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Published on December 15, 2007

PTT Plc and the Finance Ministry will negotiate the terms of transferring the company's gas and oil pipeline business back to the state before presenting a final resolution to the Cabinet following the Supreme Administrative Court's ruling yesterday to spare PTT from stock-market delisting.

Finance Minister Chalongphob Sussangkarn said PTT shares, which closed at Bt368 on Thursday, would continue to be suspended at least until next Tuesday when the Cabinet considers the asset transfer.

Energy Minister Piyasvasti Amranand said details of the transfer had to be quickly finalised so that PTT shares could be traded.

The court yesterday ruled on consumer groups' challenge to the legality of PTT's privatisation. The company is the largest on the Stock Exchange of Thailand (SET) with market capitalisation of Bt1 trillion. Although the court did not rule against PTT's listing, it ordered PTT to return pipeline operations to the Finance Ministry.

PTT president Prasert Bunsumpun was relieved after the ruling, saying it was the best solution as the energy giant would not have to be delisted, even though the requirement to return pipeline operations to the state may have an impact on its operations.

Speaking at a press conference two hours after the court finished reading the ruling, Prasert said the judgement would require PTT to transfer some of its assets and operations, causing additional expense from the tax arising from the transfer of such assets all at once.

PTT will face an additional burden from leasing gas and oil pipelines from the Finance Ministry on an annual basis.

Of overall PTT assets worth Bt900 billion, the book value of the pipeline network is Bt100 billion. Pipeline operations generate revenue for PTT of about Bt20 billion a year.

"The ruling has a very small impact on PTT operations because PTT will retain the rights to exclusively utilise the pipelines. The decision should not adversely affect earnings. Besides, PTT expects the tax relating to the transfer and the leasing fee to be paid to the Finance Ministry should not be very high because it would affect consumers," said Prasert.

Piyasavasdi said the transfer of PTT assets was unlikely to benefit consumers because the pipeline fee was unlikely to be reduced. Besides, PTT may have to pass the burden from higher tax payments and the leasing fee to consumers.

He said PTT would have to look into the details of the ruling to see the extent to which it covers the transfer of assets to the Finance Ministry. PTT will also have to discuss lease collection. He could not provide an exact amount for the impact from the transfer.

Chalongphob said the Cabinet would consider how to transfer the assets back to the state. Before then, the Treasury Department will look into the details of the transfer, based on the benchmark regarding the transfer of state-enterprise assets.

Areepong Bhoocha-oom, director-general of the Public Debt Management Office, said the PTT assets would be transferred to the Finance Ministry without any cost, while the government would have to consider the proper lease rate without adversely affecting consumers.

SET president Patareeya Benjapholchai said yesterday that the exchange expected to lift suspension of PTT shares on Tuesday or Thursday, pending information released by PTT on the transfer. Foreign investors yesterday asked the SET about the PTT case ruling and were eager to know when stock would be allowed to trade. However, she said the SET would not provide any prop-up measure for PTT stock once it was allowed to be traded.

Brokerage houses and fund managers expressed positive views on the court's ruling, which did not surprise them, but they are waiting to see details of the agreement between the Finance Ministry and PTT.

Kongkiat Opaswongkarn, chairman of the Federation of Thai Capital Market Organisation, said the ruling was a "neutral conclusion" in line with his expectations and good for the stock market. Had the court ruled to delist PTT, the consequences would have been severe.

However, the court verdict will cause PTT's stock to fall by about Bt100 per share from the fair value of Bt430-Bt470. The pipeline business is valued at about Bt100 billion.

However, PTT's closing price of Bt368 on Thursday showed the market had already absorbed the expected news of the ruling. But investors are now keeping an eye on negotiations between the Finance Ministry and PTT over the management of the pipeline business.

Kongkiat also said some foreign investors had expressed concern about whether there would be similar cases. PTT's case will make the privatisation of other state enterprise more difficult, he added.

Pichai Lertsupongkit, senior director of the marketing department of Thanachart Securities, said the ruling had only a slight negative impact on the stock market as investors had expected the pipeline business to be transferred, as reflected in the earlier drop in PTT's share price. The return of the pipeline business would reduce the fair value by about Bt80-Bt100 per share from Bt450.

Siam City Securities believes the book value of PTT will fall by Bt14 per share. The revenue of PTT is expected to remain unchanged but the net profit will be lower as PTT has to pay a leasing fee to the Finance Ministry.

A KTB Securities analyst said he was not surprised with the ruling. "The market reaction has been positive, as you've seen. The market knew about the pipeline case already. This made the market sentiment clearer and there is less pressure," he said.

Korawut Leenabanchong, chief investment officer of UOB Asset Management (Thai), said he would not sell out PTT stock despite the ruling, as the fundamentals of the stock were quite strong. In some cases, if the company sold PTT, it might not be able to buy back the stock due to the ceiling of 15 per cent of fund value required by the Securities and Exchange Commission.

Nasu Chansom, head of equity investment at Ayudhya Asset Management, said he was satisfied with the ruling, as it contained nothing serious or surprising. The fundamentals of the stock will depend on details of the price of the pipeline business.

 Watcharapong Thongrung,

 Siriporn Chanjindamanee

 The Nation