack rental rate: THB 36,000 / rack / month based on summary of Draft Sublease Agreement, assessed
by Merlin's Solutions International Company Limited which comparable to the market price
• Rack rental growthrate: 1.5% / year based on summary of Draft Sublease Agreement
Rental of Customer
Center
• Rental Rate: THB 0.32 M / Month based on summary of the Draft Sublease Agreement
• Rental Rate Growth: 3% / Year based on summary of the Draft Sublease Agreement
Electricity Charge
• Charge rate for electricity: 30% of the electricity charge charged by the PEA based on summary of
the Draft Sublease Agreement
• Variable Electricity Charge: 1,723 units / Rack / month based on actual historical expense from the
power bill filed by PEA for the month from January 2017 to July 2018
• Fixed Electricity Charge: 150,240 units / month based on actual historical expense from the
electricity bill filed by PEA for the month of January 2017
• Electricity charge : THB 3.55 / unit based on average electricity sales price of PEA from 2008 to 2017
• Electricity charge increased rate : 2.25% / year based on changing price rate of average electricity
sales price of PEA from 2008 to 2017
Adjustment from cash inflow and outflow from entering into the transaction
Additive : Capital
Expenditures
Because the Fund is obliged to pay Capital Expenditures, so the Capital Expenditures have to be additive.
Based on Technical appraisal report by Merlin’s Solutions International Co., Ltd. estimated from building
and equipment replacement value of INET-IDC3 phase 1 as follows:
• Year 2026: THB 3.14 M
• Year 2031: THB 139.08 M
• Year 2036: THB 18.46 M
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Discount Rate
The IFA discounted the cash flow by weighted average cost of capital (WACC) of the Company as
a discount rate to determine the present value of cash outflow (more detail of discount rate in 4.1.1.3 “The
Financial Projection by the IFA”).
Detail of factors, assumption and discount rate can be summarized as follows.
Factor Assumption
Risk free rate on government bond (Rf) 3.30%
Rate of return on investment in the SET (Rm) 13.11%
Market-based risk indicator of stock price (Beta) 1.00
Cost of equity (Ke) 13.42%
Cost of debt (Kd) 4.70%
Corporate Income Tax (T) 20.00%
Target equity to total assets ratio (We) /1 64.00%
Target debt to total assets ratio (Wd) /1 36.00%
WACC 9.97%
Remark : /1 The capital structure is based on the Company's target which will take patial income from entering
into the Transaction to repay long-term debt.
From the above assumptions, the IFA has calculated the present value of net cash outflow of the
Company according to the Operating Sublease Transaction equals to THB 2,248.59 M (See more details in
Appendix 4 "Financial projection of Operating Sublease Transaction"). The value of the Long Term Lease
Transaction depends on the final offering price of the Fund’s investment units which is determined by the
book building and other factors, such as the capital market condition at that time.
In this regard, the IFA does not compare the present value of free cashflow of the Company
according to the Operating Sublease Transaction of THB 2,248.59 M with the transaction size of the
Operating Sublease Transaction of THB 2,274 – 7,666 M because such value was calculated from rental fee
of the Operating Sublease Transaction with period of approximately 9 years including the renewal of the
agreement but not exceeding 31 December 2045 or approximately 26 years under the Sublease Agreement
without calculating the present value.
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Sensitivity Analysis
The IFA has conducted a sensitivity analysis of the present value of the net cash outflow of the
Company from the Operating Sublease Transactionby changing 2 assumptions, which are changing in growth
rate of rack rental fee and electricity charge according to summary the Draft Sublease Agreement. The
growth rate will not exceed 3.5% and not less than 1.5% per year as follows:
Unit: THB M Growth rate of rack rental fee
Base Case (1.50%) 3.50%
Grow
th R
ate
of E
lect
ricity
Char
ge
1.50
%
2,238.26 2,662.81 Ba
se C
ase
2,248.59 2,673.13
3.50
%
2,268.27 2,692.81
The result of the sensitivity analysis by changing in the growth rates of rental fee and the growth
rate of electricity charge will make the present value of the cash outflow for the Opertaing Sublease
Transaction with the Fund between THB 2,238.26 – 2,692.81 M.
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Estimated Assets’ Profit
The IFA calculated present value of profit from INET-IDC3 phase 1 throughout the sublease period
of 26.5 years according to entering into the Sublease Agreement with the Fund. The estimation based on
the Company’s historical performance which was presented in the Company’s separated financial
statement including income statement and other comprehensive income as of 31 December 2017 and the
comprehensive income for the 9 months ended 30 September 2018. Such period reflects full capacity
performance of INET-IDC1 and INET-IDC2.
The Company’s historical core service revenue is from INET-IDC1, INET-IDC2, and INET-IDC3 phase
1 from January 2017 – September 2018 because the data center business is the core service revenue of
the Company including Cloud Solution Service, Internet Access, Co-Location Service, and EDC Network Pool
and other service incomes deducted by cost of service (salary, circuits rental fee, utility, insurance fee,
service contract fee, sales promotion and others) and selling and administrative expense to calculated
current profit per rack then applies such profit to forecast future performance of INET-IDC3.
In this regard, the IFA forecasted the future performance based on historical performance only with
conservative approach. However, it is possible that the Company will operate more value-added service
and/or more profit than the estimation. (detail of business plan shown in the introduction)
The estimated of the assets’ profit after entering into the Operating Sublease Transaction is
summarized as follows:
Item Amount (THB)
Service revenue/1 2,079,730,535
Cost of service (1,244,825,775)
Gross profit from service 834,904,760
Selling expense (189,893,259)
Administrative expense (43,030,650)
Profit before interest, tax, depreciation, and amortization 601,980,851
Referred number of Rack (Rack)/2 605
Referred profit / rack / month 47,376
No. of rack of INET-IDC3 phase 1 (Rack) /3 432
Projection period (year)/4 26.5
Profit growth (% from the Thai inflation) Refer to the IMF
Discount rate (%)/5 9.97
Present value of the profit from the assets /6 2,503,407,200
Remark: /1 Service revenues are Cloud Solution Service, Internet Access Service, Co-Location Service, EDC
Network Pool and others from 1 January 2017 – 30 September 2018
/2 Referred weighted average (after rounding) number of racks installed and serve to Cloud and Co-
Location customers (not including racks for the system) from 1 January 2017 – 30 September
2018 of INET-IDC1, INET-IDC2, INET-IDC3 phase 1
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88
/3 The rack occupancy rate at the end of 2019 and 2020 is set at 95% and 100% respectively. As
referred from the Company’s projection, the Company will find new customers to INET-IDC3 at
full occupancy within 2020 (as of 9 December 2018, there were 239 racks to serve Cloud and Co-
Location customers in INET-IDC3)
/4 See more details in 1.6.5 “Summary of the Draft Sublease Agreement”
/5 See more details in 4.1.1.3. “The Financial Projection by the IFA”
/6 The value after income tax with the tax rate 20%
Source: 1) Income statement and comprehensive income statement for the year ended 31 December 2017
2) Comprehensive income statement for the 9 months ended 30 September 2018
3) Information from the management interview
4) Number of racks as of 31 December 2017 from the Company
5) Audit Lead Sheet from the Company
From the financial projection by the IFA, the present value of the profit from the assets after
entering into the Operating Sublease Transaction for 26.5 years equals to THB 2,503.41 M which is more
than the net present value of cash outflow throughout the projection period of THB 2,248.59 M and cause
the net present value of the Operating Sublease Transaction to be positive of THB 254.82 M. Thus, the IFA
is of the opinion that entering into the Long Term Lease Transaction with the Fund is appropriate.
Opinions of the Independent Financial Advisor
89
4.1.3 Fair Value of the Acquisition of Assets Transaction
The Units Subscription Transaction
The IFA has considered the appropriateness of the Units Subscription Transaction by the financial
projection by the IFA as follows:
4.1.3.1 Financial Projection by the IFA
The IFA has prepared a financial projection to appraise the Units Subscription Transaction of the
Fund, the IFA uses the Discounted Cash Flow Approach (DCF), which is an approach to consider future cash
flow generation.
The IFA has estimated the capability to generate free cash flow of the Fund then discounted by
the weighted average cost of capital (WACC) of the Fund to consider the present value of free cash flow.
The result is the fair value of the transaction.
The Main Assumptions Used in the Financial Projection are as Follows:
Assumption Description
Projection Period From 30 June 2018 to 31 December 2045, totaling 26.5 years based on the Land Lease Agreement
between the Company and SCG
Date of Establishment 30 June 2019
Revenue
Rental of Rack
• Number of racks: 492 racks based on the summary of Draft Sublease Agreement
• Rack rental rate: THB 36,000 / rack / month based on the summary of Draft Sublease Agreement,
assessed by Merlin's Solutions International Company Limited which comparable to the market price
• Rack rental growthrate: 1.5% / year based on the summary of the Draft Sublease Agreement
Rental of Interior area
of Customer Center
• Rental Rate: THB 0.32 M / Month based on summary of the Draft Sublease Agreement
• Rental Rate Growth: 3% / Year based on summary of the Draft Sublease Agreement
Electricity Charge
• Charge rate for electricity: 30% of the electricity charge charged by the PEA based on summary of
the Draft Sublease Agreement
• Variable Electricity Charge: 1,723 ft. / Rack / month based on actual historical expense from the
power bill filed by PEA for the month from January 2017 to July 2018
• Fixed Electricity Charge: 150,240 ft. / month based on actual historical expense from the electricity
bill filed by PEA for the month of January 2017
• Electricity charge : THB 3.55 / unit based on average electricity sales price of PEA from 2008 to
2017
• Electricity charge increased rate : 2.25% / year based on changing price rate of average electricity
sales price of PEA from 2008 to 2017
Expense of assets
Rental expense from
Reserved Electricity
Generator Station
• Rental Revenue : THB 1 M / year based on the summary of Draft Building Lease Agreement
• Rental increased rate : 2.5% / year based on the summary of Draft Building Lease Agreement
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90
Assumption Description
Capital Expenditures Estimating based on Technical appraisal report by Merlin’s Solutions International Co., Ltd.
Expense of the Fund
Professional Fee
• Professional Fee such as appraisal fee, audit fee, and technical advisor fee: THB 3 M / year
• Growth rate of Professional Fee : Increase in the line with inflation forecast of Thailand based on
IMF
Annual Unit Fee
• Fee Rate
0.035% of registered capital not exceeded THB 200 M
0.030% of registered capital exceeded THB 200 M but not exceeded THB 1,000 M
0.025% of registered capital exceeded THB 1,000 M but not exceeded THB 5,000 M
0.020% of registered capital exceeded THB 5,000 M but not exceeded THB 10,000 M
0.010% of of registered capital exceeded THB 10,000 M
• However, the minimum fee rate must not less than THB 50,000 and not exceeded THB 3 M based
on The Stock Exchange of Thailand
Management Fee and
Fund Supervisors Fee
Management Fee and Fund Supervisors Fee : not exceeded 0.50% of total asset based on
comparable funds and/or trusts since the Fund Is still in the process of preparing to apply for
approval with the SEC
Custodians Fee Fee Rate : 0.038% of registered capital which the minimum fee must not less than THB 430,000 based
on The Thailand Securities Depository Co., Ltd..
