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The Launch of Thailand Future Fund“Thailand Focus 2018 : The Future is Now”29th August 2018, Grand Hyatt Erawan Bangkok HotelPrapas Kong-IedDirector-GeneralState Enterprise Policy Office (SEPO)
Thailand’s Plan for Infrastructure DevelopmentTransportation infrastructure quality plays a crucial role in improving competitivenessSelected Regional Infrastructure Ranking from 137 economicsThailand’stransportationinfrastructure isstill developingcompared toother developedcountries in AsiaPacificCompetitiveness Ranking from137 CountriesOverall Ranking32ndInfrastructure Ranking43rdInfrastructure Quality67thRoad Quality59thRailroad Quality72ndPort Quality63rdAir Transport Quality39thOn 27 March 2015, the Cabinet approved the Transport Infrastructure Development Master Plan (2015 – 2022)which consists of 5 key programs, aiming to reduce cost of logistics and transportationTransport Infrastructure Development Master Plan 2015-2022Road Enhance capacity ofhighway network Develop roadnetworks to connectASEAN countriesSource: Ministry of TransportRail Upgrade railinfrastructure andoverall system Build double-trackand their extensionto bordersMass TransitAirports Extend mass transitrailway system inBangkok and vicinity Enhance capacity ofairports to be theregional center of airtransportation Improve quality ofservice and safety ofmass transit bus Establish aviationindustrial estatesSeaports Improve seaport onthe gulf of Thailandand Andaman sea2
Alternatives to Finance Thailand’s Important Infrastructure ProjectsThe Transportation Action Plan 2018 consisted of 44 projects with total investment budget of THB 2,021.3 billionSource: Public Debt Management OfficeSource: Ministry of TransportLimitations of Government’s Sources of FundingGovernmentBudgetCompeting funding needs with currentexpenditure and social projectsGovernmentBorrowingPublic debt level must be maintainedbelow 60% of GDPSOEs’ IncomeSOE’s annual cash flow is not sufficientto meet rapid demand of investmentPPPSome sectors or types of assets maynot be suitable for private participation3
Thailand Future Fund (TFF), An Alternative Funding VehicleTFF was established on 24 November 2016, following the approval of the Office of the Thai SEC,as a result of The Cabinet’s resolutionPSole government-sponsored infrastructure fund for investing in infrastructure projects to enhance Thailand’s competitiveness.PCommitted government holdings to ensure the success of the fund.PAlternative funding for infrastructure projects, lessening dependency on the Thai government annual’s budget and public debt.PPromote development of Thailand’s capital markets and provide investors with investment opportunities in quality infrastructure assetsof state agencies.DevelopedAssetsInvestment policy Initial Investment TFFValue creationfor sCabinetacknowledgedpotential projects TFF aims to invest in value-enhancing state agencies’infrastructure assets/projects to create long-term distributiongrowth potential Including expressways or toll roads, railways, electricity generationand distribution, airports, deep seaport, and other infrastructurebusinessesInitial asset injection will be Partial Toll Revenue collected from theexisting routes of EXAT’s expresswaysThe Cabinet also acknowledged the other two potential projectsof the Department of Highway (“DOH”) could be potentiallyinjected into TFF1. Bangkok – Baan Chang Highway No. 742. Bangkok Outer Ring Road Highway No.9
TFF’s Proposed Initial Structure and InvestmentsGeneral Investors (domestic and foreign),Ministry of Finance, and SOEsHolds investment unitsof SET listed entity Receives return throughdividends and capital gains TFF will receive 45% of EXAT’s two expressways’ tollrevenue for the period of 30 yearsThailand Future Fund (TFF)Injects capital45% of future toll revenue throughRevenue Transfer AgreementCabinet-approvedBrownfield ProjectsAsset ownerand operatorInvestmentCash flowDuring the initial stage, TFF will invest in twobrownfield projects owned and operated by theExpressway Authority of Thailand (EXAT).TFF will receive a fixed percentage of future revenueas governed by the Revenue Transfer Agreement (RTA)I. Chalongrat ExpresswayII.Buraphawithi Expressway EXAT plans to utilize proceeds from any funds raisedthrough TFF to develop its greenfield projectsI. Rama 3 - Dao Khanong - Western Outer Ring RoadExpresswayII.Third stage expressway system (N2 and East - WestCorridor section)5
EXAT Overview 11The Expressway Authority of Thailand (EXAT) is astate enterprise established under the Ministry ofTransport, founded in 1972.The system currently consists of eight expresswayswith a total length of 224.6 kilometers.Cabinet-approvedProjects for TFFOperationStartedChalongrat Expressway1996Details/Direction Total length of 28.2 kilometers Chatuchot - Ram Intra Ramkhamhaeng - Pattanakarn Chalerm Mahanakorn Expressway22BuraphawithiExpressway2000 Total length of 55 kilometers Chalerm Mahanakorn Expressway Bang Na - Bangpakong - Chonburi6
EXAT’s New Projects 2Short-term greenfield projects include Rama 3 Dao Khanong - Western Outer Ring Roadexpressway and Third stage expressway system(N2 and East-West Corridor section)Projects112Current StatusRama 3 - Dao Khanong – Western OuterRing Road Expressway Estimated cost: THB 30.4 billion EIA approved Currently in design process stage Expects construction to start in 2018Third stage expressway system (N2 andEast-West Corridor section) Estimated cost: THB 14.4 billion Feasibility study stage7
TFF Benefits1 Benefits of TFFP Provides fund raising alternative to the Thai government, leading to the acceleration of the Thai government investment ininfrastructure projects, which can be injected into TFF in the future, and enhancing the country’s competitiveness.P Allows for less dependency on the Thai government annual’s budget and public debt.P Provides opportunities to invest in high performance and stable income infrastructure projects to both institutional andretail investors.P Promotes the development of Thailand’s capital markets by adding diversity to investment products and attracting foreigninvestors to Thai capital markets.2Benefits for the First Fund Raising by EXAT’s AssetsP Long-Term DurationP Low Volatility The exclusive RTA has a duration of 30 years TFF is expected to benefit from long-termand stable revenue, supported by the longterm RTA and Thailand’s megatrends whichshould contribute to the continued orincreased usage of Initial ExpresswaysContract Duration of Thai IFFs at IPO rs16 Years12(6)Years11(7)Years TFF is expected to experience low volatility incash flows of the expressways Under the RTA, TFF will enjoy the share ofthe expressways’ toll revenue TFF will not bear the operating costs or capitalexpenditure of the expressways, with theexception of certain insurance costsP Incentivization Built-in incentive scheme to improve theoperation of the expressways by EXAT EXAT will retain a larger portion of the tollas set out in the RTA The mechanism ensures that EXAT and TFF’sinterests are aligned and increase in tollrevenue will be mutually beneficial forboth parties8
I. Rama 3 - Dao Khanong - Western Outer Ring Road Expressway II.Third stage expressway system (N2 and East - West Corridor section) Thailand Future Fund (TFF) General Investors (domestic and foreign), Ministry of Finance, and SOEs Cabinet-approved Brownfield Projects 45% of future toll revenue through Revenue Transfer Agreement
