FocusMab Ta Phut resolution eases investor concerns in Thailand

03 September 2010 08:33  [Source: ICIS news]

By Nurluqman Suratman

SINGAPORE (ICIS)--Thailand’s clearer regulation governing harmful industries, which saw the lifting of the court ban on 74 out of the 76 projects in Mab Ta Phut, is a cheerful consequence of the controversial case, analysts said.

The Central Administrative Court ruled on Thursday to allow nearly all the suspended projects in the industrial estate to proceed with construction and operations, nearly a year after it ordered the injunction on them.

The decision was based on the list provided by the executive branch of the government that itemised 11 industries considered as environmentally harmful.

This was likely to ease regulatory concerns investors might have in doing future business in Thailand, analysts said.

“The court’s decision should have a positive impact on investments in Thailand, as the assessments needed for industrial projects are clearer now,” said Naphat Chantaraserekul, an analyst with DBS Vickers Securities in Bangkok.

Investor sentiment in Thailand, already rattled by political instability, took another blow in late September 2009 from the suspension of major projects in Mab Ta Phut – the country’s petrochemical hub.

The court injunction was issued on the projects on grounds that they are environmentally harmful under Article 67 of the Thai constitution.

“There was no organic law or clear guidelines in place before the court suspended the projects, but now investors would have a better idea from which government authority to get their licences or permits from,” Chantaraserekul said.

Based on the provided definition of harmful industries, the court on Thursday withdrew the operating licenses of only two of the original 76 banned projects.

These are the 95,000 tonne/year monoethylene glycol (MEG) expansion project of PTT Chemical and the 90,000 tonne/year vinyl chloride monomer (VCM) expansion of Thai Plastic and Chemicals.

PTT Chemical may have to deal with a 2% hit in earnings for not being able to run its 390,000 tonne/year MEG facility at full capacity, said Chantaraserekul of DBS Vickers.

“We believe that it should take at least 6- 12 months for terminated projects to apply for an operating license, and get EIA (Environmental Impact Assessment), HIA (Health Impact Assessment) approval, and conduct a public hearing as required by law,” he said.

All the other projects of PTT group were allowed to proceed. PTT is the biggest oil and gas player in Thailand.

The company’s sixth gas-separation plant (GSP) was expected to start in the middle of the fourth quarter of this year after about two months of test runs, Suttichai Kumworachai, an analyst with brokerage house KGI Securities in Bangkok.

The commercial start-up of the sixth GSP should boost PTT’s earnings by Thai baht (Bt) 6.5bn in 2011, according to Chantaraserekul of DBS Vickers.

Its operations would help PTT ramp up its ethylene production at its 1m tonne/year ethane cracker, and consequently raise the output of its downstream plants, said a source at PTT Chemical, a unit of PTT.

Siam Cement’s projects were also freed up from suspension.

“The major concerns are over with the court decision, but there could be some turbulence in the next couple of weeks due to environmental concerns raised by NGOs (Non-Governmental Organisations),” Kumworachai said.

Environmental groups may be planning for another salvo and file a case with the Supreme Court, analysts said.

“They (NGOs) are now processing the legal documents to file the petition and we will know in about two weeks what their decision is,” Kumworachai said.

With additional reporting by Helen Lee

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By: Nurluqman Suratman

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