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Published on December 13, 2007

A delisting of PTT Plc from the Stock Exchange of Thailand could send the bourse's benchmark index plunging by almost half and could cost the government Bt1 trillion to turn the petroleum giant back into a wholly state-owned enterprise, stock analysts warned yesterday.

The Supreme Administrative Court rules tomorrow on a petition filed by consumer groups against PTT's 2001 privatisation, which could see the country's largest oil and gas firm erased from the big board.

PTT executives are preparing various scenarios to deal with the court outcome, even though industry analysts don't expect its delisting. But if it happens, the SET Composite Index would fall by almost a half because PTT's stock has the biggest market capitalisation.

SCB Securities said if PTT has to be taken private, the SET index might sink to the level of 400-500 points. It closed yesterday 0.76 per cent lower at 834.09.

Thanachart Securities said the PTT delisting might cause the government great damage as it may have to find Bt1 trillion to buy back shares at the current high market price to make PTT publicly owned again.

PTT legal officers are working with the Energy and Finance ministries to prepare contingency measures.

"We are working out plans to ensure PTT's operation regardless of the court's ruling," a PTT source said.

Suparut Kawatkul, permanent secretary of the Finance Ministry, said the State Enter-prise Policy Office has cooperated closely with the Energy Ministry on the PTT case, but he did not give out any details of a plan to deal with the worst-case scenario.

SET president Patareeya Benjapholchai said the exchange might suspend trading of PTT stock on the day when the ruling is expected to soften the impact on large and small investors.

She said PTT executives had also sought advice from the Securities and Exchange Com-mission on handling any post-ruling chaos. If the court rules that PTT's privatisation was unlawful, the company would lose its listing status and the state would need to tender for all shares held by other investors.

Several brokerages are also working out possibilities to prepare investors for the ruling. While most of them speculate that the delisting won't happen, PTT will be forced to quickly

separate its gas transmission pipelines from its core business as promised in its initial public offering prospectus.

The consumer groups cited PTT's failure to divest its gas transmission pipeline business as one reason to nullify the privatisation process. The Cabinet under then prime minister Thaksin Shinawatra resolved that PTT did not have to let go of its gas pipelines before privatisation, triggering the controversy as consumer groups claimed the pipelines were considered national assets.

Another Finance Ministry source said he does not ex-

pect any serious consequences, such as what the Electricity Generating Authority of Thailand (Egat) faced, when consumer groups succeeded in halting its privatisation. PTT's case is different from Egat's, the source said.

The PTT source said the company is set to follow whatever the Court decides. "We're preparing for the worst to the most lenient scenarios. And whatever the result is, we have to explain to investors what happens next."

The PTT source said the worst-case scenario is the Court deciding to delist PTT and letting the government take full control over the gas transmission pipelines. However, the government would not take responsibility for the aftermath. The company would have to deal with the fallout on its own.

The second most severe scenario is the delisting of PTT and the separation of the pipelines from its assets. The government would continue to supervise the gas transmission lines but PTT would retain the right to use them. Under this scenario, the Finance Ministry would buy back PTT shares.

These two scenarios would turn PTT back into a wholly-owned state enterprise with no flexibility in operation. That would erode foreign investor confidence in PTT and the country. The stock market would take a hit because PTT is the biggest blue chip on the exchange.

The third scenario is to leave PTT on the SET but split out the gas transmission pipelines as required by law. And even though the pipelines would be supervised under a future law by a regulator governing the energy business, PTT would continue to maintain the exclusive right to use them.

The mildest scenario is for PTT to continue operating under unchanged conditions.

An Ayudhya Securities analyst said although the securities house views delisting as unlikely, chances are PTT would face risks from future claims over its right to operate, especially over the issue of the gas pipelines.

The brokerage assessed the risk associated with three treatments of the gas transmission pipelines.

First, they are spun off but PTT still holds 100 per cent of the shares in the newly set-up company to operate them. However, PTT will continue to be responsible for the tax burden incurred from establishing the new company.

The second possibility is that PTT would have to return the gas pipelines to the Finance Ministry and PTT wouldn't receive the right to continue using them. In that case, PTT's earnings per share would drop by 19 per cent.

Lastly and most likely, according to the brokerage, the pipelines are transferred to the Finance Ministry but PTT retains the right to use them by leasing them back. PTT's earnings per share would drop by 1 per cent.

Thanachart Securities believes the ruling will favour PTT. However, in the worst case where PTT has to hand the pipelines back to the government without any compensation, the book value of PTT would decline by 30 per cent from the current Bt333 billion as the book value of the pipelines is around Bt100 billion. PTT's net profit and stock price are likely to plummet by 25 per cent.

The Consumers Foundation petitioned the Supreme Administrative Court on August 31 of last year to revoke the 2001 Royal Decree Determining the Powers, Rights and Benefits of PTT Plc and 2001 Royal Decree Determining the Time for Repealing Laws Governing the Petroleum Authority of Thailand, as PTT was formerly called.

The Cabinet, the prime minister and the energy minister at the time were named as respondents.

The groups filed the case after successfully calling on the court to nullify the two decrees that supported the privatisation of Egat. Caretaker prime minister Thaksin Shinawatra, the Cabinet and then energy minister Viset Choopiban were highlighted as respondents in the Egat case.

 Siriporn Chanjindamanee,

 Watcharapong Thongrung

 The Nation