Others Expense
• Other Expenses : THB 2 M / year consisted of unitholder’s meeting expense, advertising expense,
printing expense, and expense of obtaining a new tenant based on comparable funds and/or trusts
since the Fund Is still in the process of preparing to apply for approval with the SEC
• Growth Rate of Other Expenses : Increase in line with inflation forecast of Thailand based on IMF
(See more details in Appendix 1 “Economic and Industry Overview”
Dividend Dividend Payment : not less than 90% of adjusted net profit based on the SEC
Investment Portion 33.33% according to the Company information
Opinions of the Independent Financial Advisor
91
Discount Rate
The IFA discounted the cash flow by weighted average cost of capital (WACC) of the Fund as a
discount rate to determine the present value of cashflow to the investors. The IFA calculates WACC by
weighted average of the cost of interest-bearing debt (Kd) and the cost of equity (Ke) are as follows.
WACC = Ke*E/(D+E) + Kd*(1-T)*D/(D+E)
Ke = Cost of equity
Kd = Cost of interest-bearing debt
T = Corporate income tax rate
E = Equity
D = interest-bearing debt
The cost of capital (Ke) is derived from the Capital Asset Pricing Model (CAPM).
Ke = Rf + β(Rm – Rf)
Whereby
Risk Free Rate (Rf) is risk-free rate based on return on Thai government bond the 30-year
as of 21 December 2018
Beta (β) is a market risk measurement of the fund which is a coefficient of variation
between changes of SET Index and the peers’ unit price.
The IFA is referring to the past 3 years Levered Beta until 21 December 2018 of the peers
which the core business structure are similar to the Fund (Source: Bloomberg) as shown
in the table below.
Symbol Fund
DIF Digital Telecommunication Infrastructure Fund
JASIF Jasmine Broadband Internet Infrastructure Fund
The IFA has adjusted the affect of debt-to-equity ratio to calculate the unlevered beta of
the peer fund by the following equation:
Unlevered Beta = Levered Beta / (1+(1-tax) x (D/E) Peers)
Then calculate the levered beta of the Fund by using the D/E of the Fund itself to the
following equation:
Levered Beta = Unlevered Beta x (1+(1-tax) x (D/E) the Fund)
The beta is equal to 0.28
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Market Return (Rm) is the average rate of return on investment in the SET over the past
30 years until 30 November 2018.
Detail of factors, assumptions and discount rate can be summarized as follows.
Factor Assumption
Risk free rate on government bond (Rf) 3.30%
Rate of return on investment in the SET (Rm) 13.11%
Market-based risk indicator of the Fund price (Beta) 0.27
Cost of equity (Ke) 5.95%
Cost of debt (Kd) 0.00 % (no loan)
Target equity to total assets ratio (We) /1 100%
Target debt to total assets ratio (Wd) /1 0.00 % (no loan)
WACC 5.95%
Remark : /1 The capital structure is based on the Company's target.
Based on the above assumptions, The IFA calculates the present value of the expected dividend
from the investment units of the Fund is THB 978.52 M which is higher than the size of the invesement
(between THB 800 - 950 M depends on the final offering price of the Fund's investment units determined
by the method of surveying the demand for investment units of institutional investors (Book Building) and
depends on many factors such as the conditions of the capital market at that time). This makes net present
value of the Units Subscription Transaction positive by between THB 28.52 – 178.52 M. Thus, the IFA is of
the opinion that entering into the Units Subscription Transaction with the Fund is appropriate.
Opinions of the Independent Financial Advisor
93
Sensitivity Analysis
The IFA has conducted a sensitivity analysis of the present value of expected dividends from
investment units subscription of the Fund by changing 2 assumptions, which are changing in growth rates
of rental fee and the growth rate of electricity charge based on the Draft Sublease Agreement as follows:
Unit: THB M Growth rate of rental fee
Base Case 3.50%
Grow
th R
ate
of E
lect
ricity
Char
ge
1.50
%
972.97 1,209.25
Base
Cas
e 978.52 1,214.80
3.50
%
989.27 1,225.55
The results of the sensitivity analysis by changing the growth rates of rental fee and the growth rate
of electricity charge will make the present value of expected dividends from investment units subscription
of INET Infrastructure fund at between THB 972.97 – 1,225.55 M.
4.1.4. Cash inflow and cash outflow from the Transaction Documents and expenses that may
arise from entering to the Transaction
The Long Term Lease Transaction, the Undertaking Transaction, the Operating Sublease Transaction
and the Units Subscription Transaction are related agenda items and conditional upon each other. The
condition in the Transaction Documents require the Company to be responsible for other related expenses
including the expenses that may arise from the risk of entering to the Transaction which may affect the net
present value of the disposal of assets (the Long Term Lease Transaction) and the acquisition of assets (the
Operating Sublease Transaction and the Units Subscription Transaction).
Opinions of the Independent Financial Advisor
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Main assumptions for the projection are as follows:
Assumptions Details
Cash inflows and Cash Outflows According to the Conditions in the Transaction Documents
Cash in from land rental in
advance
Before entering into the transaction, the Company is obliged to pay annual land rental to SCG
as follows:
• Rental area: 19.55 rai based on Land Lease Agreement between SCG and INET
• Rental rate: THB 55,125 / rai based on Land Lease Agreement
• Rental increase rate: 5% every 3 years based on Land Lease Agreement
After entering into the transaction, the Company has to pay all rental fee in advance for THB
36.30 M, the Company is not obliged annual land rental as mentioned above. Thus, the annual
land rental has to be additive.
Cash in from Advanced
Taxes Redemption
According to the Supplemental Memorandum of Land Lease Agreement, the Company agrees
to be liable for taxes incurred to the lessor (payment in cash). However, the Company can
redeem the paid cash every 3 years if the agreement remained.
• Total amount to be redeemed: THB 9.24 M
• Redemption period: every 3 year until end of projection.
Cash in from Rental
Guarantee
The Company will receive the rental deposit back from the Fund based on summary of the Draft
Sublease Agreement (under the assumption of 1.5% Rack rental growth rate) as follows:
• Year 2031: THB 118,494,983
• Year 2037: THB 137,938,668
• Year 2045: THB 158,214,918
Cash out from land rental
in advance
After entering into the transaction, the Company must pay land rental in advance: THB 36.30 M
based on the Supplemental Memorandum of Land Lease Agreement
Cash out from Advanced
Taxes Redemption
According to the Addendum to Land Lease Agreement, the Company agrees to be liable for
taxes incurred to the lessor (payment in cash) as a sum of THB 9.24 M based on the the
Supplemental Memorandum of Land Lease Agreement
Cash out from Rental
Guarantee
According to summary of the Draft Sublease Agreement, the Company has to deposit the rental
guarantee equals to first 6-month sublease cost of the customer center building and rack and
deposit more in every 4th and 7th calendar year as follows:
• Rental guarantee of customer center THB 1,920,000
• Rental guarantee of rack THB 106,272,000
• From the start of the 4th calendar year, the Company shall deposit more rental guarantee
so that total rental guarantee is equal to sublease cost for first 6 months of the 4th
calendar year
• From the start of the 7th calendar year, the Company shall deposit more rental guarantee
so that total rental guarantee is equal to sublease cost for first 6 months of the 7th
calendar year
Cash out from Additional
Investment in Rack
To entering into the Long Term Lease Transaction, the Company needs to invest in additional
250 Racks as follows:
• Current Total Rack: 262 Racks based on the Company information.
Opinions of the Independent Financial Advisor
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Assumptions Details
• Total Rack to be installed before entering into the Long Term Lease Transaction: 492 Racks
based on summary of the Draft Sublease Agreement.
• Rack Value: THB 28,919 / Rack based on Technical Appraisal Report by Merlin’s Solutions
International Co., Ltd.
Cash out from Fund setup
cost
• Professional fee, such as financial advisor fee and legal advisor fee: THB 60 M pay in year
2018 based on projection by the Company
• Advertising Expense: THB 3 M pay in year 2018 based on projection by the Company
• Others Expense, such as leasehold registration fee and VAT: THB 4.62 M pay in year 2018
based on projection by the Company
Cash outflows from expenses that may arise from the transaction (Worst Case Scenario)
Cash out from Corporate
Income Tax Arising from
Profits from Selling Assets
• Transaction size: THB 2,400 – 2,850 M
• Assets book value: THB 758.49 M
• Projection period: 26.5 years
• Tax rate: 20%
Cash out from the Risk of
not Receive Vat Loan
Repayment
• Transaction size: THB 2,400 – 2,850 M
• Movable property proportion: 76% from the Company’s projection
• Tax rate: 7%
Cash out from the Risk that
the Company Tax Benefits
from the BOI be Canceled
Details in topic 2.3 “Risk from Entry into the Transaction of the Acquisition and Disposal of
Assets”
Opinions of the Independent Financial Advisor
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Summary of Present Value of Cash Inflows and Cash Outflows Follow the Conditions in the
Transaction Documents (Adjustments) and Present Value of Tax Burden and the Company’s Risks
that may Arise from Entering into the Transactions (Worst Case Scenario)
Present Value of Cash Inflows and Cash Outflows Following the Conditions in the Transaction Documents
(Adjustments)
List Transaction Size (THB M)
2,400 2,850
1) Cash in from land rental in advance/3 10.75 10.75
2) Cash in from Advanced Taxes Redemption/3 2.35 2.35
3) Cash in from Rental Guarantee/4 80.57 80.57
4) Cash out from land rental in advance/3 (36.30) (36.30)
5) Cash out from Advanced Taxes Redemption/3 (9.24) (9.24)
6) Cash out from Rental Guarantee/4 (184.27) (184.27)
7) Cash out from Additional Investment in Rack (6.65) (6.65)
8) Cash out from Fund setup cost (64.10) (69.80)
Total Net Present Value of Cash Inflows and Cash Outflows Follow the
Conditions in the Transaction Documents (Adjustments) (206.88) (212.58)
Present Value of Tax Burden and the Company’s Risks that may Arise from Entering into the
Transactions (Worst Case Scenario)
List
Transaction Size
(THB M)
2,400 2,850
1) Cash out from Corporate Income Tax Arising from Profits from Selling Assets (107.01) (136.34)
2) Cash out from the Risk of not Receive Vat Loan Repayment (127.72) (151.66)
3) Cash out from the Risk that the Company Tax Benefits from the BOI be
Canceled (22.86) (22.86)
Total Present Value of Tax Burden and the Company’s Risks that may
Arise from Entering into the Transactions (257.58) (310.86)
Opinions of the Independent Financial Advisor
97
4.2 Appropriateness of the Conditions Precedent of the Transaction
The Meeting of Board of Directors of the Company No. 1 1 /2018 dated 2 1 December 2018 has
determined the key terms of the transaction as follows:
4.2.1 The Disposal of Assets Transaction
The conditions precedent for the Long Term Lease Transaction shall be conditional upon:
1) the resolution of the Shareholders’ Meeting of the Company to approve the Long Term Lease
Transaction, the Undertaking Transaction and other relevant transactions including the entering
into the Long Term Lease Agreement, the Undertaking Agreement and other relevant
agreements with the Fund;
2) the Asset Management Company as the Fund Manager has been granted an approval for the
establishment and management of the Fund by the SEC;
3) the completion of offering of investment units to general investors and the Fund has received
sufficient amount of funds to enter into the Long Term Lease Transaction;
4) the completion of registration of the Fund from the SEC; and
5) the fulfillment of other conditions as specified in agreement for the Long Term Lease
Transaction and other relevant agreements.
