Capital Markets’ Role in Thailand Energy Sector
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Capital Markets’ Role in Thailand Energy Sector
July 2014
2
Global Privatization – Rationales and Lessons Learned
Global Evidences – Emerging Economies Privatization
There are a considerable number of privatizations remain in the pipeline
“If privatization is an evil, why governments in so many countries have done and are still working on privatizations?”
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
3 4 13 24 26 24 22 22 25 67 50 42 39 16 16 20 34 53 105 133 38
28111
341497 519
794
1,108993 1,010
757
1,796
385
188 164 140 171 225 288 249 236 197
Sales proceeds in US$ billion Number of transactions
A database of privatization records 10,197 transactions in 139 developing countries between 1988-2008, yielding US$ 773.3 billion revenues
Most profoundly, during the 1990s, a variety of rapid privatization techniques were adopted by the countries of Eastern Europe and the former Soviet Union, transforming their economies after the fall of communism
The transition of Chinese economy from communist to market-based has shown remarkable result. China contributed 6.4% of the total sales proceeds from 1988 – 1999 but contributed more 37.7% from 2000 - 2008 -------------------------------
Source: WorldBank Privatization Data 1988 - 2008
3
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Cabinet Approval on Management Policy for SOEs and Development of PTT
The National
Economic and
Social
Development
Plan: The Fifth
Plan (1982-1986)
Privatization Activities in Thailand
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
2 August 1989IPO Size: THB 6,000 mmSET Market Cap: THB 388 bn
19 July 1991IPO Size: THB 5,700 mmSET Market Cap: THB 707 bn
Cabinet Approval on preparation guideline and privatization process
1
2
10 June 1993IPO Size: THB 1,318 mmSET Market Cap: THB 1,507 bn
16 January 1995IPO Size: THB 4,488 mmSET Market Cap: -THB 3,066 bn
27 July 1996IPO Size: n/aSET Market Cap: THB 3,409 bn
6 December 2001IPO Size: THB 32,200 mmSET Market Cap: THB 1,607 bn
2 November 2000IPO Size THB 7,540 mmSET Market Cap: THB 1,336 bn
11 March 2004IPO Size: THB 17,328 mmSET Market Cap: THB 4,514 bn
17 November 2004IPO Size: THB 3,058 mmSET Market Cap: THB 4,327 bn
--------------------------Source: SET, Phatra Securities Estimates
SET INDEX
4
Privatization of PTT
200
250
300
350
400
450
1-A
ug-0
1
8-A
ug-0
1
15-A
ug-0
1
22-A
ug-0
1
29-A
ug-0
1
5-S
ep-0
1
12-S
ep-0
1
19-S
ep-0
1
26-S
ep-0
1
3-O
ct-0
1
10-O
ct-0
1
17-O
ct-0
1
24-O
ct-0
1
31-O
ct-0
1
7-N
ov-0
1
14-N
ov-0
1
21-N
ov-0
1
28-N
ov-0
1
5-D
ec-0
1
12-D
ec-0
1
19-D
ec-0
1
26-D
ec-0
1
2-Ja
n-02
9-Ja
n-02
16-J
an-0
2
23-J
an-0
2
30-J
an-0
2
6-F
eb-0
2
13-F
eb-0
2
20-F
eb-0
2
27-F
eb-0
2
6-M
ar-0
2
13-M
ar-0
2
20-M
ar-0
2
27-M
ar-0
2
30
33
36
39
42
PTT (RHS)
SET (LHS)
Listing Date:6 December 2001
Pre-Deal Marketing:15 – 29 October 2001
Decision on launching and determine price:26 October 2001
IPO Filing Became Public:8 October - 7 November 2001
Management Road Show:29 October - 16 November 2001
Share Subscription Period:12 - 16 November 2001
Decision on Pre-Deal Marketing:8 October 2001
9/11
Event
PTT IPO Price
--------------------------Source: SET, Phatra Securities Estimates
THB Per Share
5
PTT’s Offering Structure
Privatization Process Coordinator
Domestic Bookrunners
Total Size THB 32,200 mm(1)
IPO Shares 920 mm sharesIPO Price THB 35
International Bookrunners
9.99% 18.37% 35.88% 35.76%
Selling Agents
Domestic International
Thai Institutional Investors
Syndicate Retails(2) General PublicInternational Institutional Investors
-------------------------------------(1) Includes overallotment shares(2) With +20 securities firms as underwriters
6
PTT’s Price Performance
PTT’s Price Performance is In-line With Comparable
