trends in private investments and financing: a case study of thailand’s energy sector 28 nov 2007...
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Trends in private Trends in private investments and investments and financing: financing: A case study of Thailand’s A case study of Thailand’s energy sectorenergy sector
28 Nov 200728 Nov 2007Chuenchom Sangarasri Greacen, Palang ThaiChuenchom Sangarasri Greacen, Palang ThaiSairung Thongplon, Sairung Thongplon, Confederation of Consumer Organization, Confederation of Consumer Organization, ThailandThailand
Regional Training Workshop “Understanding investments and Regional Training Workshop “Understanding investments and investment treaties and agreements”investment treaties and agreements”FOCUS, Bangkok, ThailandFOCUS, Bangkok, Thailand
OutlineOutline
Privatization trendsPrivatization trends Investment trends Investment trends Financing trendsFinancing trends Implications for civil society Implications for civil society
advocacyadvocacy
Privatization trends:Privatization trends:the defeat of neo-liberal agendathe defeat of neo-liberal agendathe rise of nationalistic monopolistic the rise of nationalistic monopolistic “champions”“champions”
60s-80s: development of state-led, 60s-80s: development of state-led, centralized energy heavily influenced centralized energy heavily influenced by USAID, WB by USAID, WB
90s: Neo-liberal reforms: partial 90s: Neo-liberal reforms: partial privatization of SOE’s assets, IPPs, privatization of SOE’s assets, IPPs, (failed) Power Pool or Third Party (failed) Power Pool or Third Party AccessAccess
2000s: the rise of “National 2000s: the rise of “National Champions”Champions”
The “National The “National Champions”: the case of Champions”: the case of PTT, EGATPTT, EGAT PTT: privatized in 2001PTT: privatized in 2001 EGAT: IPO planned in 2006 but EGAT: IPO planned in 2006 but
aborted and later reversed aborted and later reversed through a court verdict in a through a court verdict in a historic lawsuit brought on by historic lawsuit brought on by consumer groupsconsumer groups
PTT: facing a similar lawsuit, PTT: facing a similar lawsuit, verdict expected next month verdict expected next month
Key features of PTT and Key features of PTT and (aborted)(aborted) EGAT privatizationEGAT privatization
Monopoly with noIndependent regulator
Listing in theStock market
Partial public-private status
To maximize “rent” (corruption revenue) by the ruling politicians in monopoly businesses through direct
shareholding (nominee funds) and policy corruption
Privatization of monopoly Privatization of monopoly utilitiesutilities : : aggression of money aggression of money politicspolitics
Politicians-cum-
businessmen
Cabinet
Parliament
Regulators
Listed companiesw/ ties to politicians
