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Business Deals

Thailand's PTT seeks bidding partner for $7bn rail project

Energy group expects high-speed link to cut logistics costs and boost retail revenue

Thai energy group PTT sees opportunities to expand its retail business -- an important revenue generator --  along the proposed high-speed rail line.   © Reuters

BANGKOK -- Thai oil and gas group PTT is in discussions with potential partners about a joint bid for an estimated $7 billion high-speed train project linking three major airports, as part of the country's Eastern Economic Corridor plan to promote high-value manufacturing

The move would pave the way for Thailand's largest company by market value to make its first investment in railway operations. PTT believes that operating a railway line would help it cut logistics costs, as well as offer new expansion opportunities for its retail business, which is due to float on the Thai stock exchange by next year.

PTT would not bid alone, said Chansin Treenuchagron, the state-owned conglomerate's new president and CEO. The company was seeking partners with rail expertise to form a consortium for a bid.

"We are in talks with several companies," he said, including two that operate rail mass transit. Chansin cited BTS Group Holdings -- the majority shareholder of Bangkok's Skytrain system -- and Bangkok Expressway and Metro Public Company, often called the Blue Line.

The deadline for submitting a bid is Nov. 12. The company’s board in April agreed in principle to exploring a bid for the high-speed rail project.

Chansin argued that building and operating a high-speed rail line could help lower the group's logistics costs because most of PTT's units operate on Thailand's eastern seaboard, which the government aims to upgrade with new infrastructure as part of the economic corridor project.

"More than 50% of our group's operations, including an oil refinery unit, a gas separation unit, power plants and petrochemical production plants -- and thousands of our employees -- are in the EEC area," he said. "So, we think if we won the right to operate the train that links the area, it will help cut costs and create value to our assets and our supply chain."

Operating the railway could also help PTT boost retail revenue, a priority for the company. "If we win the project, we could have an opportunity to expand our retail business, such as placing Cafe Amazon at train stations," Chansin said, referring to the PTT coffee shop brand that has 2,557 locations at home and in Japan, Laos, Cambodia, Oman and the Philippines.

PTT's retail and consumer business, which generates around 20% of overall net profit of $2.1 billion in the first half of this year, was spun offin 2017 and renamed PTT Oil and Retail ahead of a flotation on the Thai stock exchange expected by next year. 

Fourteen other Thai businesses expressed interest in the rail project, along with seven Chinese companies including China Railway Construction, China State Construction Engineering and Sinohydro, four from Japan, two from France, two from Malaysia, one Italian company and a South Korean consortium, according to the State Railway of Thailand, the state-owned operator that oversees the bidding.

The 220 km route will connect Suvarnabhumi, Don Mueang and U-Tapao airports, marking the first large infrastructure project to be built in the Eastern Economic Corridor. The rail project will shorten travel time between Bangkok and the corridor to less than one hour.

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