Thailand's largest duty-free retailer King Power International is set to meet with its trading partners and foreign agents over what it calls "the unfair" annulment of its two contracts with Airports of Thailand Plc (AOT).

The meeting with 200 duty-free shop representatives and 100 brand name agents is King Power's attempt to find an immediate and practical solution to the annulment announced last Thursday.

King Power's deputy managing director, Chulchit Boonyakate said the contracts were deemed legal according to a decision by the previous board chaired by Srisook Chandrangsu and they did not need to come under the Public-Private Joint Venture Act.

Meanwhile, Admiral Bannawit Kengrean, who chairs the National Legislative Assembly's subcommittee investigating corruption problems at Suvarnabhumi Airport, will today petition the Assets Examination Committee to investigate the AOT's controversial deals with King Power, a source said yesterday.

Former prime minister Thaksin Shinawatra, former transport minister Suriya Jungrungreangkit and AOT's former board chairman Srisook are expected to be named as being involved in the deals, according to the source.

The AOT's board on Thursday nullified the two contracts that awarded King Power the right to run the duty free shop and manage the commercial area at Suvarnabhumi Airport. It said King Power deliberately brought down several project values to below Bt1 billion to avoid coming under the Public-Private Joint Venture Act.

Under the law, the contracts would have been subject to a more extensive review.

Chulchit believes it was a "matter of differences in thought and approach". He wants to further negotiate with the AOT's current directors for a just solution.

The two contracts, which cost Bt4 billion in concession fees, granted King Power the exclusive right to operate retail outlets and sell duty-free goods within the premises of Suvarnabhumi, Chiang Mai, Phuket and Hat Yai International Airports until 2015.

So far, King Power has paid Bt2.63 billion in concession fees two years in advance. Financial analysts have calculated that revenues from King Power account for about 25 to 30 per cent of AOT's total turnover.

Meanwhile, Deputy Transport Minister Sansern Wongcha-um has summoned the AOT board and executives for a discussion next week over the nullification of the company's contracts with King Power International.

He said the nullification has affected confidence in the AOT, because the awarded concessionaire had signed the contracts but could not continue to do business.

Sansern said Transport Minister Theera Haocharoen would also attend the meeting.

"We will focus on how the AOT will handle its relationship with other companies," he said, adding the discussion will cover legal, political and economic aspects, as well as advantages and disadvantages of business transactions.

An analyst at Ayudhya Securities said the AOT's contract termination with King Power is a threat to the AOT's finances because revenue generated from the concession is worth Bt1.23 billion per quarter, accounting for 25 per cent of AOT's total revenues in the first quarter this year.

King Power would have to lodge legal action against the AOT, requesting damages from the contract termination, and the AOT would have to open a new bidding to replace King Power.

"It is a time-consuming process and would have quite an impact," the analyst said.

If the AOT reduces retail space, its revenues from the concession would also be reduced, the analyst said, adding the AOT might earn higher income if the new bidding is competitive and transparent.

A Siam City Securities' analyst echoed the sentiment, saying King Power was the main renter of retail space at Suvarnabhumi Airport and it contributed around 30 per cent of AOT's revenues.

As it was unclear whether AOT would gain an advantage or a disadvantage from the contract termination with King Power, the broker was uncertain.

Asia Plus Securities Plc's research unit said the annulment of King Power's two contracts with the AOT should have a short term negative impact.

"The research unit believes there will be a re-opening of the bidding for new operators. In that case, the AOT is expected to have more benefits than ever," it said.

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