EGAT IPO REJECTED
Ruling not end to privatisation drive
Stock market investors shrug off ruling by Supreme Administrative Court, SET climbs up 5.3 points
The Supreme Administrative Court's ruling yesterday against Egat Plc's privatisation should not pose a threat to the government's planned sale of other non-energy state enterprises, although the ruling will push Egat's privatisation back to square one, according to senior government officials and stock brokers.
To State Enterprise Policy Office director-general Vichai Jungrakkiat, the ruling came as something of a surprise, prompting his office to send legal experts to consult Energy Ministry officials overseeing the energy industry. The legal experts will need to look at all related laws to see whether there is a way to proceed with privatisation.
"The verdict has made Egat's privatisation more complicated," he conceded.
The Supreme Administrative Court yesterday revoked the two royal decrees supporting Egat's privatisation. One decree highlighted the privatised entity's power and rights, the other the deadline when Egat's state-enterprise status would come to an end. The court ruled that the earlier transformation of the state agency into a public company was illegitimate.
The halting of Egat's privatisation is expected to affect its sister organisations - the Provincial Electricity Authority and the Metropolitan Electricity Authority - which are the next energy-related agencies under the privatisation plan.
But experts said the ruling would not affect the privatisation of non-energy agencies, primarily TOT Plc and CAT Telecom Plc.
"The telecom industry is different. Both agencies followed proper public-hearing procedures, and there is the National Telecommunications Commission to regulate the industry. So, whether they can be privatised has nothing to do with the Egat case," said one expert.
TOT president Teerawit Charuwat agreed. He said yesterday that he did not believe that the case of Egat would affect TOT's listing plan.
"TOT and CAT are different cases. They have their own problems, particularly how the government will handle their monopolistic power and conflicts with private operators," said Democrat MP Korn Chatikavanij.
Caretaker Finance Minister Thanong Bidaya could not be reached for comment yesterday. He was away, while the People's Alliance for Democracy held a protest outside his ministry's compound.
But in a speech on Wednesday to graduate students at Northwestern University's Kellogg School of Management in Evanston, Illinois, he said the government wanted to proceed with state-enterprise privatisation, but it was against the wishes of some portions of society. He admitted that the process of Egat and TOT Corp privatisation was complicated.
One contentious issue is how dams would be managed after Egat goes public, as dams are also used for agricultural purposes. If profit is the priority, dams should be mainly used for power production. Another issue is ownership of the power grids.
TOT's privatisation has been opposed by its staff, and there questions have been raised about its monopolistic power.
Korn, an early opponent of Egat's privatisation, said that despite the ruling, the government would need to answer an important question about the state enterprise. Egat will have two identities after its transformation into a public company under the Corporatisation Act: the Electricity Generating Authority of Thailand and Egat Plc.
"Now that the court has not nullified the Corporatisation Act, Egat Plc will remain in place. Then what to do with the assets that have been transferred to the public company?" he asked.
Stock investors shrugged off the bad news, although some analysts predict that the verdict will have a negative impact on the prospects of the Stock Exchange of Thailand's dream to enlarge the market with more big-cap stocks.
The bourse's index closed up 5.31 points, or 0.7 per cent, at 729.72 after a three-day consecutive fall. Yet the index fell to an intra-day low of 726.01 in the afternoon after the Supreme Administrative Court ruled that Egat's planned initial public offering could not proceed.
"The ruling did not move the market much, because it was a ruling specifically against Egat on its privatisation procedures. This does not mean it will apply to future cases of privatisation that follow the rules," analyst Pichai Lertsupongkit at Prudent Siam Securities told Dow Jones Newswires.
Sukit Udomsirikul, assistant managing director of the Business Department at Siam City Securities, said investors reacted coolly to the decision, as they had already lost hope for Egat's listing when the court froze the privatisation last November. Still, he noted that since Egat could not be listed, the exchange was losing a weapon for boosting market capitalisation and trading volume. This will be exacerbated by the likely loss of Thai Beverage Plc to the Singapore Exchange.
"Right now, investors are more concerned about the political conflict," said Sukit.
An analyst at one foreign brokerage house noted there would be no short-term impact from the Egat decision but that in the long term, it could be a problem when big-capitalisation companies did not emerge in the market.
"Particularly, if Shin Corp seeks a delisting, the Thai market weight in the Morgan Stanley Composite Index would drop from slightly above 2 per cent to 1.8-1.9 per cent. It's worrying now that there are no new big stocks to replace Shin," he said.
Ministry may opt to float agency's power plants
After the Supreme Administrative Court's ruling to nullify Egat Plc's privatisation, the Finance Ministry may instead choose to list some of Egat's power plant units on the stock exchange using Electricity Generating Plc and Ratchburi power plant as models for the initial-public-offerings, an Egat insider said yesterday.
The source, who asked for anonymity, said that listing Egat's power plant units was among the potential options for mobilising funds, even though Egat staff would not be happy with this alternative.
However, Egat does not have many choices left now that the court slammed the door on its ability to raise funds on the stock market any time soon.
He said that the Egat's top executives on Wednesday discussed various options for raising funds in anticipation that the Supreme Administration Court would declare the Egat privatisation plan illegal. Egat needs Bt200 billion to invest in four power plants before 2010.
The source said that Egat still had the ability to borrow money.
Regardless, Egat will not revert back to being called the Electricity Generating Authority of Thailand because the company has already transformed under the Corporatisation Law, said the source.