4.2.2 The Acquisition of Assets Transaction
The conditions precedent for the Operating Sublease Transaction and the Units Subscription
Transaction shall be conditional upon:
1) the resolution from the Shareholders’ Meeting of the Company to approve the Long Term
Lease Transaction, the Operating Sublease Transaction, the Units Subscription Transaction and
other relevant transactions including the entry into the Operating Sublease Agreement and
other relevant agreements with the Fund;
2) the fulfillment of conditions as specified in Long Term Lease Agreement and/or other relevant
agreements
3) the fulfillment of conditions as specified in the Operating Sublease Agreement and/or other
relevant agreements (as the case maybe);
4) the Asset Management Company as the Fund Manager has been granted an approval for the
establishment and management of the Fund by the SEC;
5) the completion of offering of investment units to general investors and the Fund has received
sufficient amount of funds to enter into the Long Term Lease Transaction; and
Opinions of the Independent Financial Advisor
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6) the completion of registration of the Fund from the SEC.
The IFA opines that the above conditions are reasonable due to entering into the transaction, the
parties must enter to both acquisition and disposal of assets and the Company must invest in the Fund.
Moreover, the Transaction needs the resolution from the Shareholders’ Meeting of the Company which is
in accordance with the SET conditions to protect the shareholders’ interests.
Furthermore, the approval of acquisition and disposal of assets transaction, the contract and the
signing the document which is related to the Fund transaction, the Long Term Lease Transaction, the
Undertaking Transaction, the Operating Lease Transaction, the Units Subscription Transaction, and/or other
related transaction, including assign and delegate the authority related to the transaction, shall be deemed
to be related agenda iterms, and conditional upon each other. Therefore, if any of those agenda items is
not approved by the shareholders’ meeting, the other related agenda iterms will not be proposed to the
meeting for consideration and shall be deemed to be canceled.
Opinions of the Independent Financial Advisor
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Summary of the Opinions of the Independent Financial Advisor
Summary of the Opinions of the IFA on the Acquisition and Disposal of Assets in Connection with
the Entry into Transactions with the Infrastructure Fund for Information Technology Services
Infrastructure Business of Internet Thailand Public Company Limited
The IFA has considered the fair value on the Acquisition and Disposal of Assets in Connection with
the Entry into Transactions with the Infrastructure Fund for Information Technology Services Infrastructure
Business of Internet Thailand Public Company Limited by the book value approach and the discounted
cash flow approach (DCF). The fair value of the assets of the 3 transactions are summarized in the table
below:
1. Summary of The Disposal of Assets Transaction
1.1 Fair Value of The Disposal of Assets Transaction (The Long Term Lease Transaction)
Valuation Approach Fair Value of the Assets
(THB M)
Book Value Approach 758.49
Discounted Cash Flow Approach (DCF) by the IFA 2,248.59
The IFA is of the opinion that:
- The Book Value Approach is inappropriate because it considers the assets’ value at a point
in time without taking into account their potential to generate free cash flows in the future.
- The Discounted Cash Flow Approach is appropriate because it considers the long term lease
agreement, the operating sublease agreement and the operation plan of the fund manager
which reflects the potential of assets to generate revenue and free cash flows in the future.
Value of cash inflow that the Company will receive from the Long Term Lease Transactions
(between THB 2,400 – 2,850 M, depends on the final offering price of the Fund's investment units
determined by the method of surveying the demand for investment units of institutional investors (Book
Building) and depends on many factors such as the conditions of the capital market at that time) is greater
than the fair value of the assets appraised by the IFA of THB 2,248.59 M. This makes net present value of
the Long Term Lease Transaction positive by between THB 151.41 – 601.41 M. Thus, the IFA is of the
opinion that entering into the Long Term Lease Transaction with the Fund is appropriate.
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100
2. Summary of the Fairness of the Price of the Accquisition of Assets Transaction
2.1 Fair value of the Accquisition of Assets Transaction (The Operating Sublease Transaction)
Valuation Approach
Fair Value of the Sublease
Agreement
(THB M)
Book Value Approach 758.49
Discounted Cash Flow Approach (DCF) by the IFA 2,248.59
The IFA is of the opinion that:
- The Book Value Approach is inappropriate because it considers the assets’ value at a point
in time without taking into account their potential to generate free cash flows in the future.
- The Discounted Cash Flow Approach is appropriate because it considers the long term lease
agreement, the operating sublease agreement and the operation plan of the fund manager
which reflects the potential of assets to generate revenue and free cash flows in the future.
Based on the valuation by the IFA, the present value of net cash outflow throughout the operating
sublease period of 26.5 years equals to THB 2,248.59 M.
Moreover, the IFA has appraised the present value of the profit from the assets after entering into
the Operating Sublease Transaction for 26.5 years equals to THB 2,503.41 M which more than the present
value of the cash outflow throughout the projection period. This makes net present value of the Operating
Sublease Transaction positive by THB 254.82 M. Thus, the IFA is of the opinion that entering into the
Operating Sublease Transaction with the Fund is appropriate.
2.2 Fair value of the Accquisition of Assets Transaction (Units Subscription Transaction)
Valuation Approach
Fair Value of Units
Subscription Transaction
(THB M)
Discounted Cash Flow Approach (DCF) by the IFA 978.52
The IFA is of the opinion that:
- The Discounted Cash Flow Approach is appropriate because it considers the long term lease
agreement, the operating sublease agreement and the operation plan of the fund manager
which reflects the potential of assets to generate revenue and free cash flows in the future.
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Based on the valuation by the IFA, the present value of the expected dividend from the investment
units of the Fund is THB 978.52 M which is higher than the size of the invesement (between THB 800 - 950
M depends on the final offering price of the Fund's investment units determined by the method of surveying
the demand for investment units of institutional investors (Book Building) and depends on many factors
such as the conditions of the capital market at that time). This makes net present value of the Units
Subscription Transaction positive by between THB 28.52 – 178.52 M. Thus, the IFA is of the opinion that
entering into the Units Subscription Transaction with the Fund is appropriate.
Summary of the net present value of the Disposal of Assets Transaction and the Accquisition of
Assets Transaction
Summary of the net present value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction
List
Transaction Size
(THB M)
2,400 2,850
Net Present Value from the Long Term Lease Transaction /1 151.41 601.41
Net Present Value from the Operating Sublease Transaction /2 254.82 254.82
Net Present Value from the Unit Subscription Transaction 178.52 28.52
Total Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction before Adjustments 584.75 884.75
Present Value of Cash Inflows and Cash Outflows Follow the Conditions in the Transaction Documents
(Adjustments)
List
Transaction Size
(THB M)
2,400 2,850
1) Cash in from land rental in advance/3 10.75 10.75
2) Cash in from Advanced Taxes Redemption/3 2.35 2.35
3) Cash in from Rental Guarantee/4 80.57 80.57
4) Cash out from land rental in advance/3 (36.30) (36.30)
5) Cash out from Advanced Taxes Redemption/3 (9.24) (9.24)
6) Cash out from Rental Guarantee/4 (184.27) (184.27)
7) Cash out from Additional Investment in Rack (6.65) (6.65)
8) Cash out from Fund setup cost (64.10) (69.80)
Total Net Present Value of Cash Inflows and Cash Outflows Follow the
Conditions in the Transaction Documents (Adjustments) (206.88) (212.58)
Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction after Adjustments 377.87 672.17
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Source: /1 Summary of the Draft Building Lease Agreement and Summary of the Draft Equipment Lease Agreement /2 Summary of the Draft Sublease Agreement /3 Summary of the Supplemental Memorandum of Land Lease Agreement /4 Summary of the Draft Sublease Agreement /5 Summary of the Draft Operating Agreement
Therefore, the net present value of the Disposal of Assets Transaction and the Accquisition of Assets
Transaction after adjustments is between THB 377.87 - 672.17 M (Base Case Scenario). However, the IFA
has considered the tax burden and the Company’s risks which are 1) corporate income tax arising from
profits from selling assets, 2) the risk of not receive Vat Loan repayment, and 3) the Risk that the Company
Tax Benefits from the BOI be Canceled. The IFA then calculate the present value of tax burden and the
Company’s risks that may arise from entering into the transactions as follows
Present Value of Tax Burden and the Company’s Risks that may Arise from Entering into the
Transactions (Worst Case Scenario)
List
Transaction Size
(THB M)
2,400 2,850
1) Cash out from Corporate Income Tax Arising from Profits from Selling Assets (107.01) (136.34)
2) Cash out from the Risk of not Receive Vat Loan Repayment (127.72) (151.66)
3) Cash out from the Risk that the Company Tax Benefits from the BOI be
Canceled (22.86) (22.86)
Total Present Value of Tax Burden and the Company’s Risks that may Arise
from Entering into the Transactions (257.58) (310.86)
Summary of Net Present Value of the Disposal of Assets Transaction and
the Accquisition of Assets Transaction 120.28 361.30
The IFA has calculated the net present value of the Disposal of Assets Transaction and the Accquisition of
Assets Transaction from entering into the transactions which is between THB 275.58 – 310.86 M. Under the
assumption that all the cases of burden and risks occur, the the net present value of the Disposal of Assets
Transaction and the Accquisition of Assets Transaction from entering into the transactions will be decreased
to THB 120.28 – 361.30 M which still remain positive.
Therefore, the shareholders should approve the transaction for the acquisition and disposal of
assets of the Company. However, the decision as to vote in favor of the said transactions depends principally
on the shareholders’ individual judgement. The shareholders are recommended to additionally study the
information in all documents enclosed with the notice of the shareholders’ meeting so as to use judgement
and discretion for proper voting decision.
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Baker Tilly Corporate Advisory Services ( Thailand) Co. , Ltd. , as an independent financial advisor,
hereby certifies that it has prudently considered and analyzed all the obtained information, and its opinions
are impartial and just in compliance with the professional standards and principles, with due regard to the
shareholders’ benefits.
The opinions of the IFA are based on the publicly available data and documents, the information
from the analysis and future outlook of the industry, the information and documents obtained from the
Company, the Investment Analysis, the summary of valuation report of the independent appraiser and the
interview with the management of the Company. The IFA may not certify the accuracy or completeness of
the information obtained from the Company and from the interview with the management of the Company.
In addition, the IFA has provided the opinion to the Company’s shareholders regarding the Acquisition and
Disposal of Assets, based solely on the economic environment and the information prevailing at the time
of preparing this report. As such, any significant change in these factors could have an impact on the IFA’s
opinion.
Yours sincerely,
(Yundyong Thantiviramanon)
Senior Partner
Compliance Officer in the Financial Advisory Function
Baker Tilly Corporate Advisory Services (Thailand) Company Limited
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Appendix 1: Economic and Industry Overview
1. Economic Overview
Source: Bank of Thailand
Thai economy in the second quarter of 2018 expanded by 4.6%, compared to 4.9% in the previous
quarter. After seasonal adjustment, the economy in the second quarter grew by 1.0% from the first quarter
of 2018. There were many sectors expanded in the second quarter of 2018: Export value grew by 12.3%;
the private consumption expenditure and the total investment grew by 4.5% and 3.6%, respectively, and
agriculture sector expanded by 10.4%. Headline inflation averaged 1.3%, accelerated from 0.6% in the first
quarter of 2018, and current account surplus of 5.2% of GDP decreased from 11.6% of GDP in the first
quarter of 2018. The Office of the National Economic and Social Development Board (NESDB) expects the
Thai economy to grow in the range of 4.2% to 4.7% in 2018, with the following key supporting factors.
