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The State Railway of Thailand (SRT) has agreed to renew the land-lease contract with Central Group for another 20 years, for total returns of Bt21 billion.

Chief financial officer Arak Ratboriharn said yesterday that the SRT committee set up in accordance with Article 13 of the Public-Private Joint Venture Act to examine the lease renewal, has reached the agreement with Central Group over the terms.

Under the renewed contract, Central Group will pay 20 per cent of the amount in advance, he said.

Central Group's existing 30-year lease will expire on December 18. It covers 47.22 rai of the Central Lat Phrao shopping complex, a 600-room hotel, parking buildings and an office for rent. Under the current contract, the group has paid lease fee of Bt10.6 million per year to SRT.

Central will invest an additional Bt2.4 billion to renovate its existing shopping complex and its hotel, including constructing new buildings in the Lat Phrao area.

Central Group is expected to earn Bt2 billion revenue per year from the Lat Phrao complex, according to SRT's land appraisal consultants. If its revenue exceeds the estimated Bt2 billion, it agrees to pay 5 per cent of the excess revenue to SRT, Arak said.

The company's representatives yesterday unofficially met SRT governor Yutthana Tapcharoen, an SRT source said.

The source said that Yutthana agreed with the Article 13 committee after considering that Central Group has good plans to improve the land and the 20-year renewal is a suitable period. Yet, he noted that if the Cabinet considers the Bt21-billion return too low, it will be subject to another review.

According to Arak, after this, the SRT will forward the contract to the Office of Attorney-General before forwarding it for the Cabinet's approval. SRT will sign the contract with the company after getting the Cabinet nod.

Kim Eng Securities (Thailand) analyst said the contract renewal will boost the stock value of Central Pattana, the group's property development arm, by Bt3-Bt5. It will also revise upward CPN's 2008 net profit once details of the contract are announced.