In June 2007, the government announced the 2007 Independent Power Producer (IPP) solicitation for 3,200mw, using a power purchase agreement similar to that used in its successful 1994 solicitation. Seven projects were awarded Power Purchase Agreements (PPAs) in that round – all achieved financial close, and all but one have commenced production. On October 19 2007, 20 proposals were submitted. The announcement of successful bidders is expected before the general election on December 23 2007.
Potential investors will have several concerns on their due diligence checklists. PTT is the sole buyer of natural gas from petroleum concessionaires, and the sole seller of gas-to-gas-fired power plants. A suit was filed against PTT in September 2006, seeking to reverse the 2001 corporatisation of the Petroleum Authority of Thailand. Special interest groups filed a suit in the Administrative Court, following their success in reversing the corporatisation of the Electricity Generating Authority of Thailand (EGAT) in March 2006. The government has taken several steps to forestall that result. It has enacted a Royal Decree, published on February 16 2007, withdrawing special powers, rights and benefits granted to PTT in 2001. It has also set up an interim regulatory body for the electricity industry. On November 7 2007, the National Legislative Assembly approved the Energy Industry Act, which will become law upon publication later this year. It provides for a new regulatory regime for electricity and natural gas business, and the establishment of the Electricity Regulatory Board. Because PTT conducted an Initial Public Offering (IPO), listed its shares, and has the largest market capitalisation on the Stock Exchange of Thailand (SET), any reversal of corporatisation would be a serious event.
The Foreign Business Operations Act (FBOA) prohibits companies managing 43 restricted businesses if foreigners own 50% or more of the shares, unless (in the case of lists two and three) a foreign business licence is obtained. An amendment to the FBOA is still pending in the National Assembly. It would introduce voting rights (under law, articles of association or agreement) and management control as additional elements in determining the number of shares held by foreigners, when administering the ceiling in the FBOA. The amendment addresses the practices of issuing preference shares with diluted voting rights to Thai shareholders, and/or using Thai nominees to circumvent ceilings on foreign ownership. The FBOA does not apply to electricity-generating business, or to holders of petroleum concessions. Service companies providing services to these businesses can obtain foreign business licences as a matter of routine, or have exemptions under bilateral treaties. Petroleum concessionaires and generators are not subject to statutory ceilings on foreign ownership, and have rights to purchase land under the Petroleum Act and the Investment Promotion Act (BOI).
The government announced in May 2007 the 20th round of bidding for petroleum concessions, offering 56 blocks onshore and nine in the Gulf of Thailand. Bids will be accepted on the 15th day of each month for one year. The government will take bids from both Thai and foreign companies. Amendment no. 6 to the Petroleum Act was published on October 17 2007. The amendment provides financial incentives for marginal and declining fields. It allows for faster governmental decisions in administering concessions, and it updates provisions applicable to operations and environmental and social matters.
After the September 19 2006 coup, an interim government was installed and an interim National Assembly appointed. The new constitution was approved by a referendum in August 2007. A general election is scheduled on December 23 2007.