Thailand Future Fund IPO delayed by cost concerns

Thailand Future Fund IPO delayed by cost concerns

The planned initial public offering (IPO) of the Thailand Future Fund (TFF) will be pushed back for another three months to September as concerns over the cost of launching the fund continue.

Expressway Authority of Thailand (Exat), the owner of two expressways to be pooled as underlying assets in the government's infrastructure fund, said it was concerned about the high financial costs.

According to Exat, the fund-raising costs of the TFF would exceed the cost of borrowing backed by the Finance Ministry, said Chanvit Nakburee, deputy director of the State Enterprise Policy Office (Sepo).

Exat is not the only state agency concerned about the TFF's financing costs.

The Transport Ministry has also questioned the issue, although Sepo, through the Budget Bureau, persuaded the ministry that the infrastructure fund could help avoid an increase in public debt.

Sepo will clarify the TFF's fund-raising costs to Exat's board of directors soon, Mr Chanvit said.

Even though the TFF's fund-mobilisation will carry higher financial costs than borrowing backed by the Finance Ministry, it is intended to help the government raise funding to finance construction of infrastructure projects and avoid a rise in public debt, he said.

With the TFF, the government will have room to run up debt to fund publicly beneficial projects, including hospitals, telecommunications and safety nets for retirees.

Even though public debt is still below the 60% ceiling, the government must seek other funding sources for its big-ticket infrastructure projects.

Public debt stands at 43% of GDP, meaning there is only 2.6 trillion baht left before reaching the threshold, Sepo director-general Ekniti Nitithanprapas said recently. The government's big-ticket infrastructure projects for transport alone need a combined investment of 2.3 trillion baht.

Moreover, if public debt reaches the threshold under the Finance Ministry's sustainable framework, it could erode the creditability of government's bonds, pushing up both their cost and that of state investment projects.

The state plans to raise the first batch of 40-50 billion baht from the TFF IPO.

The plan entails using two brownfields -- Chalong Rat Expressway (Ram Intra-At Narong) and Burapha Withi Expressway (Bang Na-Chon Buri) -- as underlying assets.

Mr Chanvit said 45% of future revenue from Chalong Rat Expressway and Burapha Withi Expressway, or 44 billion baht, will be sold to investors through the TFF.

He denied a report that the TFF's return would be 8%, saying the rate will depend on the outcome of the book-building process to gauge investor demand.

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