PTT begins to tally financial implications

Business News - Saturday December 15, 2007

PTT RULING / MUTUAL FUND PRICING AND FUTURE OF ENERGY GIANT'S ASSETS

PTT begins to tally financial implications

YUTHANA PRAIWAN

While PTT Plc executives can breathe a sigh of relief about the legitimacy of its 2001 stock listing, the final impact on the company's balance sheet and future operations remains an open question. The Supreme Administrative Court, while reaffirming PTT's status as a listed company, yesterday ordered its pipeline assets to be returned to the state.

Prasert Bunsumpun, the PTT president, said the company's pipeline assets had a book value of 100 billion baht, or more than 10% of total group assets.

The pipeline assets generated around 20 billion baht in revenue per year for PTT, a minute portion of the estimated 1.4 trillion baht in revenues projected by the energy conglomerate this year.

Mr Prasert said the company would spend the weekend reviewing the court ruling and its implications.

''We need to clarify which assets are to be included in the court order,'' he said after the ruling was announced.

Energy minister Piyasvasti Amranand said the transfer details would be finalised for approval by the government on Tuesday, the date of the last cabinet meeting of the Surayud Chulanont government.

The court said usage rights, authority and 32 rai of expropriated land used for PTT's gas pipelines must revert to the state. But less certain is whether the order extends to PTT's entire pipeline network covering 3,000 kilometres.

Whether the order focuses only on onshore pipelines or also includes offshore pipelines was another issue requiring interpretation, as well as whether the transfer includes assets of PTT subsidiary Thai Petroleum Pipeline Plc. Around 70% of the pipeline network is located offshore in the Gulf of Thailand.

PTT also needs to consider that its pipeline assets include assets developed after the company was transformed from a state enterprise into a public company, and thus it would deserve compensation from the government if they were transferred to the Finance Ministry.

Mr Prasert said PTT also had to talk with the Finance Minister on the tax liabilities incurred from the asset transfer as well as future pipeline rental rates.

He estimated total expenses for the transfer could exceed 10 billion baht, which would have little impact on PTT's cash flow. PTT posted nine-month net profits of 73.3 billion baht on revenues of 1.09 trillion.

Areepong Bhoocha-oom, the director-general of the State Enterprise Policy Office, said the Finance Ministry may choose to set a relatively low rate for PTT's use of land and pipeline assets to minimise the impact on end-users.

''A low rental rate would help PTT keep its operating costs stable. We also need to consider the impact [of the ruling] on gas buyers,'' he said.

The Finance Ministry, which holds 52% of PTT, also needs to consider that charging commercial rates for pipeline usage would only take funds away from the company and push up energy costs.

PTT executives said that with the transfer of the pipeline assets, the company would scrap earlier plans to set up a new company overseeing gas operations. PTT is expected to maintain rights over the management of the country's natural gas transmission grid.

Bangkok Post