PTT abandoned its plan to merge the firms because the Revenue Department insisted the tax incentive for newly listed companies - set at 25 per cent for five years, instead of the normal 30-per-cent rate - would be revoked after the merger, PTT president Prasert Bunsumpun said.

PTT has a 49.84-per-cent stake in Aromatics and holds 49 per cent of Rayong Refinery,

"The consolidation between Rayong Refinery and Aromatics will be made through an acquisition. We have to study which company will acquire the other one and the process will take place early next year," Prasert said.

The process will not follow the model used to merge Thai Olefins (TOC) and National Petrochemical (NPC) into PTT Petrochemical Plc. "The recent merger between TOC and NPC had the same problem and that's why we have to change the pattern of consolidation to keep the tax incentive," Prasert said.

PTT initially planned to merge Rayong Refinery and Aromatics to cut costs. Under the plan the merged unit would later be consolidated with Thai Oil Plc to strengthen PTT's oil-refinery business.

"The merger is in line with the second master plan for the development of the capital market under which tax incentives are offered to facilitate listed companies' growth and boost their liquidity. But since the Revenue Department insists on not giving the tax cut, it will not encourage business mergers in the future and the stock market will be less attractive," Prasert said.

Meanwhile, PTT is expanding its co-generation services to office buildings, shopping complexes and hospitals. Co-generation uses natural gas to produce electricity while the by-products are used to make cool water for air conditioning.

PTT has already installed a co-generation system at Suvarnabhumi Airport.

PTT and the Metropolitan Electricity Authority (MEA) have signed a contract with Dhanarak Asset Development Co, a property arm of the Treasury Department, to sell electricity and cool water for air conditioning to Bangkok's Government Complex, currently under construction.

Prasert said the co-generation system would cut costs for building owners and the country.

Construction of the co-generation system will take a year, and cool water is expected to be distributed from March 2008 until June 2038 for the Government Complex at Chang Wattana Road.

The project is worth Bt700 million.

The system will increase the efficiency of burning natural gas from 50 per cent, when gas alone is used as fuel to generate electricity, to 80 per cent, Prasert said.

PTT and MEA also planned to install co-generation systems for the new buildings at Siriraj Hospital and Future Park shopping complex, he said.

More and more shopping centres, office building and hospitals are expected to install the system, he noted.

Wichit Chaitrong

The Nation