PTT told to return pipelines business

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By Amy Kazmin in Bangkok

Thailand's Supreme Administrative Court has ordered PTT, the energy conglomerate, to return its natural gas pipeline business to the state, saying such assets “must be used for the benefit of the public, not a private company”.

However, the court rejected an appeal by Thai consumer groups for the renationalisation of the company, bringing some relief to investors, who feared a massive stock market sell-off if the court ordered the reversal of its 2001 listing.

But analysts say the transfer of PTT's pipelines business could still have negative repercussions for the company and the broader stock market, depending on how it is handled. Pipelines account for 10 to 15 per cent of PTT's annual profits.

PTT has sought to play down the impact of the transfer, saying it expected to be compensated for the transfer and to remain the operator of the pipelines. Piyasvasti Amranand,the energy minister, will propose a detailed plan for the transaction early next week.

Sriyan Pietersz, head of research at JPMorgan, said any transfer without compensation to PTT would be “tantamount to expropriation”. Other analysts said the government would probably try to avoid such a move, which could cause an outcry – and even legal challenges – from minority shareholders. The state owns 52 per cent of PTT.

Mr Pietersz said the verdict was likely to complicate future privatisations, and could help entrench low valuations in the Thai stock market, which is now trading at a 25 per cent discount to regional peers.

“It is the second instance of the judiciary overturning government policy, raising questions about the viability of government policy reform in the future,” he said.

Keith Neruda, head of research at UBS, said the company's long-term prospects had become “more cloudy”. He added: “It's not going to be clear what businesses they can engage in.”

Trading in PTT was suspended yesterday, but the market rose afterwards on relief it would not be delisted. PTT is the largest company in the Thai stock market.