Bureaucracy State-ownedenterprises
Nominees
control
Make favorable policies
A snapshot of PTTA snapshot of PTT Market cap 1 trillion baht ($30bn), Market cap 1 trillion baht ($30bn),
15% of Thailand’s stock market15% of Thailand’s stock market
Modus OperandiModus Operandi to achieve to achieve “Aggressive growth” “Aggressive growth”
PTT as mother PTT as mother company with company with monopoly rights and monopoly rights and captive consumer captive consumer basebase
PTTEP as partially PTTEP as partially private subsidiary with private subsidiary with privileged access to privileged access to state benefits, support state benefits, support and PTT’s financial and PTT’s financial strengthstrength
PTTEP pursues risky, PTTEP pursues risky, high-return projects high-return projects abroadabroad
MOF
PTT
PTTEP
52%
66%
State privilege
sMonop. Consum
ers$ passthru
State privilege
s
Others
Others 34%
48%
Only 33% of PTTEP’s dividends returns to the stateOnly 33% of PTTEP’s dividends returns to the statePTTEP alone accounts for 20% of PTT’s net incomePTTEP alone accounts for 20% of PTT’s net income
กำ�� ไ รสุ�ทธิ� ปตท. (ล้��นบ�ท)
(20,000)
-
20,000
40,000
60,000
80,000
100,000
ชุ�ดข้�อมู�ล2 (6,381) 12,698 21,565 24,507 37,580 62,666 85,521
2542 2543 2544 2545 2546 2547 2548
PTT Net Profit (Million baht)
2006 = 95,2612005
1999
ชื่�� อ ต��แหน�ง กำรรมกำ�รบร�ษั�ท ผล้ตอบแทน ป� 2549 นายพรชุ�ย ร�จิ�ประภา ปล�ดกระทรวงพล�งงาน ประธานกรรมูการ บมูจิ. ปตท .^ 219,863.01 *
ประธานกรรมูการ กฟผ.^ 37500 (เฉพาะ เบ !ยประชุ�มู) กรรมูการ ปตท . เคมู�คอล 865,560
ประธานกรรมูการ บมูจิ. โ รงกล�$นน%!ามู�นระยอง^ ย�งไ มู'มู ข้�อมู�ล นายณอค�ณ สิ�ทธ�พงศ์+ รองปล�ดกระทรวงพล�งงาน กรรการ บมูจิ. ไ ทยออยล+ 85,000 ***
นายค�ร�จิ�ต นาครทรรพ รองปล�ดกระทรวงพล�งงาน กรรมูการ บมูจิ. ผล�ตไ ฟฟ,าราชุบ�ร โ ฮลด�!ง^ ย�งไ มู'มู ข้�อมู�ล (1,600,000
หากครบป/) นายไ กรฤทธ�1 น�ลค�หา อธ�บด กรมูเชุ2! อเพล�งธรรมูชุาต� กรรมูการ บมูจิ. ปตท .สิผ. 2,289,344
นายเมูตตา บ�นเท�งสิ�ข้ อธ�บด กรมูธ�รก�จิพล�งงาน กรรมูการ บมูจิ. ปตท . 2,640,000
นายพาน�ชุ พงศ์+พ�โ รดมูอธ�บด พ�ฒนาพล�งงานทดแทนและอน�ร�กษ์+พล�งงาน กรรมูการ บมูจิ. ผล�ตไ ฟฟ,าราชุบ�ร โ ฮลด�!ง
368,000 **** (~2,000,000 หากครบป/)
นายว ระพล จิ�รประด�ษ์ฐ์+ก�ลผ��อ%านวยการสิ%าน�กงานนโ ยบายและแผนพล�งงาน กรรมูการ บมูจิ. ปตท .สิผ.^
ย�งไ มู'มู ข้�อมู�ล (~2,000,000 หากครบป/)
นายสิ�ชุาต� จิ�นลาวงศ์+ห�วหน�าผ��ตรวจิราชุการกระทรวงพล�งงาน กรรมูการ บมูจิ. อะโ รเมูต�กสิ+^
ย�งไ มู'มู ข้�อมู�ล (~2,000,000 หากครบป/)
นายนเรศ์ สิ�ตยาร�กษ์+ผ��ตรวจิราชุการกระทรวงพล�งงาน กรรมูการ บมูจิ. บางจิาก 360,000
นายพ ระพล สิาคร�นทร+ กรรมูการ บมูจิ. ผล�ตไ ฟฟ,าราชุบ�ร โ ฮลด�!ง^ ย�งไ มู'มู ข้�อมู�ล (1,600,000
หากครบป/) กรรมูการ บจิ. ผล�ตไ ฟฟ,าราชุบ�ร ไ มู'มู ข้�อมู�ล
ท $มูา: รายงานประจิ%าป/ 2549 ^ เร�$มูด%ารงต%าแหน'งชุ'วง รมูต.พน. ป7ยสิว�สิด�1* ด%ารงต%าแหน'งกรรมูการ 31 ว�น *** ด%ารงต%าแหน'งกรรมูการ 10 ว�น** ด%ารงต%าแหน'งครบ 12 เด2อน **** ด%ารงต%าแหน'งกรรมูการ 8 เด2อน