1. The improvement of the global economy which will further enhance growth of export and key
production sectors,
2. The favorable expansion of government consumption and public investment,
3. The more pronounced recovery of private investment, and
4. The improvement of household income conditions
All in all, it is expected that export value will increase by 10.0%, private consumption and total
investment will grow by 4.1% and 4.4%, respectively. The headline inflation is forecasted to be in the range
of 0.9% - 1.4% and the current account will record a surplus of 8.4% of GDP. (Source: The Office of the
National Economic and Social Development Board)
3.9%4.4% 4.2%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
-
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
(F)
2019
(F)
%
THB
Billio
n
Gross Domestic Product
GDP (THB Billion) % Growth Rate
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2. Inflation Rate
Source: International Monetary Fund
Headline inflation in the second quarter of 2018 was at average of 1.3%, accelerating from 0.6% in
the first quarter of 2018 following the expansion of both food and non-alcoholic beverages and non-food
and beverage categories. Core inflation was at an average of 0.8%, compared to 0.6% in the first quarter of
2018. In 2018, it is expected that the Headline inflation will be in the range of 0.7% - 1.7%, rising from 0.7%
in 2017 following the recovery of domestic demand and the increasing trend of crude oil cost in the world
market. (Source: Bureau of Macroeconomic Policy, Fiscal Policy Office)
3.3
3.8
3
2.21.9
-0.9
0.2
0.7
1.4
0.71.1
1.4
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F
Perc
enta
ge C
hang
e
Inflation Rate
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3. Policy Interest Rate
Source: Bank of Thailand
In the second quarter 2018, the policy rate was still set at 1.5% per annum, steadily after being
decreased since 2011 because the current monetary easing has helped prop up economic growth and
reinvigorate headline inflation. According to the results of the Monetary Policy Committee meeting. ("The
Board") on 19th September 2018, The Board decided to maintain the policy interest rate at 1.5% per annum
with an estimation that Thai economy is expected to continue expanding resulted from the gradual increase
of foreign effort and domestic demand (Source: Bank of Thailand)
2.75%
1.25%
2.00%
3.25%
2.75%
2.25%2.00%
1.50% 1.50% 1.50% 1.50%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2-2018
Policy Interest Rate
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4. Data Center Business, Co – Location Business, and Cloud Business
Data Center is a facility used to strore information, and electronic devices needed to access the
data such as servers and network devices. It is the center of services for organizations or business units that
want to present and / or access information via the internet. Due to the current high competition, businesses
must be able to communicate and transfer information quickly and accurately without limited access to
information. Currently, there are many data center providers. Organizations do not need to invest in their
own data centers which require high investment value and maintenance costs. As a result, high standard
data centers with data protection and ICT equipment become more demanding.
The demand of Data Center business is likely to expand in the present and in the future due to
the development of technology and access to the Internet. There are more audio and video transmissions.
In 2016, the market capitalization of data center business is USD 33.6 billion, and it is expected to grow to
USD 60 .8 billion in 2020 . The data usage via mobile phones (Smart Phone) for the financial services and
commerce will drive demand for data centers. Also, the private sectors has transformed its business model
from investing in their own data centers ( Enterprise Data Center) to using more co-location and cloud
services from the providers. The rate of co-location service selection in corporate customers accounted for
59% with higher growth rate than investing in internal data center that accounted for 31%. The co-location
service is an option with less initial investment and more convenient. Moreover, the data center is able to
provide services with safety equals to or higher than investing in internal data center and can expand faster.
In Asia Pacific and Thailand, the use of co-location and cloud services is becoming more acceptable with
more than 15% of the large enterprise and SMEs has turned to use such services. The Data Center market
between 2014 and 2022 in Asia Pacific and Thailand is expected to grow between 14.7% - 30%.
The supply of Data Center business in Thailand grew significantly by 180% between 2015 and 2017
with more than 30 service providers. The major service providers include CAT, CS Loxinfo, TCC Technologies,
Switch, NTT, True Corporation, and KIRZ. However, all space for delivering Data Center in Thailand is less
than 500,000 sq. ft. which is a low level in other parts of the region including Japan, China, South Korea,
Singapore and Hong Kong. It is expected to grow at an average of more than 8% per year between 2018 to
2022 for supporting demand from a rise of mobile phones (Smart Phones), using of social media and
functional application. Particularly, these service in Thailand and Indonesia has increased in using Data
Center from large enterprises to store and analyze data further. For the purpose that an investment in this
business will be consistent with the promotion of digital policies for the economy and society of the Thai
government. As a result, service providers in other countries are becoming more interested in investing in
Thailand.
(Source: Merlin’s, Investment Analysis, 4 September 2018)
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Global Data Center Growth Forecasts for the Year 2016 – 2021
(Source: Cisco Global Cloud Index, 2016 – 2021)
The above graph represents the global data center growth forecasts for the year 2016 – 2021
measured by the installed storage capacity in exabytes (“EB”). The total data center storage capacity is
estimated to grow nearly 4-fold from 663 EB in 2016 to 2.6 zettabyte (“ZB”) by 2021. Business application
will have the highest share of installed storage throughout the forecast, while social networking and media
streaming will have the fastest growth. The CAGR is 37% and 36%, respectively.
Tier and Tier Classification System for Data Center
Uptime Institute’s Tier Classification System for data center is approaching the two-decade mark.
Since its creation in the mid-1990s, the system has evolved from a shared industry terminology into the
global standard for third-party validation of data center critical infrastructure. The system was created to
effectively evaluate data center infrastructure in terms of a business requirements for system availability.
Furthermore, Tier enables company to align their data center infrastructure investment with business goals.
Uptime Institute is the only firm licensed to rate and certify designs, constructed facilities, and
ongoing operations. The tier certification provides assurances that there are no shortfalls or weak links
anywhere in the data center infrastructure divided into 3 types as follows:
1. Tier Certification of Design Documents (“TCDD”) provides an in-depth review of the 100%
design documents.
2. Tier Certification of Constructed Facility (“TCCF”) is an on-site verification of the installed
infrastructure.
3. Tier Certification of Operational Sustainability (“TCOS”) evaluates the presence and
effectiveness of management and operations.
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Tier is classified into 4 tiers as follows:
- Tier I: Basic Capacity Tier I data center provides dedicated site infrastructure to support information
technology beyond an office setting. Tier I infrastructure includes a dedicated space for IT systems; an
uninterruptible power supply (“UPS”) to filter power spikes, sags, and momentary outages; dedicated
cooling equipment that won’t get shut down at the end of normal office hours; and an engine generator
to protect IT functions from extended power outages.
- Tier II: Redundant Capacity Components Tier II facilities include redundant critical power and cooling
components to provide select maintenance opportunities and an increased margin of safety against IT
process disruptions that would result from site infrastructure equipment failures. The redundant
components include power and cooling equipment such as UPS modules, chillers, pumps, and engine
generators.
- Tier III: Concurrently Maintainable Tier III data center requires no shutdowns for equipment replacement
and maintenance. A redundant delivery path for power and cooling is added to the redundant critical
components of Tier II so that each and every component needed to support the IT processing
environment can be shut down and maintained without impact on the IT operation.
- Tier IV: Fault Tolerance Tier IV site infrastructure builds on Tier III, adding the concept of Fault Tolerance
to the site infrastructure topology. Fault Tolerance means that when individual equipment failures or
distribution path interruptions occur, the effects of the events are stopped short of the IT operations.
As refers to Uptime Institute, the companies in Thailand receiving the tier certification are as follows:
Company Name Data Center Name Data Center
Location Tier Certification
PTT Public Company Limited PTT Data Center, Phase 1 Chonburi
Tier IV Certification of Constructed
Facility
Tier IV Certification of Design
Documents
Genesis Data Center Company
Limited Genesis Data Center Samut Prakan
Tier III Certification of Constructed
Facility
Tier III Certification of Design
Documents
True Internet Data Center Company
Limited
TIDC Data Center BNA, Phases 1-
2
Bang Sao Thong,
Samut Prakan
Tier III Certification of Constructed
Facility
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Tier III Certification of Design
Documents
Internet Thailand Public Company
Limited INET-IDC3, Building 1, Phase 1-2
Kaeng Khoi,
Saraburi
Tier III Certification of Design
Documents
Electronic Government Agency
(“EGA”) EGA Data Center Bangkok
Tier III Certification of Design
Documents
(Source: Uptime Institute, TrueIDC)
Co – Location Business
Co – Location is a space rental service that includes renting out rack space to organizations or users
to install their servers or other network equipment. The purposes are to connect to the high – speed
internet which located in the standardized design data center. This ensures that the data will be kept safely
and used efficiently.
At present, cloud services have been growing at a very rapid pace because many companies
relocate their computer equipment from small in-house data center to the massive cloud locations. This
takes the burden of managing the hardware and securing the data into the hands of experts. In addition,
many individuals accept that it is worth to pay a small monthly or annually fee in order to bring massive
data into secured and backed – up space, whereas the users can access from anywhere. Therefore, co -
location business will continue to grow along with the growth of the cloud services.
Moreover, there is a projection that the co – location market share of the Asia Pacific will outgrow
the North America by 2020. China will continue driving most of the growth, combining with the emerging
markets (such as Malaysia and Thailand) and the mature markets (such as India, Japan, Singapore, and
Australia), as a result, the Asia Pacific will have more market share than the North America.
Benefits of the Co – Location
- The company can save cost of building their own co – location by renting instead.
- The company hires fewer technical staff as they don’t need to worry about running cables,
managing power, installing equipment, or any other technical processes.
- Exceptional reliability as the co – location is typically built with preparation for redundancy.
This includes backup power generators, security, multiple network connections, and much
more.
- The company can choose the location near their users.
- The company can predict their expenses because the sign contract last at least 1 year.
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- The company can scale up their business easily as the new servers or other equipment can
be added quickly.
(Source: Rack Solutions, Data Center Knowledge)
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Cloud Business
Cloud is a computer system supporting for a user’s working. There are network services, data storage, testing
the system or installing a database and use of software. The user can freely change the usage pattern and
access to information through the internet with limitless of time and place and supporting the expansion
of business. Therefore, users do not need to invest in IT equipment in the office instead of spending on
actual service to the service provider. For the purpose that the usage of cloud is connected to data center
of the service provider with having the standard and efficient information security and ICT equipment.
3 Types of Cloud Service are as Follows:
1. Infrastructure as a Service (IaaS)
Users will receive hardware and infrastructure services composing of network, database, and center
processing unit along with basic devices such as servers and operating system. These services will be
compatible with software and other applications including the use of configured virtual machine, so
the investment in expensive hardware is not necessary. However, software, application and system
management are responsible by the users. So, it is suitable for organizations having their own IT
personnel.
2. Platform as a Service (PaaS)
Users will receive hardware and infrastructure services similarly to IaaS, but more specifically with a
platform facilitating software development and applications enabling developers to work more
efficiently such as platform services for creating websites or other applications. Therefore, it is suitable
for organizations with less IT resources but still need a high development and use of technology
especially start-up company which is a small size but has high demand in software development for
business.
3. Software as a Service (SaaS)
Users will receive software services on Cloud system, where service providers will be responsible for
everything from network, server, hardware through a design of software development. As a result, users
do not need IT knowledge to maintain their own system. With only basic knowledge, users will be able
to apply to the business such as email services or other package software which can be accessed
through the internet promptly. Therefore, this type of cloud service is currently a part of many business
operations.
(Source: INET)
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The Differences of SaaS, PaaS and IaaS
(Source: Cisco Global Cloud Index, 2016 – 2021)
Cloud Business Growth Forecasts by Types for the Year 2016 – 2021
(Source: Cisco Global Cloud Index, 2016 – 2021)
The above graph represents the cloud business growth forecast for the year 2016 – 2021 which
divided into 3 types as stated above. The SaaS maintain majority share throughout the forecast period, and
by 2021 will have 75% share of all cloud workloads with 23% of CAGR. PaaS will have the equally CAGR
but will have only 9% share of all cloud workloads. The CAGR of all 3 types is at 22%.
