PTT consolidation on hold until Map Ta Phut ruling
The Nation 18 November 2009 | Chalida Ekvitthayavechnukul
PTT Group's consolidation is set to be delayed until the Supreme Administrative Court rules on the fate of 76 industrial projects in Map Ta Phut and nearby areas that have been suspended.
"The court proceedings have affected the evaluation of each company's assets and investment plans," said Chainoi Puankosoom, president and CEO of PTT Aromatics and Refining (PTTAR). "Hence, we have to wait for the verdict before making any decision. Right now, we expect to conclude our M&A plan next month and take 4-6 months for all the procedures."
He added that the M&A was earlier scheduled to be concluded in October, but it had been delayed because of prolonged problems in Map Ta Phut.
"If the court orders the suspension of the 76 projects, we [PTT and its subsidiaries] have planned to swap our products and export the surplus instead of using as feedstock for the new plants [which are suspended]. Under the synergy and business adjustment, our business performance should not be strongly impacted," he said.
Although PTTAR's Euro IV upgrading project, worth US$220 million (Bt7.3 billion), is also one of the 76 projects suspended, it remains on track to complete it by the end of 2011 as the new Euro IV oil standard will be implemented in 2012. So far, this project has already signed a construction contract and ordered the machines.
Chainoi emphasised that this project would not impact negatively on the environment, and on the contrary it would minimise the impact because of lower sulphur in the oil refining process.
"All of our projects have already passed the environmental impact assessment [EIA], which included health impact assessment [HIA], in the procedure. However, we are willing to follow the new environment act once the government implements it," he said.
Chainoi added that the company would give full support to make the related laws and regulations clear because that would restore investor confidence and improve the country's investment climate.
PTTAR plans to spend $330 million over the next five years, starting from 2010 to 2014. Of that, the Euro IV project is the largest project and the balance $110 million will be used to improve its production efficiency and other maintenance costs.
Chainoi said the gross integrated margin (GIM) in this quarter would be around $5.5 to $6 per barrel, which makes the average of GIM in 2009 higher than $5 per barrel.
Chainoi said the GIM in 2010 would not be much different from this year because of slow recovery of the global economy.
Although new plants in China and the Middle East will start up in this quarter, the margin will not be much lower because oil refineries in the United States and Japan have shut down and cut their capacity following lower demand globally.
As a result, the price of aromatic products will vary in line with the changing oil price. He said it would rather be concerned about the insufficient feedstock to make aromatic products.
PTTAR's revenue this year may not reach its target of Bt270 billion but it will not affect the profitability. Yesterday, it won a Bt3-billion loan contract from the Export-Import Bank of Thailand to finance PTTAR'S expansion plan as well as productivity enhancement, manufacturing process improvement and environmental preservation in both upstream petrochemical and petroleum refining industries.
"We gained the profit of Bt3.3 billion by hedging 20 per cent of our refining capacity this year. We are considering our hedging plan in the coming year, when we are allowed to hedge up to 50 per cent of our production capacity, if it generates the satisfying margin," he said.
PTT has assumed oil price at $68 to $74 per barrel this year and $72 per barrel in 2010, he added.