ผ��ตรวจิราชุการกระทรวงพล�งงาน
Conflict of interests: Conflict of interests: public policy vs private profitspublic policy vs private profits
Uneven attention by top-level energy Uneven attention by top-level energy bureaucrats: official duty vs. board meetings of bureaucrats: official duty vs. board meetings of energy companyenergy company
Participation in Participation in meetingsmeetings
PTT Plc. board PTT Plc. board
meetingsmeetings**Ft subcommittee Ft subcommittee
meetings**meetings**
Mr. Cherdpong SiriwitMr. Cherdpong SiriwitEnergy Permanent SecretaryEnergy Permanent Secretary
1313/1313/
4/64/6
Mr. Metta BunterngsukMr. Metta BunterngsukDirector of EPPODirector of EPPO
8/98/9 5/65/6
*2003 Annual Report of PTT Plc. **The subcommittee on automatic tariff adjustment mechanism (Ft charge), from Oct 2003-2004. Gas price charged by PTT was a main cost of the electricity tariff. Mr. Cherdpong and Metta served as the chairman and deputy chairman of the Ft subcommitee respectively.
Government officials look after the private sector’s interests better than
the public’s?
100%
90%
67%
83%
Trends in Trends in privatization:privatization:summarysummary NationalisticNationalistic Monopolistic with regulator to Monopolistic with regulator to
counter-balancecounter-balance Collusion of politicians-Collusion of politicians-
bureaucrats-businesses to bureaucrats-businesses to maximize corruption rent, maximize corruption rent, exploiting private-public identityexploiting private-public identity
Trends in investment:Trends in investment:Unnecessary investmentsUnnecessary investments “cooked “cooked up” by a consortium of “politicians-up” by a consortium of “politicians-technocrats-businesses” to churn technocrats-businesses” to churn profitsprofits Case in point: the 2007 Power Development Plan (PDP) Case in point: the 2007 Power Development Plan (PDP)
calls for a doubling of capacity and calls for a doubling of capacity and ฿฿2trn investment in 2trn investment in power sector alonepower sector alone
Clear gains in energy stocks as a result of business-Clear gains in energy stocks as a result of business-friendly policyfriendly policy
Index Market Cap.
(M Baht) Index
Market Cap. (M Baht)
SET index 732.3 5,398,975 894.34 6,902,455 22.1%Energy - total 1,549,720 2,416,915 55.4% Energy - PDP-related 1,189,947 1,975,093 66.0% Energy- PTT-related* 1,178,612 1,946,230 65.1% Energy - PDP/PTT-related 1,379,886 2,259,729 63.8% Energy-non-PDP/PTT 25,212 22,126 -13.2%Non-energy SET index 3,849,255 4,485,540 8.7%
*"PTT-related" = PTT having more than 25% shares (voting rights) in the company
Share value increase in 1
year (%)
3-Nov-06 2-Nov-07
Too high ?
1,000 MW/yr increase should be sufficient?
