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PTT

Buyback of PTT 'a bad idea'

Energy and financial experts foresee a disastrous future for PTT, the national oil and gas company, if it is forced to abandon its quasi-state-enterprise status and be fully re-nationalised as proposed by some anti-government protesters.

These experts also urged those who are sponsoring this movement to rethink their strategies, as they are based on proven misperceptions on the energy sector. Nationalising the energy company or repurchasing shares from private investors would only weaken the group and the economy, they argue.

"It would be a total disaster," Banyong Pongpanich, chairman of Phatra Securities, said at an invitation-only discussion last week, packed with more than 100 participants who were eager to weigh the pros and cons of the proposal.

His firm advised the initial public offering of PTT in 2001. Thirteen years later, PTT is the Thai company with the biggest market capitalisation, at Bt820 billion as of Friday or 7 per cent of the total Bt11.7-trillion market cap.

After the privatisation, the company led other state enterprises in terms of business expansion. Together with four listed subsidiaries - PTT Exploration and Production (PTTEP), PTT Global Chemical (PTTGC), Thai Oil (TOP) and IRPC - the group's combined value was 16.5 per cent of the Stock Exchange of Thailand's market capitalisation as of February 27.

Banyong was concerned with the impact on the stock market as well as on the economy as the supply chain - particularly the petrochemical industry - could falter if PTT were nationalised.

He and former energy minister Piyasvasti Amranand shared the view that PTT's 49-per-cent private ownership should not be terminated as that would once again give full control to politicians. Both proposed the full privatisation of the company, by selling off the remaining 51-per-cent stake held by the Finance Ministry.

"Such [political] intervention has persisted despite the privatisation. Still, it's better than other state enterprises wholly owned by the government, like SRT," Banyong said, referring to State Railway of Thailand.

"Full intervention could affect its business efficiency, while selling the remaining 51 per cent would raise hundreds of billions [of baht] that could be used to finance many key projects."

Piyasvasti reckoned that taking back PTT was not tantamount to energy-sector reform. He noted that the sector had been improved throughout the past years since the petroleum law was enacted in 1971 to be one of the strongest in the economy. There were some areas that do need to be reformed such as the energy-pricing structure, competition and governance, but he said nationalisation would only kill the sector's efficiency built up over recent decades.

He also said nationalisation would be unfair to investors holding PTT shares, including the Government Pension Fund, the Social Security Fund and individuals.

Noting that some supported re-nationalisation of PTT as a political move to punish the Thaksin Shinawatra government that launched the privatisation, the energy expert said these people missed the point. Whoever benefited from the deal back then are no longer vulnerable to punishment, Piyasvasti said. The action would only end any good governance seen in the company.

He attacked the campaign for drawing public support through distorted information, for example that Thailand's fuel-pump prices are higher than in Myanmar, or that Thailand has abundant resources that could enable it to export refined oil. The fact is Thailand imports crude oil for refining and excess refined output is exported at the ex-factory price, the same as the price quoted for local fuel retailers.

These protesters refuse to admit that subsidies and tax measures push up pump prices in Thailand. Figures also show that Thailand is a net energy-importing country, with an annual energy bill of more than Bt1 trillion. With the 21st petroleum-block auction delayed for years, this could hurt the future, as gas and oil reserves are good for only the next 20 years.

Piyasvasti also noted that PTT deserved some fairness concerning its operations, which has grown in scale because of unexpected circumstances and opportunities.

Given the depleting reserves, it is essential for Thailand to proceed with oil and gas exploration. Meanwhile, if the pricing structure were fairly fixed, the nation would see a greater need for renewable-energy development.

"Our wisdom has fallen back to the level of 100 years ago. We're so obsessed with internal issues like the nationalisation of PTT that we ignore the issue of global warming or renewable-energy development. Focusing on a wrong issue would only lead to wrong policies that do not tackle long-term issues," he said.


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