Pieces in place for Thai privatization

David Knott
London
[email protected]

Thailand's government aims to privatize oil and gas state monopoly Petroleum Authority of Thailand (PTT) by fourth quarter 1998.

The plan has been received coldly in some quarters: the Thai public and officials and employees of state enterprises complain that privatization involves selling national assets to companies that only seek profits.

Thailand's National Energy Policy Office (NEPO) wants to offer shares in PTT and Electricity Generating Authority of Thailand (EGAT) to the private sector.

The Chavalit Yongchaiyudh administration left office recently, having advocated sale of state holdings in energy businesses to raise 480 billion baht ($12 billion) to bail out the Thai economy.

Among companies earmarked for sale of state interests were Electricity Generating plc, Esso Thailand Ltd., PTT Exploration & Production plc (Pttep) and Thai Oil Co.

Warning

Mike Williams, undersecretary of state at the U.K. Treasury, visited Bangkok recently to warn the government that the wrong decision on restructuring the Thai energy sector could damage the battered economy even further.

"It is necessary to decide on the future structure of the sector before privatization," said Williams. "Only when those decisions have been made and a plan already set out will the sector be ready."

Pttep has warned that a sale of its shares to help pay off a $17.2 billion International Monetary Fund (IMF) loan contradicts IMF rules.

Pttep Chairman Mechai Viravaidya said it is the intention of PTT, which owns 70.98% of Pttep, to retain Pttep's status as a state enterprise by keeping a majority stake in the company.

Mechai said PTT will be prepared to reduce its stake in Pttep only to a minimum of 51%. Meanwhile, the National Energy Policy Committee (NEPC) has agreed to a plan that calls for PTT to reduce its interest in Pttep by 5-10% through an increase in share capitalization.

NEPC guidelines state that new shares will be offered to private investors, with set percentages being allocated for local and overseas buyers depending on stock market conditions.

Pttep plans

Mechai is adamant that any money raised from sales of Pttep shares will not be used to pay off national debts but for financing of Pttep projects and expansion.

Established in 1988, Pttep aims to emerge from the fray as an international petroleum E&P firm. It plans to broaden its asset portfolio into several neighboring countries and further afield, while maintaining extensive stakes in domestic hydrocarbon projects.

Pttep's current registered capital is 3.1 billion baht ($72 million). Its net proven petroleum reserves amount to more than 550 million boe.

Mechai said recently that the planned share offering would likely take place sometime next year, when stock market conditions have improved.

Meantime, a new chairman of PTT has been appointed: Preecha Attavipak, permanent secretary of state for industry, has taken over from civil servant Sivavong Changkasiri.

The move is likely to strengthen government's hand for privatization plans, since earlier this year Preecha also replaced Sivavong as chairman of EGAT.