PTTEP chief reassures investors on move to take over Cove energy

Several brokerage houses expected PTTEP to raise capital to finance the 1.22-billion pound sterling (Bt60.5 billion) acquisition. This led to a continued fall in the stock price and market capitalisation.

Chief executive officer Tevin Vongvanich said investors should not be overly concerned over recapitalisation, as the acquisition is meant to sustain growth and returns thanks to the huge gas reserves in the Mozambique gas field, which is three or four times as high as reserves in the Gulf of Thailand.

Investors’ benefits are the priority, he said, adding that the company was finalising the financing method. UBS, which is advising PTTEP on the acquisition, on May 23 signed a deal to provide 950 million pound in financing, structured as a one-year bridge loan.

"We are considering financing options – borrowing or recapitalisation. It’s not final yet. But if we have to raise capital, we will be concerned about the impact and investors’ benefits. At the same time, we need to maintain the growth of return, which has been rising since listing. Recapitalisation should not raise concerns, as we will maintain investor return at a high level," he said.

Tevin noted that some of the financing would come from cash flow and the rest from loans. The company needs to balance revenue and expenses in line with the policy to maintain financial strength and growth in investor return, he added.

From May 23, the company has 28 days to complete the offer. Last week, it raised its offer for Cove Energy by 25 per cent from the February bid to beat Royal Dutch Shell.

Since the new offer was announced on May 23, PTTEP’s share price has fallen. At Bt153 yesterday, the price was at a six-month low. At Bt507.8 billion, the market capitalisation has also dropped by more than Bt28.2 billion from the May 22 level of Bt536 billion.

Meanwhile yesterday, PTTEP received written consent from Mozambique’s Ministry of Mineral Resources for the indirect acquisition of a gas field in the African country, bringing the Thai company another step closer to successful acquisition of Cove Energy.

The consent was one of two conditions imposed by PTTEP’s subsidiary PTTEP Africa Investment (PTTEP AI) for the acquisition of Cove Energy. The other is that Cove Energy’s board of directors must encourage shareholders to sell their shares to PTTEP AI.

The consent was required as a result of the indirect change of control of Cove Mozambique’s interest in the country if the recommended cash offer is finalised.

The granting of the consent confirms that the Mozambican government has strong confidence and trust in the capability of PTTEP to increase and strengthen the energy supply to both Thailand and Mozambique, Tevin said.