Rising expenses will push the project cost to US$283.4 million (Bt10.8 billion) from the previously estimated $200 million, the companies said in separate statements to the Stock Exchange of Thailand.

Due to the higher investment cost, PTT Chemical has agreed to reduce its interest in PTT Phenol, which was set up to run the phenol production and distribution project, to 30 per cent from 40 per cent previously, the company said in a statement.

Aromatics (Thailand) will raise its stake in PTT Phenol to 30 per cent from 20 per cent, while PTT will maintain its shareholding at 40 per cent.

For the 40-per-cent stake, PTT will have to invest $56.7 million, up from the previous plan of $40 million, the company said in a separate statement.

PTT Phenol will produce 200,000 tonnes of phenol per year and 120,000 tonnes of acetone. PTT Phenol plans to fund half the project via borrowings, with the rest from investment by its shareholders.

PTT, PTT Chemical and Aromatics (Thailand) also approved new investment for the second phase of PTT Utilities Ltd, which runs an electricity and steam-generation project in eastern Rayong province. The project costs $134.4 million.

The first phase, which costs $127 million, is still under construction and will be ready for operation by the middle of the year.

PTT and PTT Chemical each own 40 per cent of PTT Utilities, while Aromatics holds 20 per cent. PTT Utilities will use borrowings to fund two-thirds of the project, with the rest coming from its shareholders.

Meanwhile, PTT said in a separate statement yesterday that it had secured a 23-billion-yen (Bt7.4 billion), 30-year loan from American Family Life Assurance, which bears an interest rate of 4.45 per cent per annum. It will pay the interest in US dollars and the principal in yen.

The loan is part of its five-year financing plan to raise Bt50 billion to fund its investments during 20052009.

It hedges against foreign-exchange volatility via a swap contract with ML Capital Market Bank, guaranteed by Merrill Lynch, and with Siam Commercial Bank.

Under the swap agreement, the principal will be converted into $196.9 million of US currency, and PTT will pay a swap premium of just below 1 per cent a year, bringing the total interest cost of the loan to 5.44 per cent.

The loan offers a cheaper interest cost than a bond issue, the company said.

If PTT issued dollar bonds during the same period, it would have to pay roughly 6.95 per cent in interest, the statement said.