Thai Oil Plans Billion Baht Bond Issue
Thai Oil, the country's largest oil refiner, plans to issue Bt5 billion worth of bonds, which will be used mainly to adjust its debt portfolio during this quarter.
The company has overall debt of Bt48 billion, of which Bt40 billion is long term and Bt8 billion short term.
The bonds will have a maturity of between three and seven years, managing director Viroj Mavichak said yesterday.
"We have a strong financial position but think it's a good time to issue bonds, because interest rates are now much lower. We will mainly use these new bonds to extend our repayment period for short-term debt, not for new investment projects," he said.
Thai Oil joins companies like Advanced Info Service and Asian Property Development in selling bonds as borrowing costs drop amid a cooling in the inflation rate and the economic slowdown.
The yield on five-year government debt fell 159 basis points over the last three months to 2.45 per cent yesterday, said the Thai Bond Market Association.
The company completed its debottlenecking project last year, which boosted its refining capacity to 275,000 barrels per day.
It now plans to spend US$50 million to $100 million (Bt1.75 billion to Bt3.5 billion) this year on three ongoing projects: Thai Lube Base's expansion project, a final feasibility study for an aromatics plant and an ethanol plant.
However, it will review the feasibility of other investments, such as a residue-upgrading project in the first half of the year. This project, for the upgrading of residue into higher-value distillate products and processing of heavier and cheaper crude, previously required an investment of $1.5 billion to $1.6 billion.
"The project's investment was quite high, so we postponed it. However, we're reconsidering it, because the construction cost has become much lower, in line with the oil price," Viroj said.
He said Thai Oil would refine at full capacity this year, although oil demand is forecast to drop significantly.
"We have one of the most efficient refineries in the region, so we don't have to reduce our refining capacity. However, we'll increase our export proportion from 20 per cent in 2008 to 25-30 per cent this year, as domestic demand has declined," he added.
The company expects local demand to fall by 2 per cent from last year's level, particularly for fuel oil and jet oil.
Thai Oil predicts the global crude-oil price will average about $60 per barrel this year. The price of crude in the second half will be higher than in the first six months, Viroj said, as a result of the expected economic recovery.
Thai Oil and its five subsidiaries have combined assets worth Bt154.074 billion and posted sales of Bt333.9 billion in the first nine months of 2008.