Minister rejects 5% lease fee

PTT PIPELINES

Minister rejects 5% lease fee

Income estimate 'may be too low'

Published on January 8, 2008

Finance Minister Chalongphob Sussang-karn has rejected the Treasury Department's recommendation that the government collect a rental fee equal to 5 per cent of revenue for PTT's use of natural-gas pipelines it was recently forced to hand back to the government.

A source said the minister felt PTT's estimate of income from the pipelines might be too low.

Chalongphob will also seek Cabinet approval to delay consideration of the gas-pipeline lease fee for three weeks.

Chalongphob has instructed the committee that is considering the pipeline lease fee to adjust the recommendation and resubmit it to him in two weeks. The source said the adjusted rate was likely to be higher than that proposed last week.

The Cabinet is expected to fix a lease fee after receiving Chalongphob's recommendation. It will be paid by PTT for running three natural-gas pipelines following the Supreme Administrative Court's decision that although PTT's privatisation should not be reversed, the company must return certain pipelines and land plots to the government.

Last week, the committee considering the gas-pipeline lease fee, led by the Treasury Department, recommended the collection of 5 per cent of annual revenue from PTT's services using the three selected pipelines, plus a 3-per-cent adjustment for inflation each year.

Last Thursday, Treasury Department deputy director-general Amnuay Preemonwong said the committee concluded that the lease fee should be based on revenue sharing and annual adjustment for inflation.

The first year's leasing fee would be Bt180 million, or 5 per cent of PTT's Bt3.6-billion revenue from its gas-pipeline business. Over the 30 years of a lease contract, the fee would amount to about Bt7.888 billion, he said.

The source yesterday said Chalongphob had questioned the source of the Bt3.6-billion revenue estimate. He also sought more information about the calculation of the Treasury Department's formula.

The source said Chalongphob was not satisfied with the formula because of unclear figures for PTT's actual revenue and expenditures. He has not only asked for more information from PTT, but also sought help from experts at Chulalongkorn University who oversaw the university's lease of land to MBK shopping centre. The university receives 7 per cent of MBK's assets as an annual leasing fee.

Chalongphob and his advisers are expected to spend about two or three weeks pondering the issue, the source said, adding that calculating the lease fee based on revenue from gas-pipeline transmissions had proven to be more difficult than the MBK-Chulalongkorn case, because of the difficulty in fixing the asset value of the pipelines.

The source said revision of the lease-fee proposal was ordered after an opinion suggested the Finance Ministry had not received full details of PTT's business related to the gas pipelines, so the Treasury Department's formula was unable explain clearly to the public why the leasing fee was only 5 per cent.

After the Supreme Administrative Court's ruling, the Cabinet assigned the Finance Ministry to decide how much should be collected as a rental fee from PTT. However, it required that a minimum rent should be 5 per cent.

Before the Cabinet meeting, Chalongphob discussed an appropriate leasing rate with Energy Minister Piyasvasti Amranand. He even raised the scenario of charging PTT a 20-per-cent leasing fee.

The Finance Ministry is also preparing to ask the Council of State to interpret the Supreme Administrative Court's ruling last month that ordered PTT to separate its gas-pipeline business and return the pipelines to the Finance Ministry.

The source said the ministry is not sure whether the entire network of natural-gas pipelines or only a part of it should be transferred to the ministry.

Wichit Chaitrong

The Nation