Peak Demand Increase Per Year (MW):Actual vs. March-07 Forecast
-500
0
500
1000
1500
2000
2500
1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021
Actual Mar-07 Forecast
15 yr average = 914 MW
14 yr avg = 1,884 MW
Past averages:20 yr = 897 MW10 yr = 808 MW
Investment based on unrealistic demand Investment based on unrealistic demand forecast forecast Increase in peak demand/year (MW)Increase in peak demand/year (MW)
Supply options Supply options considered in PDP2007considered in PDP2007
Only capital Only capital intensive, intensive, centralized centralized gas/coal plants, gas/coal plants, large hydro, large hydro, nuclear considerednuclear considered
DSM/CHP/RE not DSM/CHP/RE not considered as considered as options & very options & very limitedlimited– DSM only 0.2% of DSM only 0.2% of
savingsaving– CHP SPP capped at CHP SPP capped at
1,700 MW1,700 MW– RE/CHP VSPP RE/CHP VSPP
capped at 1,100 MWcapped at 1,100 MW
L = low case B = base case H = high case1=“lowest cost” 2=“probable coal scenario” 3=“LNG + increase power imports”
กำ��ล้�งกำ�รผล้�ตใ หม�ท �ถู"กำบรรจุ�ใ นแผน PDP2007 (MW)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
L1 B1 H1 L2 B2 H2 L3 B3 H3
SPP Nuclear Gas Coal Gas Turbine Import
No need to build new No need to build new green-field power plants in green-field power plants in 15 years15 years Installed capacity as of May 2007 Installed capacity as of May 2007 27,788 MW27,788 MW
(Reserve margin = 22% )(Reserve margin = 22% )
Planned capacity additions by 2021 (excluding all green-field Planned capacity additions by 2021 (excluding all green-field coal-fired, nuclear, gas power plants, uncommitted hydro coal-fired, nuclear, gas power plants, uncommitted hydro imports) imports)
== 14,876 MW14,876 MW
Substract decommissioned plants Substract decommissioned plants -8,462 -8,462 MWMW If allowing more CHP/cogen If allowing more CHP/cogen == 2,000 2,000 MWMW If implementing additional DSM/EE measuresIf implementing additional DSM/EE measures == 1,500 1,500 MWMW If allowing greater contribution from RE If allowing greater contribution from RE == 500 500
MWMW
Total generation capacity in 2021Total generation capacity in 2021 = = 38,202 38,202 MWMW
2021 peak demand 2021 peak demand (if grows 1000 MW/yr)(if grows 1000 MW/yr) = = 32,568 32,568 MWMW
Reserve margin*Reserve margin* = = 17%17%*Required minimum reserve margin of 15% to ensure system reliability
Secondary problemSecondary problemPrivate participation in Private participation in investmentinvestment
Half of the capacity additions -> Half of the capacity additions -> private sector (IPP bidding & private sector (IPP bidding & imports)imports)
EGAT and its subsidiaries have EGAT and its subsidiaries have similar conflict of interest issues similar conflict of interest issues as PTT’sas PTT’s
Competing IPP projects have Competing IPP projects have cross shareholderscross shareholders
ผล้�ตไฟฟ%�อ�สุระ (IPP)
700 MW
ร�ชื่บ�ร เพ�เวอร* (IPP) 1,400 MW
ผล้�ตไฟฟ%�ร�ชื่บ�ร 3,645 MW
ไตรเอนเนอยี (IPP) 700 MW
น�,�เท�น 2 1,070 MW
ระยีอง1,232 MW
ขนอม824 MW
แกำ�งคอยี Gulf (IPP) 1,468 MW
BLCP(IPP) 1,400 MW
RATCH
Gulf Electric
EGCO
ปตท.สุพ.
Thai Oil Power
CLP
บ��นป"
กำฟน.
กำฟผ.
Thai Oil Plc.
ปตท.
บร�ษั�ท ผล้�ตไฟฟ%� แล้ะน�,�เยี/น
SPPs118 MW
SPPs374 MW
SPPs789 MW
15
%
56
%
50%
5
0%
22.4%
25
.41
%
33
%33%
34%
45
%
1
5%
10%
26
%6
6%
50
%
25
% 10
0%
50% 25
% 10
0% 1
00
%
15
-8
0%
10
0%
55%
5
0%
ต�วเลข้ % แสิดงสิ�ดสิ'วนการถื2อห��น
Cross-shareholding in energy business
ปตท . กฟน . กฟผ . บ�านป�
RATCHThai Oil Plc.