3 Types of Cloud Systems are as Follows:
1. Private Cloud
The private cloud which organization creates for internal use only. The service provider and the users
can control and improve the system security on their own.
2. Public Cloud
The public cloud creates for everyone to access. The service provider externally manage through the
internet and the users are restricted to the control. The public cloud is growing faster than the private
cloud as the security system is strengthening. Therefore, many organizations have adopted the public
cloud.
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3. Hybrid Cloud
The combination of the private cloud and the public cloud which increases the flexibility in managing
the system more than using only one system.
Cloud Business Growth Forecasts by Systems for the Year 2016 – 2021
(ท่ีมา: Cisco Global Cloud Index, 2016 – 2021)
Benefits of Cloud Service
1. Reduce costs and unnecessary expenses
The service providers will invest almost all IT resources, ranging from hardware, infrastructure to 24-
hour system administration which costs are based on the actual usage. Therefore, it would cost higher
if the business invests in hardware and hires IT staff to maintain the system within the organization.
2. Support business expansion quickly
The cloud service can increase CPU capacity or expand information storage at any time for supporting
the expansion of business that needs more IT infrastructure with no hassle and time-consuming
procedures. Therefore, the company can spend time in developing other business functions.
3. Increase the convenience and promptness of work
No restrictions on location, time, or devices. It can be worked with only availability of the internet such
as Skype for business meetings, file sharing through the website or the usage of Smart VDI to access
data through other devices unlimitedly like notebook, tablet or even smartphone.
4. Access to advance technology
The service providers will upgrade and search for the modern technology to collaborate with Cloud
system and provide solutions that are always beneficial to each business.
5. Store data securely
Using cloud system with the service providers having Data Center approved by an international standard
ensures that data is stored under tight security, have policies to deal with emergencies, and certainly
not to be taken any advantage. (Source: INET)
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Appendix 2: Information of Internet Thailand Public Company
Limited
1. Background and General Information
Internet Thailand Public Company Limited (“INET” or the “Company”) is a one-stop service
provider of ICT infrastructure. The Company offers a comprehensive array of services, ranging from full
internet access services, internet data center services and supporting equipment, and all the way to cloud
computing services (cloud solutions provider).
The Company was established on 1 March 1995 under the name of “Internet Thailand Service
Center (ITSC)” that offered internet services for commercial purposes. On 14 May 1996, the Council of
Ministers passed a resolution for the incorporation of the Company. Accordingly, the Company was
incorporated on 13 May 1997. Moreover, on 9 October 1997, the Company received approval from
Communications Authority of Thailand (at that time) to act as the internet service provider for legal entities
or organizations, as well as natural persons, without limitation of time. On 28 August 2001, the Company
was converted into a public limited company and increased its registered capital according to the resolution
of the Council of Ministers, and was first traded in the Stock Exchange of Thailand on 14 November 2001.
Significant developments of the Company over the past 3 years are as follows:
Year Details
2015 - The Company was given some support from the Board of Investment of Thailand (BOI)
in the form of lowered import taxes for equipment and 8-year exemption for corporate
income tax for Cloud Solutions Service.
- The Company obtained ISO/IEC 20000-1:2011 certification for its standard service
management system over its cloud service and INET Information Data Center (INETIDC),
on top of the newly improved enterprise network connectivity at both Thai Summit
Tower and Bangkok Thai Tower.
- The Company also obtained ISO/IEC 27001:2013 for its information security management
over its cloud service and INET Information Data Center (INET-IDC) at both Thai Summit
Tower and Bangkok Thai Tower.
- The Company obtained a certification from Cloud Security Alliance – Security Trust &
Insurance Registry (CSA-STAR) that guarantees the Company’s cloud security. For Cloud
Service Providers, the certification signals the readiness and potential of the Company
to become a full Cloud Service Provider (CSP), given the fact that the Company has
made it to becoming the first CSP in Thailand to obtain the certification.
- The Company partnered with Synacor Inc. to deploy Email-as-a-Service (EaaS) using
Zimbra, the globally leading platform which allows the Company to provide its clients
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Year Details
in both private and public sectors with higher levels of efficiency and security of its
service.
- The Extraordinary General Meeting of shareholders has a resolution to pass on an INET-
IDC3 investment project of 750 million baht. It expected to be completed by the
beginning of 2017.
2016 - The Company has been promoted by the Board of Investment (BOI) for Data Center
Services, and awarded the incentives on the import duty exemption for the import of
equipment from abroad as well as the corporate income tax exemption for Data Center
Services for 8 years.
- The Company organized the Extraordinary General Meeting of Shareholders No. 1/2016
which passed the resolution to increase the registered capital of the Company by means
of allocating the newly issued ordinary shares in the amount of not exceeding
250,020,799 shares with the par value of THB 1 per share to the existing shareholders of
the Company in proportion to their shareholding (Right Offering: RO) at a price of THB 3
per share at the allocation rate of 1 existing share per 1 new ordinary share, the fractions
of which shall be disregarded.
- In July, the Company changed the registered capital from THB 333,333,333 to THB
512,541,598, and the paid-up capital from THB 250,020,799 to THB 500,041,575.
- The Company completed the construction INET Internet Data Center 3 ( INET-IDC3 )
preparing to fully launch Co-Location and Cloud Services in 2017.
2017 - The Company was certified with ISO 22301:2012 on business continuity management
systems under the scope of cloud services for both Thai Summit Tower and Bangkok
Thai Tower
- The Company officially launched its first phase of INET Data Center 3 (INET-IDC3) that
embraces international standards.
- The Company was certified with ISO 27799:2016 on information security management
under the scope of cloud services, according to the best practice in health informatics,
for both Thai Summit Tower and Bangkok Thai Tower.
- The Company was the first company in Thailand to have been certified with PCI DSS
under the scope of PCI Cloud IaaS that encompasses both Thai Summit Tower and
Bangkok Thai Tower. Such certification indeed enhances the Company’s standards in
providing security for financial transactions.
- The Company received standard certification from Uptime TIER III Certification of Design
Documents (TCDD) for INET Data Center 1.
Source: Form 56-1 of INET as of 2017
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2. Type of Business
The Company is a one-stop service provider of ICT infrastructure which can be divided into 3
businesses as follows:
2.1. Cloud Services
Cloud services are services that incorporate the use of computer resources and internet networks
under security standards that comply with ISO/IEC 27001 and ISO/IEC 20000. Cloud services can be classified
into three major categories, as follows:
• Infrastructure as a Service ( IaaS) is a service that provides IT infrastructure, such as server and
storage, which enables users to save IT-related costs and efficiently manage their revenues to
correspond to their expenses.
• Platform as a Service ( PaaS) is a platform-based service where users can run applications on
the system without having to invest in hardware and software.
• Software as a Service ( SaaS) is an application-based service, such as Email on Cloud and ERP
on Cloud.
For over six years, the Company has been offering cloud services in the form of public cloud for
enterprises under the security standards that have been certified with ISO/IEC 27001:2013 for services
provided by INET data centers (INET-IDC) at Thai Summit Tower , Bangkok Thai Tower and Kaeng Khoi District,
Saraburi Province. In addition, the Company has been certified with ISO/IEC 27001:2013 for Cloud Services
and ISO 2000-1:2011 for information management and Cloud Services at both Thai Summit Tower and
Bangkok Thai Tower. These standard certifications undoubtedly guarantee that customers will receive high-
quality services with optimal security. Moreover, the Company is the first company in Thailand to have
been certified with Cloud Security Alliance-Security, Trust & Assurance Registry (CSA-STAR), which is an
information security standard that is specific to cloud-based systems. Such certification substantiates the
Company’s readiness and competency in providing services, whereby the Company has acquired trust from
an increasing number of large organizations. In addition to the provision of services that are of high quality
and security, the Company also offers free trials to various organizations.
To provide Cloud meet the needs of customers more coverage. the Company has more platform
in Cloud Service as VMware , Microsoft Azure , Openstak platform. And additional certification ISO27799:2016
Information Security Management Scope of the Cloud Services at Thai Summit Tower and Bangkok Thai
Tower and PCI DSS, the first in the country under the scope of PCI Cloud IaaS encompasses Summit Building,
Thailand. Tower and Tower Bangkok Thailand to raise service standards, safety and financial transactions.
As part of the customer support electronic transactions in the Asian region, have used PCI Cloud IaaS
Thailand's affordable, fast and secure.
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In 2015, the Company was granted with investment privileges by the Board of Investment (BOI)
through the waiver of corporate income taxes on revenue from cloud services for a term of 8 years.
Alternatively, the Company has consistently developed new services on the cloud system to fulfill the
variety of needs of customers and their businesses, such as the development of local Microsoft Azure
services, HP Cloud, Email on Cloud, and virtual desktop services.
2.2 Internet Access
The Company provides internet access services for businesses with a variety of speeds. The service
areas cover all provinces in Thailand, which enable users to access nationwide internet networks. Internet
services can be connected through various means, including broadband internet networks and high-speed
leased lines, with the bandwidth that has been appropriately managed to correspond to the needs of
customers. Likewise, customers are able to check their usage status in real time. The Company also provides
technical support staff who are available 24 hours. Guaranteed high quality with a Service Level Agreement
(SLA) Uptime 99.90%.
In order to raise the level of service. It has improved service system. With the Software-defined
network systems to help manage a network that is one of the critical infrastructure of the company
automatically. Reduce the risk of human error and down. Result in the service being accepted, and select
run from the country's large businesses, enterprise organizations.
2.3 Co-Location Services
Internet Data Center (INET-IDC) is a center for providing services to agencies or business
organizations that intend to transmit data through internet/intranet, both public and private networks. INET
data centers offer an array of services, which include:
• Co-Location : a server depository service for organizations that seek for security and stability
by depositing their equipment at the provided area.
• Business Continuity Planning / Disaster Recovery Center : a data backup center for secured and
efficient database management through the provision of backup operating areas that
encompass internet and supporting equipment to support the operations of employees during
all emergency crises, such as flood and political crises.
Both Internet data centers of the Company, Thai Summit Tower, Bangkok Thai Tower and Saraburi
Province The design focuses on the 3 site can be connected to each other at high speed and with high
stability. With security standards and provides a convenient stop for 24 hours, are equipped with mutual
backup systems in full redundancy Dark Fiber Size 10 Gbps. Route 4 (Fiber Route) means that if any
emergency routes are missing. The Company’s customers range from the national leading organizations
such as securities firms that engage in online securities trading, popular website providers, and all the way
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to foreign users who want to disseminate information to users in Thailand. The center has 3 design concepts
and construction. Based on the global standards and highlight the subject of value and safe for both the
equipment, human and environment.
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3. Revenue Structure
Revenue from Cloud Services are accounted for approximately 31-43% of total revenues of the
Company during 2015-2017. In addition, the Company also has other sources of income, which are different
proportion in each year, as follows:
Details of Revenue
As of 31 Dec
2015
As of 31 Dec
2016
As of 31 Dec
2017
THB M % THB M % THB M %
Cloud Services 242.68 39 429.59 43 480.84 31
Internet Access Services 129.67 21 152.65 15 212.78 14
Co-Location Services 120.85 19 146.03 15 185.28 12
EDC Network Pool Services 22.84 4 27.82 3 34.90 2
Revenue from Other Services/1 93.93 15 101.42 10 74.65 5
Other Income/2 14.08 2 143.85 14 553.04 36
Total 624.04 100.00 1,001.36 100.00 1,541.49 100.00 Source: INET Form 56-1 as of 2017
Remarks: /1 Revenue from other services include software services, manage services, and sales of computer equipment or other related
equipment.