-------------------------(1)Simple Average of Comparable companies comprises CNOOC, Sinopec, and PetroChina(2)Comparable prices are rebased to PTT’s IPO price at THB 35
SET INDEX
De
c-0
1F
eb
-02
Ma
y-0
2A
ug
-02
Oct
-02
Jan
-03
Ap
r-0
3Ju
n-0
3S
ep
-03
No
v-0
3F
eb
-04
Ma
y-0
4Ju
l-0
4O
ct-0
4Ja
n-0
5M
ar-
05
Jun
-05
Au
g-0
5N
ov-
05
Fe
b-0
6A
pr-
06
Jul-
06
Oct
-06
De
c-0
6M
ar-
07
Ma
y-0
7A
ug
-07
No
v-0
7Ja
n-0
8A
pr-
08
Jul-
08
Se
p-0
8D
ec-
08
Ma
r-0
9M
ay-
09
Au
g-0
9O
ct-0
9Ja
n-1
0A
pr-
10
Jun
-10
Se
p-1
0D
ec-
10
Fe
b-1
1M
ay-
11
Jul-
11
Oct
-11
Jan
-12
Ma
r-1
2Ju
n-1
2S
ep
-12
No
v-1
2F
eb
-13
Ap
r-1
3Ju
l-1
3O
ct-1
3D
ec-
13
Ma
r-1
4Ju
l-1
40
2
4
6
8
10
12
PTT
Comps
7
Historical Spreads and Oil & Gas Prices
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q2014
Singapore Hydrocracking Margin(1)
2.19 1.61 4.04 7.54 7.00 5.45 7.65 6.14 3.64 4.59 8.26 7.49 6.19 5.98
Crude Oil – Arab Gulf Dubai(2) 18.28 26.24 27.9 33.11 53.19 56.71 89.06 37.02 78.29 88.54 104.84 106.67 107.89 104.63
Naphtha Singapore(3) 18.55 31.05 34.95 40.55 54.65 59.75 94.65 29.25 79.55 95.65 99.5 103.2 107.36 102.42
(US$/bbl)
-------------------------------(1) Thai oil Analyst Presentation for 2001 – 2005 and Thomson Reuter for 2006 – 2014 (2) Bloomberg(3) Bloomberg
8
PTT Group Use of Proceeds Raised from PublicProceeds from Public Shareholders
PTT IPO
PTTEP IPO
PTTEP PO'94
PTTEP PO'98
PTTEP PO'12
TOP IRPC BCP Total Proceeds
28.0 1.3
6.54.8
32.0
14.6
9.2
16.2 112.6THB (bn)
Total PTTEP: 40.6
------------------------Source: SETSmart and Company Prospectus
9
PTT Group Use of Proceeds Raised from Public
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
50
100
150
11 15 2141
92108
135151 158
129 132143
162
Capital Expenditure of THB 1.3 trn were Invested(1)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
50
100
150
7 10 15 23 32 4355 39 44 46 52 50 52
PTT PTTEP TOP PTTCH PTTAR PTTGC IRPC BCP
Paid More Than THB 469.7 bn of Tax Expenses(1)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0.0
50.0
100.0
150.0
2 10 11 1527
6250
64
3646
59 5970
Total Dividend of THB 510.3 bn was Paid to Public Shareholders(1)
THB bn
THB bn
THB bn
------------------------(1) Excludes RRC, ATC, TOC and NPC due to limited information (2) SETSmart and Company Prospectus
10
Investment Value and Return of Refinery
Customary Refinery Assumptions
Plant capacity 150,000 bbl/d
Investment cost per bbl USD 12,500
Total project cost (USD) USD 1,875 mm
USD / THB 32.0 per 1 USD
Total project cost (THB) THB 60 bn
Project life 25 years
Cash cost USD 1.3/bbl
Depreciation policy 4.0% per annum
Market IRR for refinery globally:
12 – 13% To achieve 12 – 13 % IRR under the assumptions on the left
Implied IRR for refinery company
GRM USD / bbl Implied IRR
USD 4 / bbl 4.0%
USD 5 / bbl 8.6%
USD 6 / bbl 12.8%
USD 7 / bbl 17.0%
If you were to build a newrefinery plant…
GRM of USD 6 / bbl is needed to maintain international market IRR of 12.8%
11
Market Replacement Cost of Refinery The Case of BCP
Market Cap Total net debt BCP EV Non refining EV Implied Refining EV
39.9
18.5 58.5 21.5
36.9
THB (bn)
(1)
------------------------Based on BCP’s closing price of THB 29.0 per share (1) Total net debt excludes net debt from solar farm businesses
BCP CDU Capacity: 120,000 bbl
Implied EV / CDU
(Market Replacement Cost)
USD: 9,610 /bbl/DAssume USD/THB: 1/32.0
12
Capital Required to Nationalize PTT Group of Companies
Nationalizing PTT Group of companies requires at least THB 802.5 bn
This calculation does not include the value of non-listed subsidiaries such as, SPRC and GPSC
____________________Source: SETSmart
Total Buyback
312,615.7
222,544.1
52,859.6
154,399.735,244.1
24,860.3 802,523.5
THB (bn)
Public Shareholding Percentage
PTT 34.0%
PTTEP 34.7%
PTTGC 50.1%
IRPC 52.0%
BCP 62.8%
SPRC 36.0%
GPSC 30.1%
Tota
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