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Published on December 15, 2007

People close to the PTT privatisation litigation say the Surayud government worked a brilliant trick to outsmart the Consumers' Foundation at the last minute.

They said it resulted in a Supreme Administrative Court ruling that saves PTT from being delisted from the stock market.

This past Monday the government "quietly introduced" the Energy Business Act to the National Legislative Assembly, they said.

The act was passed in three successive readings. The legislation took effect on Tuesday. It provides the legal framework for an energy regulatory body and for the supervision of the industry.

"Based on this crucial Energy Business Act, the Supreme Administrative Court was able to find a way out of the PTT debacle and ruled against the argument of the Consumers' Foundation that listing PTT was illegal from the outset," said one source close to the case.

The sources close to the matter said the act was introduced in the House in a discreet way that escaped the eyes and attention of the foundation, which remained unaware of its legal implications.

The foundation had been confident of winning the case, following its victory against the privatisation of the Electricity Authority of Thailand. Rosana Tositrakul heads the foundation.

It claimed the PTT privatisation was illegal because the Thaksin Shinawatra government failed to comply with requirements the company separate its gas and oil pipeline business, as stated in the PTT prospectus.

It claimed the gas and oil pipeline business - about 10 per cent of the company's total assets, or between Bt90 billion and Bt100 billion - is

a state possession because it was built with taxpayers' money.

The court ruled yesterday PTT would remain a listed company. It said removing it could affect the entire economy.

The court said the company could revise its business operations to comply with the new legislation.

The act will see a new independent regulatory agency established within 120 days.

However, the court order-ed PTT, one of the largest companies on the stock market, to transfer its gas and oil pipelines and the land they are on, to the Finance Ministry.

PTT stock was suspended yesterday, pending the ruling. It closed at Bt368 a share on Thursday.

PTT and the Finance Ministry will over the weekend come up with terms for the pipeline transfer for Cabinet to consider on Tuesday.

Energy Minister Piyasvasti Amranand said PTT would resume trading after the Cabinet approved the asset transfer. "Everything must

be finished by Tuesday," he insisted.

PTT president Prasert Bunsumpun said the asset transfer would not have a significant impact on the company. The market has already discounted this possibility.

 Siam City Securities senior analyst Mayuree Chowvikran said fair value for PTT could be reduced by Bt60 to Bt100 a share if there were no government compensation for the pipelines.

"What PTT will discuss with the Finance Ministry must be closely monitored as now it's unclear about the future of the pipelines," she said. "However, following the ruling today, investing sentiment is back to normal."

Nithi Wanikpun of Citigroup said in a report issued yesterday it was not clear how and when PTT would transfer those assets to the Finance Ministry.

PTT may need to pay tax on the transfer as well as pipeline rental fees to the ministry.

"In our target price of Bt431, PTT pipelines are valued at Bt140 a share based on economic value - that is the expected cash flow to PTT from the pipeline operations," Nithi said.

"Assuming PTT will have to share 10 per cent of its net income from the pipeline business with the ministry as rental fees following the asset transfer, our fair value will decline by Bt14 a share.

"It is too soon to estimate the tax implications at this point since the amount of asset transfer is still unknown."

Kasikorn Asset Management vice chairwoman Wiwan Tharahirunchote said the ruling was expected but its impact was yet to be gauged.

With the government taking the pipelines, fund managers will wait for details of their rental.

If the contract favours PTT - with rent the same or cheaper - then there is likely to be little impact on the stock.

Analysts will revalue the company when they known the details, she added.

Watcharapong Thongrung,

 Thanong Khanthong

 The Nation