Thai Oil Power
ผล�ตไฟฟ,าอ�สิระ
700 MW
CLP
ผล�ตไฟฟ,าราชุบ�ร
3645, MW
ไตรเอนเนอย
700 MW
BLCP1,400 MW
ระยอง 1,232 MW
ข้นอมู 824 MW
แก'งคอย 1468, MW
ราชุบ�ร เพาเวอร+
1400, MW
EGCOGluf
Electric
Glow Energy
Glow IPP
713 MW
ผล�ตไฟฟ,าและน%!าเย:น
50%
50%
100100
35%
30%
35%
45% 14.99%22.42%25.41%
50%
100
25% 100% 50%100
New IPPs
15%
IPP (ชุลบ�ร ) 735 MW
IPP(ระยอง)
1704 MW IPP (ราชุบ�ร )
1734 MW IPP
นครศ์ร ธรรมูราชุIPP (ราชุบ�ร ) IPP (ระยอง) 1126 MW
IPP โรจินะ(อย�ธยา)
1587 MW
ราชุบ�ร อ�ลล�ยแอนซ์+
100%
สุปป.ล้�ว
ชื่ .กำ�รชื่��ง
ท�งด่�วนกำร�งเทพฯRATCH
ท มคอนซั�ล้
น%!าง<มู 3 440 MW
25% 25% 28
5%125. % 1%
เซ์าอ สิท+ เอเชุ ย เอนเนอจิ
น%!าง<มู 2 454 MW
น%!าบาก 1 น%!าบาก 2
MDX
ห�วยเฮาะ 126 MW
เท�น-ห�นบ�น 220 MW
EGCOอ�ต�เล้ �ยีน
ไทยี กำฟผ.ศู"นยี*อ�ตสุ�หกำรรม
โรจุนะ
น%!าเท�น1 523 MW
น%!าเท�น2 920 MW
น%!าเง >ยบ 260 MW
สุปป.ล้�ว
25% 15%20%25%40%
25%
15% 20%
45%60%
55%20%29%
GMS Power
275
225. %
น%!าโมู 105 MW
MHW
25%
Cross shareholding in hydropower projects
Trends in financing:Trends in financing: IFIs more or less irrelevant in IFIs more or less irrelevant in
Thailand and becoming irrelevant Thailand and becoming irrelevant in Mekongin Mekong
Less debt, more equityLess debt, more equity– PTTEP, PTT -> DE ratio = 1:1PTTEP, PTT -> DE ratio = 1:1– Driven by massive profits, high Driven by massive profits, high
cashflowscashflows Debt: less loan, more bonds issuedDebt: less loan, more bonds issuedGreater reliance on the stock/bond markets for
financing for greater control by energy companies.Savings also shifted from traditional bank deposits
to investment in securities (shares and bonds)
PTT debt profile (2006)PTT debt profile (2006)
Million BahtMillion Baht Debt – BahtDebt – Baht 52,940.73 52,940.73 Debt – foreign currencyDebt – foreign currency 29,315.14 29,315.14 BondsBonds – – BahtBaht 72,181.70 72,181.70 Bonds – foreign currencyBonds – foreign currency 43,327.16 43,327.16 Contracted loansContracted loans 574.58 574.58 TotalTotal 198,339.31198,339.31
Lending by financial institutions being replaced by debt raised directly from disperse investors in bond markets, giving energy companies greater control and bargaining
power over capital
Implications for Implications for advocacy workadvocacy work Much more attention needed on Much more attention needed on
governance of the stock/bond marketsgovernance of the stock/bond markets– Disclosure of foreign fundsDisclosure of foreign funds– Conflict of interestConflict of interest
Not sufficient to focus on governance of Not sufficient to focus on governance of investment/financing (e.g. concession investment/financing (e.g. concession agreement, lending institutions)agreement, lending institutions)
Need to go after policy makers, Need to go after policy makers, monopoly energy companies to improve monopoly energy companies to improve planning process & sector governance, planning process & sector governance, and eliminate unnecessary investmentsand eliminate unnecessary investments