Thai PTT to merge chem affiliates despite Rayong projects' woes

19 January 2010 09:37  [Source: ICIS news]

SINGAPORE (ICIS news)--Thai oil and gas major PTT intends to proceed with the consolidation of its petrochemical affiliates this year despite the legal problems afflicting its major projects in Mab Ta Phut that may take up to nine months to resolve, analysts said on Tuesday.

The proposed merger of PTT Aromatics and Refining, PTT Chemical and Integrated Refinery & Petrochemical Complex (IRPC) - all with operational bases at Mab Ta Phut in Rayong province - should shore up the group’s finances and enhance its growth prospects, they said.

PTT president Prasert Bunsumpun was quoted last week in the Bangkok Post as saying that details of the consolidation of these three units would be finalised this quarter.

The fourth petrochemical affiliate – Thai Oil – would also be merged by 2012, Bunsumpun was quoted as saying.

The group was expected to publicly announce its plans for the merger after getting shareholder approval in April, said Lertchai Kochareonrattanakul, a Bangkok-based analyst at credit ratings agency Fitch Ratings.

 “A merger makes financial sense if the company wants to grow regionally,” said Suttichai Kumworachai, an analyst with brokerage KGI Securities in Thailand.

Apart from greater synergy, the merger would also increase PTT’s economies of scale and lower operating costs, said Kochareonrattanakul of Fitch Ratings.

On overall profitability, the impact of the proposed merger may not be material as PTT registers “profits from these affiliates through equity sharing”, he said.

Still, PTT would need to study the overall viability of the merger before proceeding with the plan, said Kochareonrattanakul.

“They need to assess the synergy value of the merger as well as look at tax and cost issues,” he added.

 “No final decision has been made but the company has already completed studies on mergers since last year,” said Kochareonrattanakul of Fitch Ratings.

PTT was initially scheduled to finalise details of the planned consolidation of its four affiliates in October last year, but the plan had been set aside as the company had to deal with a more pressing issue involving its major petrochemical projects in Mab Ta Phut.

While some projects have been cleared by Thailand’s Supreme Court to proceed construction, 65 other projects, 18 of which belongs to the PTT group, have remained under court injunction.

A committee has been formed to advise the government on the various social and environmental issues concerning the suspended projects at Mab Ta Phut, analysts said.  

PTT, Siam Cement Group and Bayer were represented in the committee, said Kochareonrattanakul of Fitch Ratings.

The process of getting the projects re-approved by the courts may take six to nine months to complete, analysts said.

Speeding up the process would be difficult as the parties would have to deal with social issues and confront non-governmental organisations (NGOs), said Kochareonrattanakul of Fitch Ratings.

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By: Nurluqman Suratman

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