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Published on July 28, 2007

PTT is considering buying more forward contracts to cover US$4 billion (Bt135 billion) worth of loans that will mature in the next 18 months, in order to lock in the strong baht and reduce financial costs, says a company official.

Pichai Chunhavajira, senior executive vice president of the country's largest oil and gas firm, yesterday said the forward contracts would reduce the company's investment costs.

The $4 billion worth of loans were borrowed to finance large projects, including a natural-gas separation plant, natural-gas pipeline extension and petrochemical plant.

"The investment cost of these projects is based on a baht foreign-exchange rate of 40 or 41 [to the US dollar], against 33 at present. More forward contracts would reduce the investment costs," Pichai said.

Meanwhile, president Prasert Bunsumpun yesterday said the company was evaluating whether to swap foreign-currency loans into baht loans, due to the stronger baht's interest rates.

He said 70-80 per cent of the company's debts involved dollar- and yen-denominated bonds that bore low interest rates. Earlier, PTT said it would cancel all planned dollar bonds and accelerate imports of machinery.

PTT and other state enterprises have been encouraged to swap their foreign-currency loans in order to increase demand for dollars and hence reduce pressure on the baht, which remains stronger than 34 to the dollar despite government countermeasures.

While Airports of Thailand, the State Railway of Thailand and Thai Airways International have announced their readiness to go along with the government's request, TOT yesterday said it wanted to repay its Bt965-million foreign debt to the Japan Bank for International Cooperation (JBIC) ahead of schedule.

Vatcharee Tupcharoen, TOT's acting chief finance officer, yesterday said the board had asked TOT to negotiate with the JBIC about repaying the debt before the due date.

TOT has total debt of Bt25.276 billion, of which almost Bt8 billion is owed to the JBIC.

Of the total owed to the JBIC, the first instalment of Bt965 million is due on September 20, 2017, the second instalment of Bt4.466 billion on February 20, 2018, and the final instalment of Bt2.498 billion on September 20, 2020. TOT wants to pay off the first instalment, which carries annual interest of 2 per cent, before the due date.

"If we could retire the debt right now, we could save Bt145 million in interest costs immediately," she added.

TOT has already swapped the debt in the second instalment into baht loans and is planning to do the same with the debt in the third instalment.

Energy Minister Piyasvasti Amranand also said yesterday the Electricity Generating Authority of Thailand (Egat) had been instructed to convince seven independent power producers (IPPs) to repay their $3 billion worth of loans ahead of schedule.

"Egat will also discuss with them the possibility of basing the power rates in baht. The baht-based power-rate structure would also be applied to the power-purchase contracts to be signed with new IPPs," Piyasvasti said.

The baht yesterday weakened to 33.72/74 to the dollar after weakening to 33.75 on intra-day trading. It closed at 33.71 to the dollar on Thursday.

Federation of Thai Industries chairman Santi Vilassakdanont said the measures approved by the Cabinet this week had boosted confidence among industrial manufacturers. He is confident the baht will weaken even further to 34 to the dollar in the near future.

Following discussions with Finance Minister Chalongphob Sussangkarn and Bank of Thailand Governor Tarisa Watanagase yesterday, Prime Minister Surayud Chulanont said the measures had stabilised the baht and that monetary authorities would be able to maintain that stability in the coming weeks.

Regarding a projection that the baht would appreciate to about 32 to the dollar, Surayud said that forecast had been made by "outsiders" but that Thai fiscal authorities believed they could stem its appreciation and prevent it from moving with volatility.

However, the prime minister said it was not possible to say at what level the baht should stay, because of the current volatility in world currencies.

He reiterated that the government had no plans to formulate more measures to help curb the baht, because the currency was already becoming more stable.