Page 102 - BTSGroup ONE REPORT 2021/22_EN

100 l Introduction l Nature of Business l Organisation and Shareholding Structure l Business Review l Corporate Governance l Financial Statements l Other Information l

To manage treasury management risk, the Company invests in various financial In addition, if the concession agreement is terminated, it would be deemed
assets, mainly consisting of banks deposits and financial institutions, bills an event of default under the Net Revenue Purchase and Transfer Agreement,
of exchange, short-term and long-term both debt and equity investments in which would result in BTSGIF able to enforce the Company’s obligations from
domestic and foreign financial institutions, and through local and foreign funds. the collaterals by way of enforcing all the pledged BTSC shares under
the share pledge agreement, or forcing the Company to transfer all the shares
Legal and Regulatory Compliance Risk in BTSC to BTSGIF under the share sales and purchase agreement. (Additional
details are available for consideration under Risk from Loss of BTSC Shares in
Risk from Termination of Concession Agreement and Long-Term
Operation and Maintenance Service Agreement Events of Default under the Net Revenue Purchase and Transfer Agreement).
The Company’s revenue generated by the mass transit business relies mainly on As for the long-term operation and maintenance service agreement, it includes
the concession agreement and revenue under the 30-year operation and maintenance a similar termination clause as the concession agreement, whereby Krungthep
service agreements. However, although Bangkok Mass Transit System Public Thanakom (KT) has the right to terminate the long-term operation and maintenance
Company Limited (BTSC) has sold its net farebox revenue from its operations under service agreement in case of BTSC being bankrupt or failing to perform its
the concession agreement to BTS Rail Mass Transit Growth Infrastructure Fund material obligation under the operation and maintenance service agreement and
(BTSGIF) (including transferring the related benefits and risk under the Net Revenue failing to rectify it within an appropriate period. In case of termination, BTSC will
Purchase and Transfer Agreement to the unitholders), BTSC remains the operator not be able to operate the BTS SkyTrain Network in the Silom and Sukhumvit
of and provider of maintenance for the BTS SkyTrain Core Network. As such, Route Extensions. If another operator would take over the operations of
if the concession agreement or the long-term operation and maintenance service the BTS SkyTrain Network in such route extensions, passengers may be subject
agreement is terminated, the future cash flow of the Company will be significantly to inconvenience when they start their journey in a route extension system and
impacted. Such an event may negatively affect the business, financial position, alight in the core network or vice versa. Such inconvenience may reduce the BTS
performance, and business prospects of BTSC and the Company. SkyTrain Core Network’s ridership, which may impact the farebox revenue and
financial performance of BTSGIF and the Company. In addition, BTSC may have
Under the concession agreement, the Bangkok Metropolitan Administration to be held responsible for the damages caused by the breach or termination.
(BMA) or BTSC may terminate the agreement unless a remedy or rectification
is made to the relevant breach in a specified period. The Bangkok Metropolitan Risk from Loss of BTSC Shares in Events of Default Under the
Administration (BMA) also has the right to terminate the concession agreement Net Revenue Purchase and Transfer Agreement
in the case where BTSC becomes bankrupt or intentionally and continually
breaches any material clause in the concession agreement. BTSC, as a result, In entering into the transaction to purchase transfer the net revenue to be
will not be able to operate the BTS SkyTrain Core Network and will be obliged generated by the operations of the BTS SkyTrain Core Network to BTSGIF,
to transfer the ownership in the equipment, controlling equipment, and other the Company, as the sponsor, has entered into the sponsorship and sponsor
assets located on the land utilised for the BTS SkyTrain Core Network back to guarantee agreement to guarantee the performance of obligations by
the BTSC under the Net Revenue Purchase and Transfer Agreement, including
the BMA, as well as compensating the BMA for the damages incurred thereto.