/2 Other income comprises of gains on classification of investment, gains on sales of available-for-sale securities, gains on sales
of investment in associates, interest income, and other income.
4. List of Shareholders
As of 31 August 2018, the Company had a registered capital of THB 500 .05 M with 500 ,041,575
ordinary shares (with a par value of THB 1 per share). List of shareholders and shareholding proportion
according to the Company’s shareholder register as at 31 August 2018 are as follows:
Shareholders No. of Shares %
1 National Science and Technology Development Agency 85,000,000 17.00
2 CAT Telecom Public Company Limited 80,000,000 16.00
3 TOT Public Company Limited 80,000,000 16.00
4 Mr. Boonkiert Eur-sudkich 24,285,000 4.86
5 Thai NVDR Company Limited 22,266,531 4.45
6 Mr. Surachai Prachasiitisak 7,650,000 1.53
7 Mrs. Patchara Nitivasin 6,766,500 1.35
8 Mr. Charoen Sasilaksananukul 4,201,100 0.84
9 Mr. Chao Kara 4,100,000 0.82
10 Mrs. Pichaya Poonlarp 3,900,000 0.78
11 Mr. Tanatip Pichedvanitchoke 3,946,400 0.76
12 Other 178,072,444 35.61
Total 500,041,575 100.00
Source: INET
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5. List of the Board of Directors
As of 23 August 2018, the Company’s Board of Directors consists of 12 members as follows:
No. Name Position
1 Prof. Dr. Pairash Thajchayapong Chairman of the Board of Directors
/ Chairman of Executive Committee
2 Mr. Sahas Treetipbut Director / Executive Committee Member
/ Nomination and Remuneration
Committee Member / CEO Performance
Review Committee Member
3 Ms. Narumol Wangsatorntanakun Independent Director
/ Chairman of Risk Management
Committee / Audit Committee Member
4 Prof. Emeritus Achara Chandrachai, Ph.D. Independent Director
/ Chairman of Audit Committee
5 Ms. Tanwadee Wongterarit Director / CEO Performance
Review Committee Member
6 Mrs. Morragot Kulatumyotin Director / Executive Committee Member
/ Risk Management Committee Member
/ Corporate Governance Committee member
7 Dr. Narong Sirilertworakul Director / Risk Management Committee Member
/ Corporate Governance Committee Member
8 Ms. Nilobon Tangprasit Independent Director / Chairman of
Nomination and Remuneration Committee
/ Audit Committee Member
/ Corporate Governance Committee Member
9 Mr. Aran Permpiboon Independent Director / Chairman of Nomination
and Remuneration Committee
/ Audit Committee Member
10 Mr. Aniruth Hiranraks Director
11 Mr. Morakot Thienmontree Director
12 Ms.Kunlaryarnee Kittisadtra Director
Source: INET
Opinions of the Independent Financial Advisor
122
6. List of the Management
As of 23 August 2018, the Company’s Management consists of 4 members as follows:
No. Name Position
1 Mrs. Morragot Kulatumyotin Managing Director
2 Mr. Wanchai Vach-shevadumrong Deputy Managing Director
3 Mr.Piyaret Saelee Senior Vice President
4 Mrs. Varaporn Pintola Senior Vice President
Source: INET
7. Management Structure as of 31 December 2017
Source: INET Annual Report 2017
Opinions of the Independent Financial Advisor
123
8. Financial Position Reports of Internet Thailand Public Company Limited
The report comprises of the Statement of Financial Position, Income Statement, and Statement of
Cash flow for the year ended 31 December 2015, 31 December 2016 and 31 December 2017. These were
audited by certified accountants and for the period ended 30 September 2018 which have been reviewed
by certified accountants.
Statement of Financial Position as at 31 December 2015, 31 December 2016, 31 December 2017 and
30 September 2018
(Unit: Thousand)
Items 2015
% of
Total
Assets
2016 % of Total
Assets 2017
% of
Total
Assets
30 Sep
2018
% of Total
Assets
Assets
Current assets
Cash and cash equivalents 8,355 0.71% 213,934 8.26% 44,368 1.05% 32,747 0.70%
Temporary investment 2,846 0.24% 215,772 8.34% 582,813 13.86% 184,087 3.91%
Trade and other receivables 110,427 9.33% 177,927 6.87% 239,479 5.69% 347,911 7.39%
Unbilled installments on completed work - - - - - - 374 0.01%
Inventories 1,559 0.13% 150 0.01% 22 0.00% 10 0.00%
Other current assets 18,733 1.58% 60,740 2.35% 121,613 2.89% 179,617 3.82%
Total current assets 141,920 11.99% 668,523 25.82% 988,295 23.50% 744,746 15.83%
Non-current assets
Restricted deposits at financial institutions 114,379 9.66% 66,708 2.58% 35,389 0.84% 102,196 2.17%
Withholding tax receivable 63,610 5.37% 71,055 2.74% 31,740 0.75% 26,551 0.56%
Investments in associated company 39,344 3.32% 52,550 2.03% 698 0.02% 9,890 0.21%
Investments in joint venture - 0.00% 2,461 0.10% 2,829 0.07% 991 0.02%
Deferred maintenance services for equipment - 0.00% 17,370 0.67% 36,479 0.87% 26,255 0.56%
Deposit of land - 0.00% - 0.00% 14,501 0.34% 14,501 0.31%
Property, plant and equipment 750,075 63.35% 1,611,552 62.25% 2,868,695 68.20% 3,453,797 73.41%
Intangible assets 49,539 4.18% 79,724 3.08% 202,817 4.82% 301,289 6.40%
Deferred tax assets 7,801 0.66% - 0.00% - 0.00% - 0.00%
Other non-current assets 17,285 1.46% 18,779 0.73% 24,795 0.59% 24,695 0.52%
Total non-current assets 1,042,034 88.01% 1,920,199 74.18% 3,217,943 76.50% 3,960,165 84.17%
Total assets 1,183,953 100.00% 2,588,722 100.00% 4,206,238 100.00% 4,704,911 100.00%
Liabilities and shareholders' equity
Current liabilities
Bank overdraft and short-term loans from financial
institutions 264,440 22.34% 445,755 17.22% 297,822 7.08% 483,613 10.28%
Trade and other current payables 123,684 10.45% 243,470 9.41% 328,805 7.82% 373,780 7.94%
Bonus employee accrued - 0.00% - 0.00% 104,407 2.48% 55,855 1.19%
Unearned service income 10,075 0.85% 8,303 0.32% 23,618 0.56% 12,491 0.27%
Current portion of liabilities under financial lease
agreements 94,001 7.94% 136,468 5.27% 186,943 4.44% 259,691 5.52%
Current portion of long-term loans 22,308 1.88% - 0.00% - 0.00% 138,873 2.95%
Income tax payable - 0.00% - 0.00% 2,359 0.06% 237 0.01%
Opinions of the Independent Financial Advisor
124
(Unit: Thousand)
Items 2015
% of
Total
Assets
2016 % of Total
Assets 2017
% of
Total
Assets
30 Sep
2018
% of Total
Assets
Other current liabilities 13,519 1.14% 31,756 1.23% 45,022 1.07% 41,935 0.89%
Total current liabilities 528,026 44.60% 865,753 33.44% 988,976 23.51% 1,366,475 29.04%
Non-current liabilities
Liabilities under financial lease agreements 119,050 10.06% 352,488 13.62% 512,697 12.19% 652,725 13.87%
Long-term loans from financial institutions 27,425 2.32% - 0.00% 692,249 16.46% 777,687 16.53%
Employee benefits obligation 7,485 0.63% 10,704 0.41% 13,075 0.31% 16,391 0.35%
Deferred tax liabilities - 0.00% 6,997 0.27% 102,715 2.44% 70,697 1.50%
Other liabilities 207 0.02% 207 0.01% 207 0.00% - 0.00%
Total non-current liabilities 154,167 13.02% 370,396 14.31% 1,320,943 31.40% 1,517,500 32.25%
Total liabilities 682,193 57.62% 1,236,149 47.75% 2,309,919 54.92% 2,883,975 61.30%
Shareholders' equity
Share capital
Registered share capital
500,041,575 ordinary shares, at THB 1 each - 0.00% - 0.00% 500,042 11.89% 500,042 10.63%
512,541,598 ordinary shares, at THB 1 each - 0.00% 512,542 19.80% - 0.00% - 0.00%
333,333,333 ordinary shares, at THB 1 each 333,333 28.15% - 0.00% - 0.00% - 0.00%
Issued and paid-up share capital
500,041,575 ordinary shares, at THB 1 each - 0.00% 500,042 19.32% 500,042 11.89% 500,042 10.63%
250,020,799 ordinary shares, at THB 1 each 250,021 21.12% - 0.00% - 0.00% - 0.00%
Premium on common shares 272,134 22.99% 770,206 29.75% 770,206 18.31% 770,206 16.37%
Deficit on business combination under common
control of associated company (19,208) -1.62% (11,759) -0.45% - 0.00% - 0.00%
Retained earnings
Appropriated Legal reserve 6,794 0.57% 10,921 0.42% 26,665 0.63% 26,665 0.57%
Unappropriated (3,766) -0.32% 72,848 2.81% 394,219 9.37% 447,600 9.51%
Other components of equity (4,215) -0.36% 10,247 0.40% 200,006 4.75% 64,876 1.38%
Total shareholders'equity of the parent company 501,760 42.38% 1,352,504 52.25% 1,891,138 44.96% 1,809,389 38.46%
Non-controlling interest - 0.00% 69 0.00% 5,181 0.12% 11,547 0.25%
Total shareholders' equity 501,760 42.38% 1,352,573 52.25% 1,896,319 45.08% 1,820,936 38.70%
Total liabilities and shareholders' equity 1,183,953 100.00% 2,588,722 100.00% 4,206,238 100.00% 4,704,911 100.00%
Opinions of the Independent Financial Advisor
125
Statement of Income for the period of 1 January 2015 - 31 December 2015, 1 January 2016 -
31 December 2016, 1 January 2017 - 31 December 2017 and 1 January 2018 - 30 September
2018
(Unit: Thousand)
Items 2015 % of Total
Revenue 2016
% of Total
Revenue 2017
% of Total
Revenue
30 Sep
2018
% of
Total
Revenue
Revenues from service 598,404 98.10% 853,651 99.55% 981,861 99.33% 1,002,058 99.90%
Revenues from sales 11,559 1.90% 3,859 0.45% 6,588 0.67% 1,012 0.10%
Cost of services (441,678) -72.41% (657,134) -76.63% (733,439) -74.20% (729,494) -72.73%
Cost of sales (8,669) -1.42% (3,884) -0.45% (5,887) -0.60% (781) -0.08%
Gross profit 159,616 26.17% 196,492 22.91% 249,123 25.20% 272,795 27.20%
Gain on sale of available-for-sale
investment - 0.00% - 0.00% 161,078 16.30% 141,379 14.09%
Dividend income - 0.00% - 0.00% - 0.00% 2,521 0.25%
Gain on sales of investment in associate
company - 0.00% 121,833 14.21% 71,914 7.28% - 0.00%
Gain (Loss) on sales of investment in
joint venture - 0.00% - 0.00% - 0.00% (2,774) -0.28%
Gain on classification investments - 0.00% - 0.00% 303,515 30.71% 212 0.02%
Other income 14,076 2.31% 22,022 2.57% 16,535 1.67% 16,630 1.66%
Profit before operating expenses 173,692 28.48% 340,347 39.69% 802,166 81.15% 430,763 42.94%
Selling expenses (50,348) -8.25% (84,965) -9.91% (133,877) -13.54% (68,801) -6.86%
Administrative expenses (69,966) -11.47% (144,622) -16.87% (197,611) -19.99% (165,697) -16.52%
Total expenses (120,314) -19.72% (229,587) -26.77% (331,487) -33.54% (234,498) -23.38%
Share profit (loss) associates and
investment in joint ventures 53,378 8.75% 110,759 12.92% 470,678 47.62% 196,265 19.57%
Share of profit (loss) from investment in
joint venture 0 (39) 0.00% (561) -0.06% (3,629) -0.36%
Share of loss from investment in
associated company 16,314 2.67% 19,318 2.25% 4,577 0.46% (1,922) -0.19%
Profit before corporate income tax 69,692 11.43% 130,038 15.16% 474,694 48.02% 190,714 19.01%
Finance costs (23,590) -3.87% (29,698) -3.46% (32,137) -3.25% (35,047) -3.49%
Profit before income tax 46,102 7.56% 100,340 11.70% 442,557 44.77% 155,667 15.52%
Income tax expenses (revenue) (6,990) -1.15% (15,972) -1.86% (67,013) -6.78% (35,031) -3.49%
Profit for the periods 39,112 6.41% 84,369 9.84% 375,544 37.99% 120,636 12.03%
Opinions of the Independent Financial Advisor
126
Statement of Cash Flow for the period of 1 January 2015 - 31 December 2015, 1 January
2016 - 31 December 2016, 1 January 2017 - 31 December 2017 and 1 January 2018 – 30
September 2018.
