Published on October 18, 2005

The government is expected to make a decision today on how much to increase nationwide electricity tariffs, Energy Minister Viset Choopiban said. Viset gave no indication of what the new fuel tariff (Ft) rate would be, but earlier reports said it could go up by as much as Bt0.20 per kilowatt-hour (unit) without the state’s intervention.

Gas monopoly PTT Plc reported that it is negotiating with gas producers to cut present gas prices by forwarding their projected future earnings.

Official sources say the Energy Ministry would prefer to see electricity prices increased by not more than Bt0.10 per unit.

The Ft rate is subject to review every four months and the next rate will be applied from this month until January 2006. The upcoming review comes ahead of the initial public offering of Egat Plc, the state-owned electricity generating utility.

Speaking at a seminar yesterday, Dr Piyasvasti Amranand, chairman of the Energy for Environment Foundation said the government should delay its plans to float Egat shares on the stock market next month as there are still a number of issues to be decided, including an electricity price adjustment mechanism, regulatory system, the government’s intervention on the Ft tariff and the cross-subsidy among electricity utilities.

“The likely policy changes in the future present a risk to investors,” he said.

Piyasvasti said that even though the government has said it will fix the wholesale electricity tariffs for three years, past experience has shown that if power providers incur a loss they could pressure Egat to cut its electricity rates to help them in the short-term.

He said if the government decides to list Egat as planned, its share prices would not be as high as expected.

Two years ago the Egat governor at the time said that if it was listed Egat would become the largest listed firm with a market capitalisation of Bt300 billion, today however, Egat’s estimated market value is estimated at between Bt170 billion to Bt230 billion, much less than PTT Plc’s.

This year, Egat is also expected to incur its first losses of between Bt900 million and Bt3 billion, compared to previous losses of between Bt20 billion and Bt30 billion, due to an inability to increase the Ft rates any further.

“Egat will make a profit only when the Ft is adjusted using a set formula. If the government intervenes, it will affect its profits and that could also affect PTT and PTT Exploration and Production, which would have to shoulder the cost. This could therefore produce a negative impact on the market overall,” he warned.

PTT and PTTEP is one of the largest listed companies on the local bourse.

Dr Duenden Nikomborirak, a researcher from the Thailand Development Research Institute said Egat should postpone its listing until it is better prepared. The government also needs to implement an information disclosure process to allow for transparency before it lists state utilities, she said.

She said the government would have to consider six issues before considering privatisation, they included ensuring that the state enterprise was not in a monopolised industry; substantiating any state privileges before privatisation; clarifying its regulating powers; ensuring there is a regulatory body in place; ensuring there are consumer protection mechanisms in place; and ensuring that any regulatory bodies are independent and transparent.

“If it is the case that when Egat is listed the public will not be able to inspect its operations - and that as a listed company its motivations will be to seek the highest profits for investors - the public will ultimately lose out,” she said.

Dr Bart Lucareli, chairman of LP Power Consultant said he also disagreed with listing Egat before it was ready.

Jane Namchaisiri, an executive from the Federation of Thai Industries, said the government should consider delaying listing Egat for six months as many issues remained unclear.

“If it insists on floating the shares on schedule, it could be its intention to leave things unclear now and clarify them once the IPO is complete and expect the share prices to go up subsequently,” she said.

The National Energy Policy Committee yesterday gave approval for the three state power utilities to have an average return on invested capital (ROIC) of 6.5 per cent for the next three years; with Egat at 8.39 per cent, and Metropolitan Electricity Authority and the Provincial Electricity Authority both at 4.80 per cent.

The committee agreed to maintain the base electricity tariff of Bt2.25 per unit for three years. The Ft, currently 46.83 satang per unit, is levied on top of the base tariff.

To keep electricity prices nationwide at the same rate, the committee, chaired by Deputy Prime Minister Wissanu Krea-ngam, also approved a move which would see MEA subsidise PEA by Bt9.83 billion this year, Bt10.507 billion next year, and Bt11.014 billion in the following year.

Watcharapong Thongrung

The Nation

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