It’s Unfortunate for PTT to be State-Owned Enterprise

As a state-owned enterprise in the energy sector, PTT Public Company Limited (SET: PTT), is expected to shoulder a heavier burden for households in Thailand, following the decision of policymakers to change the structure of gas price and call for compensation on operation shortfall.

Lowering the cost of living for Thai households is one of the key agenda for the new government, and it could be done through cutting electricity prices. Earlier this week, Thailand’s cabinet approved a restructuring of gas prices that are considered the root of this matter. It is the easiest and quickest method that has almost a 100% success rate.

In short, the restructuring plan will result in higher costs for PTT and tamper its profit margin, but could be beneficial to buyers such as power generators that could allow them to sell electricity at a lower price. By some estimates, this could cut PTT earnings by 20-30 billion baht per year, which is about 30% of total earnings in 2022.

Meanwhile, the Thai cabinet also agreed to call for 4,300 million baht of compensation in terms of “shortfall” from PTT. The company was practically in a dispute with the energy regulators regarding this matter, but when orders come from the cabinet, it is hard to say no, even though it requires the resolution of the board of directors to approve these measures.

Despite being a state-owned enterprise, PTT is also a public company that has nearly 49% of free float and also one of the popular stocks in the Thai market. These kinds of extortion would add more risk to shareholders, especially retailers as the company could lose a huge amount of profit for who knows how long.

This makes it obvious why the share price of PTT is not going anywhere with only 25% above its pandemic low in 2020. Even the SET Index that performed poorly this year is now about 40% higher than its pandemic low.

There are about 187,000 minor shareholders in PTT out of a total of over 192,000 shareholders. Now, the Board of Directors will need a good explanation if they will comply with the government when there are no questions asked to those that approved this ridiculous measure.