(Unit: Thousand)
Items 2015 2016 2017 30 Sep 2018
Net Cash Flows from (Used In) Operating Activities 88,845 116,733 65,636 20,743
Net Cash Flows from (Used In) Investing Activities (62,509) (631,641) 129,030 (218,148)
Net Cash Flows from (Used In) Financing Activities (42,438) 720,487 (364,232) 185,784
Net Increase (Decrease) in Cash and Cash Equivalents (16,102) 205,580 (169,566) (11,621)
Cash and Cash Equivalents at Beginning of Period 24,457 8,355 213,934 44,368
Cash and Cash Equivalents at End of Period 8,355 213,934 44,368 32,747
Analysis of Financial Position
Assets
As of 3 0 September 2018, the Company has a total asset of THB 4,704.91 M, increasing by THB
498.67 M or 11.86% from year 2017 due to the purchase of land, buildings, and equipment which is according
to the business plan and business expansion.
Liabilities
As of 30 September 2018, the Company has a total liabilities of THB 2,883.98 M, increasing by THB
574.06 M or 24.85% from year 2017 as a result from managing its cash flow in accordance to its business
plan with the ability to analyze and pay off the liabilities effectively.
Shareholders’ Equity
As of 30 September 2018, the Company has equity of THB 1,820.94 M, decreasing by THB 75.38 M
or 3.98% from 31 December 2017. It was a decrease in other components of equity, which is lower than the
increase in retained earnings.
Overview of Operating Results
As of 3 0 September 2018, the Company’s net income was THB 15.92 M and THB 120.64 M for 3
months and 9 months respectively. The company also had continue growth of total revenue when
comparing the same period of last year. The revenues from service and revenues from sales for 3 months
increased by THB 91.83 M or 36.58% and for 9 months increased by THB 283.02 M or 39.31% mainly due to
the ICT services that INET provides along with the gaining trust and confidence in customers resulting in INET
being one of the leading company in technology business.
Opinions of the Independent Financial Advisor
127
Appendix 3: Financial Projection of the Long Term Lease Transaction
Unit: THB M 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Revenue
Rack Rental Revenue 106.27 215.73 218.97 222.25 225.59 228.97 232.40 235.89 239.43 243.02 246.67 250.37 254.12
Customer Center Rental Revenue 1.92 3.96 4.07 4.20 4.32 4.45 4.59 4.72 4.86 5.01 5.16 5.32 5.47
Revenue from Electricity Charge 6.17 13.18 13.47 13.78 14.09 14.41 14.73 15.06 15.40 15.75 16.10 16.47 16.84
Total Revenue 114.36 232.86 236.52 240.23 244.00 247.83 251.72 255.68 259.70 263.78 267.93 272.15 276.43
Expenses
Substation Rental Expenses (0.50) (1.03) (1.05) (1.08) (1.10) (1.13) (1.16) (1.19) (1.22) (1.25) (1.28) (1.31) (1.34)
Capital Expenditures (3.14) (139.08)
Total Expenses (0.50) (1.03) (1.05) (1.08) (1.10) (1.13) (1.16) (4.33) (1.22) (1.25) (1.28) (1.31) (140.43)
Assets Income 113.86 231.84 235.47 239.15 242.89 246.70 250.56 251.35 258.48 262.53 266.65 270.84 136.01
Unit: THB M 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
Revenue
Rack Rental Revenue 257.93 261.80 265.73 269.72 273.76 277.87 282.04 286.27 290.56 294.92 299.34 303.83 308.39 313.02
Customer Center Rental Revenue 5.64 5.81 5.98 6.16 6.35 6.54 6.73 6.94 7.14 7.36 7.58 7.81 8.04 8.28
Revenue from Electricity Charge 17.22 17.61 18.00 18.41 18.82 19.25 19.68 20.12 20.58 21.04 21.52 22.00 22.50 23.00
Total Revenue 280.79 285.22 289.71 294.28 298.93 303.65 308.45 313.33 318.28 323.32 328.44 333.64 338.93 344.30
Expenses
Substation Rental Expenses (1.38) (1.41) (1.45) (1.48) (1.52) (1.56) (1.60) (1.64) (1.68) (1.72) (1.76) (1.81) (1.85) (1.90)
Capital Expenditures (18.46)
Total Expenses (1.38) (1.41) (1.45) (1.48) (19.98) (1.56) (1.60) (1.64) (1.68) (1.72) (1.76) (1.81) (1.85) (1.90)
Net Assets Income 279.41 283.80 288.27 292.80 278.95 302.09 306.85 311.69 316.60 321.60 326.67 331.83 337.07 342.40
Opinions of the Independent Financial Advisor
128
Appendix 4: Financial projection of Operating Sublease Transaction
Unit: THB M 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Expenses Paid to Fund
Rental of Rack (106.27) (215.73) (218.97) (222.25) (225.59) (228.97) (232.40) (235.89) (239.43) (243.02) (246.67) (250.37) (254.12)
Rental of Customer Center (1.92) (3.96) (4.07) (4.20) (4.32) (4.45) (4.59) (4.72) (4.86) (5.01) (5.16) (5.32) (5.47)
Electricity Charge (6.17) (13.18) (13.47) (13.78) (14.09) (14.41) (14.73) (15.06) (15.40) (15.75) (16.10) (16.47) (16.84)
Total Expenses (114.36) (232.86) (236.52) (240.23) (244.00) (247.83) (251.72) (255.68) (259.70) (263.78) (267.93) (272.15) (276.43)
Revenue Received from Fund
Substation Rental Revenue 0.50 1.03 1.05 1.08 1.10 1.13 1.16 1.19 1.22 1.25 1.28 1.31 1.34
Net Expenses (113.86) (231.84) (235.47) (239.15) (242.89) (246.70) (250.56) (254.49) (258.48) (262.53) (266.65) (270.84) (275.09)
Adjustments
Add: Capital Expenditures 3.14 139.08
Net Expenses after Adjustments (113.86) (231.84) (235.47) (239.15) (242.89) (246.70) (250.56) (251.35) (258.48) (262.53) (266.65) (270.84) (136.01)
Unit: THB M 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
Expenses Paid to Fund
Rental of Rack (257.93) (261.80) (265.73) (269.72) (273.76) (277.87) (282.04) (286.27) (290.56) (294.92) (299.34) (303.83) (308.39) (313.02)
Rental of Customer Center (5.64) (5.81) (5.98) (6.16) (6.35) (6.54) (6.73) (6.94) (7.14) (7.36) (7.58) (7.81) (8.04) (8.28)
Electricity Charge (17.22) (17.61) (18.00) (18.41) (18.82) (19.25) (19.68) (20.12) (20.58) (21.04) (21.52) (22.00) (22.50) (23.00)
Total Expenses (280.79) (285.22) (289.71) (294.28) (298.93) (303.65) (308.45) (313.33) (318.28) (323.32) (328.44) (333.64) (338.93) (344.30)
Revenue Received from Fund
Substation Rental Revenue 1.38 1.41 1.45 1.48 1.52 1.56 1.60 1.64 1.68 1.72 1.76 1.81 1.85 1.90
Net Expenses (279.41) (283.80) (288.27) (292.80) (297.41) (302.09) (306.85) (311.69) (316.60) (321.60) (326.67) (331.83) (337.07) (342.40)
Adjustments
Add: Capital Expenditures 18.46
Net Expenses after Adjustments (279.41) (283.80) (288.27) (292.80) (278.95) (302.09) (306.85) (311.69) (316.60) (321.60) (326.67) (331.83) (337.07) (342.40)
Opinions of the Independent Financial Advisor
129
Appendix 5: Financial Projection of Units Subscription Transaction
Unit: THB M 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Revenue
Rack Rental Revenue 106.27 215.73 218.97 222.25 225.59 228.97 232.40 235.89 239.43 243.02 246.67 250.37 254.12
Customer Center Rental Revenue 1.92 3.96 4.07 4.20 4.32 4.45 4.59 4.72 4.86 5.01 5.16 5.32 5.47
Revenue from Electricity Charge 6.17 13.18 13.47 13.78 14.09 14.41 14.73 15.06 15.40 15.75 16.10 16.47 16.84
Total Revenue 114.36 232.86 236.52 240.23 244.00 247.83 251.72 255.68 259.70 263.78 267.93 272.15 276.43
Expenses
Substation Rental Expenses (0.50) (1.03) (1.05) (1.08) (1.10) (1.13) (1.16) (1.19) (1.22) (1.25) (1.28) (1.31) (1.34)
Capital Expenditures (3.14) (139.08)
Total Expenses (0.50) (1.03) (1.05) (1.08) (1.10) (1.13) (1.16) (4.33) (1.22) (1.25) (1.28) (1.31) (140.43)
Assets Income 113.86 231.84 235.47 239.15 242.89 246.70 250.56 251.35 258.48 262.53 266.65 270.84 136.01
Fund’s Expenses
Professional Fee (1.51) (3.05) (3.09) (3.14) (3.21) (3.27) (3.34) (3.40) (3.47) (3.54) (3.61) (3.68) (3.76)
SET annual fee (0.37) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74)
Management and Trustee Fee (6.75) (12.88) (12.99) (13.07) (13.14) (13.18) (13.21) (13.20) (13.19) (13.12) (13.03) (12.89) (12.72)
Custodian Fee (0.51) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03)
Others (1.00) (2.03) (2.06) (2.10) (2.14) (2.18) (2.22) (2.27) (2.31) (2.36) (2.41) (2.46) (2.51)
Total Fund’s Expenses (10.14) (19.72) (19.90) (20.07) (20.25) (20.40) (20.53) (20.64) (20.73) (20.79) (20.81) (20.80) (20.74)
Dividend 93.35 190.90 194.01 197.17 200.38 203.67 207.03 207.64 213.97 217.57 221.26 225.04 103.74
Dividend Following Investment
Portion
31.12 63.63 64.67 65.72 66.79 67.89 69.01 69.21 71.32 72.52 73.75 75.01 34.58
Opinions of the Independent Financial Advisor
130
Unit: THB M 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
Revenue
Rack Rental Revenue 257.93 261.80 265.73 269.72 273.76 277.87 282.04 286.27 290.56 294.92 299.34 303.83 308.39 313.02
Customer Center Rental Revenue 5.64 5.81 5.98 6.16 6.35 6.54 6.73 6.94 7.14 7.36 7.58 7.81 8.04 8.28
Revenue from Electricity Charge 17.22 17.61 18.00 18.41 18.82 19.25 19.68 20.12 20.58 21.04 21.52 22.00 22.50 23.00
Total Revenue 280.79 285.22 289.71 294.28 298.93 303.65 308.45 313.33 318.28 323.32 328.44 333.64 338.93 344.30
Expenses
Substation Rental Expenses (1.38) (1.41) (1.45) (1.48) (1.52) (1.56) (1.60) (1.64) (1.68) (1.72) (1.76) (1.81) (1.85) (1.90)
Capital Expenditures (18.46)
Total Expenses (1.38) (1.41) (1.45) (1.48) (19.98) (1.56) (1.60) (1.64) (1.68) (1.72) (1.76) (1.81) (1.85) (1.90)
Assets Income 279.41 283.80 288.27 292.80 278.95 302.09 306.85 311.69 316.60 321.60 326.67 331.83 337.07 342.40
Fund’s Expenses
Professional Fee (3.83) (3.91) (3.99) (4.07) (4.15) (4.23) (4.32) (4.40) (4.49) (4.58) (4.67) (4.77) (4.86) (4.96)
SET annual fee (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74) (0.74)
Management and Trustee Fee (13.12) (12.91) (12.65) (12.33) (11.96) (11.60) (11.09) (10.50) (9.82) (9.05) (8.17) (7.18) (6.06) (4.81)
Custodian Fee (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03) (1.03)
Others (2.56) (2.61) (2.66) (2.71) (2.77) (2.82) (2.88) (2.94) (2.99) (3.05) (3.12) (3.18) (3.24) (3.31)
Total Fund’s Expenses (21.27) (21.19) (21.06) (20.88) (20.63) (20.41) (20.04) (19.60) (19.07) (18.45) (17.72) (16.89) (15.93) (14.83)
Dividend 232.32 236.35 240.49 244.73 232.48 253.51 258.13 262.88 267.78 272.83 278.05 283.45 289.03 975.01
Dividend Following Investment
Portion
77.44 78.78 80.16 81.58 77.49 84.50 86.04 87.63 89.26 90.94 92.68 94.48 96.34 325.00
Opinions of the Independent Financial Advisor
131
Appendix 6: Valuation by Independent Appraisers
The IFA has taken into consideration the appraisal report of independent appraiser who received
approval from the SEC which is American Appraisal (Thailand) Co., Ltd. (“AA”) and 15 Business Advisory
Limited (“15 Business”) for public purposes and for consideration of the assets value by income approach.
