PTT seeks to refute allegations via split-off, divestment

Corporate June 04, 2014 00:00

By Watcharapong Thongrung


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PTT, Thailand's national oil company, is considering splitting off its petroleum retail business and divesting some of its refining investments to show that it does not enjoy an unfair advantage over its rivals.

Pailin Chuchottaworn, president and CEO, said yesterday the group is studying the possibility of segregating its retail business, listing it on the local bourse and creating a new brand to compete with other retailers in the domestic market to refute allegations on social media that as the market leader, it holds an unfair advantage over its rivals, gouges consumers by distorting the price structure and rakes in massive profits.

PTT might sell its entire stakes in Star Petroleum Refining and Bangchak Petroleum, two local refiners, so that hopefully consumers and the public can see that PTT competes in the oil trading business on a level playing field.

Maybe it is time for PTT to spin off its retail business to list on the Stock Exchange of Thailand so that people could see that its profit is not as huge as they imagined. If the retail business in Thailand was so lucrative, Jet, Petronas and Q-8 probably would probably not have pulled out of Thailand.

As for the allegation that PTT was rolling in obscene profits to the tune of hundreds of billions, Palin said 43 per cent of its profit came from its natural gas, petroleum and international businesses, while the remaining 57 per cent came from firms which PTT had invested in, such as PTTEP and petrochemical, refining and other businesses abroad, such as coal and palm oil.

Its profit is small relative to its annual sales of nearly Bt3 trillion and to other foreign oil companies. PTT spent 51.9 per cent of its profit to acquire new oil and gas fields overseas to ensure Thailand has a stable supply of oil and energy to support its growing needs into the future,

It did so without having to seek financial assistance from the state or use the government’s reserve funds like many nations do.

Each year 26.4 per cent of its profits goes to the state in the form of taxes and 14.3 per cent in the form of cash dividends to both the Finance Ministry, which is its major shareholder, and the Vayupak Fund. About 7.2 per cent of its profit is paid out as cash dividends to other investors.

PTT needs to make adequate profits to support its considerable investments in oil and gas fields abroad.

From 1999-2012, PTT remitted Bt541.03 billion to the state in the form of cash dividends and taxes. The money was used to develop the country’s education, transportation and healthcare.

PTT is usually the last to raise its pump prices and the first to cut prices relative to its foreign rivals, as manifested by the 42 price adjustments, both up and down, recorded last year. PTT incurred a Bt474 million loss for selling petrol and diesel at lower prices than other players for 57 days last year.

PTT will have to put its five-year investment plan revision on hold, pending clearer policy guidelines from the National Council for Peace and Order, he added.