AA and 15 Business used the income approach from the rental revenue to evaluate the assets that
the Company and the Fund will enter to the Long Term Lease Agreement. The Company will sublease to
the Fund buildings (with component parts) of the INET-IDC3 Project Phase 1 (the data center building, the
utility building and connecting path way and customer center building) and lease equipment related to data
center services but not including high technology equipment. The agreement term is approximately 26 years
and 6 months and the fair value of AA is estimated at THB 2,699 M and 15 Business is estimated at THB
2,534 M with the assumptions as follows:
Assumption American Appraisal (Thailand) Co., Ltd. 15 Business Advisory Limited
Appraisal date 1 July 2019 1 July 2019
Appraisal Period 26 years and 6 months 26 years and 6 months
Revenue Assumptions
Rack Rental Revenue
• Number of rack: 492 Rack • Number of rack: 492 Rack
• Rental Rate: THB 36,000 / Rack / Month • Rental Rate: THB 36,000 / Rack / Month
• % Rental Growth: 2.5% / Year • % Rental Growth: 2.5% / Year
Building Rental Revenue • Rental Rate: THB 0.32 M / Month • Rental Rate: THB 0.32 M / Month
• Rental Rate Growth: 3% / Year • Rental Rate Growth: 3% / Year
Electricity Revenue
• Rack Occupancy: 75% in the first year and 100%
from year 2 onwards throughout the projection
period
• Rack Occupancy:
- 245 Rack as of 30 June 2019
- 320 Rack as of 31 December 2019
- 482 Rack from 31 December 2020 throughout the
projection period
• Electricity Rate: 30% of electricity cost charged to
the Fund by Provincial Electricity Authority
• Electricity Rate: 30% of electricity cost charged to
the Fund by Provincial Electricity Authority
• Electricity Usage IT Load: 1,012 Unit / Rack / Month • Electricity Cost IT Load: THB 3,057 / Rack / Month
• Electricity Usage Non-IT Load: 711 Unit / Rack /
Month
• Electricity Cost Non - IT Load:
- THB 0.57 M / Month for the first 72 Rack
- THB 3,642 / Month from 73th rack onwards
• Electricity Usage (Base): 150,240 Unit / Month • % Electricity Growth: 2.25% / Year
• Electricity Cost: THB 3.50 / Unit
• % Electricity Growth: 2.25% / Year
Expense Assumptions
Substation Rental Cost • Substation Rental Cost: THB 1 M / Year • Substation Rental Cost: THB 1 M / Year
• % Substation Rental Growth: 2.50% / Year • % Substation Rental Growth: 2.50% / Year
CAPEX
• Year 2026: THB 3 M
• Year 2031: THB 139 M
• Year 2036: THB 18 M
• Year 2026: THB 3 M
• Year 2031: THB 139 M
• Year 2036: THB 18 M
Discount Rate
Opinions of the Independent Financial Advisor
132
Assumption American Appraisal (Thailand) Co., Ltd. 15 Business Advisory Limited
Weighted Average Cost
of Capital (WACC) 9.5% 9.5%
The IFA is of the opinion that the 2 independent appraisers used the income approach which is
appropriate based on the revenue assumption from the agreements related to the transaction.
Opinions of the Independent Financial Advisor
133
Appendix 7: Profile and Experience of Merlin Solutions International
Company Limited
History and Experience of Advisor
Items Details
Founded in 1993
Type of advisor Class A in Telecommunication Sector (TE)
Registration authority
of advisor Consultant Database Center, Ministry of Finance (No. 420)
Accredited certification ISO 9001:2008
Target customer Government, State enterprise and Large Organization
Expertise
• Develop Information and Communication Technology master plan and
operational plan
• Design Information and Technology system and infrastructure
• Manage Information and Communication Technology
• Design and Develop Information and Communication Technology
Experience in Information and Technology or Network System Design
Employers Details
Airports of Thailand
Public Company
Limited
Advisor in Information and Communication Technology, Electronic
Communication system
Siam Cement Group
Public Company
Limited
SCG Infrastructure Master Plan Development Project
The Government
Lottery Office Information and Communication Technology Master Plan Development Project
PTT ICT Solutions
Company Limited
ICT and Communication Master Plan, PTT Exploration and Production Public
Company Limited
PTT ICT Solutions
Company Limited
Designing Advisor in ICT infrastructure system for PTT Global Infrastructure
Project
PTT ICT Solutions
Company Limited
Supervisor in Infrastructure System Development for ICT Service in PTT Head
Office Building and PTTEP Building Development and Renovation Project
Opinions of the Independent Financial Advisor
134
Appendix 8: Co-location Service Rental in Retail Price and Wholesale Price by Merlin’s Solutions International
Company Limited
Details
Company A Company B Company C Company D Company E Company F Company G Company H
½ Rack Full Rack
Full Rack
(High
Density)
Full Rack Full Rack Full Rack Full Rack ¼ Rack ½ Rack Full Rack ½ Rack Full Rack Full Rack
Retail Price
(Baht per
month)
24,400 37,000 53,000 47,000 45,500 50,000 50,000 10,000-
15,000
20,000-
25,000
42,000-
45,000 29,000
50,000-
55,000
(+20,000
Installation
fee)
54,000
(+36,000
Installation
fee)
Wholesale
Price (Baht per
month)
37,300
36,000
(volume
discount
from 50
Racks)
46,500 (start
up with 25
racks, up to
50 racks)
Electricity Price 7.5 (Baht
per unit)
7.5 (Baht
per unit)
7.5 (Baht
per unit)
7.5 (Baht per
unit)
6 (Baht per
unit)
Power supply
16 amp
,power
distribution 20
Opinions of the Independent Financial Advisor
135
Appendix 9: Cash inflows from the Conditions in the Transaction Documents and expenses that may
Arise from the Risks of the Transactions
Unit: THB M 30 June
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash inflows and Cash Outflows According to the Conditions in the Transaction Documents
Cash in from land rental in advance 1.13 1.13 1.19 1.19 1.19 1.25 1.25 1.25 1.31 1.31 1.31 1.38
Cash in from Advanced Taxes Redemption 0.73 0.89 0.94 0.98
Cash in from Rental Guarantee 118.49
Cash out from land rental in advance (36.30)
Cash out from Advanced Taxes Redemption (9.24)
Cash out from Rental Guarantee (108.19) (5.03) (5.27) (125.91)
Cash out from Additional Investment in Rack (6.65)
Cash out from Fund setup cost (64.1)-
(69.8)
Cash outflows from expenses that may arise from the Risks of the transactions (Worst Case Scenario)
Cash out from Corporate Income Tax Arising from
Profits from Selling Assets (THB 2,400 M) (6.08) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16)
Cash out from Corporate Income Tax Arising from
Profits from Selling Assets (THB 2,850 M) (7.75) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49)
Cash out from the Risk of not Receive Vat Loan
Repayment
(127.72)-
(151.66)
Cash out from the Risk that the Company Tax Benefits
from the BOI be Canceled (0.77) (3.74) (3.72) (3.89) (4.18) (4.47) (4.78) (5.72)
Opinions of the Independent Financial Advisor
136
Unit: THB M 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
Cash inflows and Cash Outflows According to the Conditions in the Transaction Documents
Cash in from land rental in advance 1.38 1.38 1.44 1.44 1.44 1.52 1.52 1.52 1.59 1.59 1.59 1.67 1.67 1.67
Cash in from Advanced Taxes Redemption 1.03 1.08 1.14 1.19 1.25
Cash in from Rental Guarantee 137.94 158.21
Cash out from land rental in advance
Cash out from Advanced Taxes Redemption
Cash out from Rental Guarantee (5.87) (6.15) (144.38) (6.75) (7.08)
Cash out from Additional Investment in Rack
Cash out from Fund setup cost
Cash outflows from expenses that may arise from the Risks of the transactions (Worst Case Scenario)
Cash out from Corporate Income Tax Arising from
Profits from Selling Assets (THB 2,400 M) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16) (12.16)
Cash out from Corporate Income Tax Arising from
Profits from Selling Assets (THB 2,850 M) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49) (15.49)
Cash out from the Risk of not Receive Vat Loan
Repayment
Cash out from the Risk that the Company Tax Benefits
from the BOI be Canceled