SRT gives PTT until end of the year to decide on renewal of land lease contract for its Bangkok HQ

SRT governor Prapat Chongsa-nguan said that if PTT failed to meet that deadline and agree on a rental fee for the renewal period, the state agency would consider this as PTT declining to extend the contract. If so, the SRT will start putting the land to other uses.

He added that the SRT had urged PTT chief executive officer Pailin Chuchottaworn to settle the matter. He said many private firms were interested in leasing the 23-rai (3.7-hectare) plot, which is in a prime business area.

The 30-year rental contract expired in March. The PTT board recently instructed the company to negotiate with the SRT to extend the lease for another 30 years, but subject to the condition that PTT would not have to pay rent as requested by the rail agency.

The board considered that the original contract between PTT and the SRT was made in a manner that was equivalent to PTT’s purchase of the land, so the company had no need to pay rent for the renewal period. 

Energy Minister Pongsak Ruktapongpisal has also said that PTT should not have to pay rent for the contract extension, as it had already paid a one-time amount to the SRT as if it had bought the land. 

Since the state agency’s land could not actually be purchased, the original contract was drawn up in the manner of a long-term lease contract. Once the contract expired, the SRT should therefore automatically renew the contract for PTT without any conditions, Pongsak has said. 

 

Rate of return 

PTT and the SRT discussed the contract extension last month, but failed to reach a satisfactory conclusion. 

According to a study by an SRT adviser hired to evaluate the rate of return for the plot, the rental income the agency should gain from PTT for another 30 years is Bt1.792 billion, with PTT being required to pay such an amount on a further one-off basis in exchange for contract renewal. The SRT wants PTT to pay such a fee by the end of December, with retroactive effect from March. 

PTT, however, wants to pay only Bt800 million for the contract renewal, of which Bt200 million is for the plot itself and Bt600 million for the lease of buildings on the land. 

Prapat said he had never seen any document to verify that PTT had paid for the land as equivalent to a one-time purchase. Documents indicate that once the contract expired, it had to renew it and pay for a rental fee to cover the new 30-year term. The calculated amount of Bt1.792 billion should not be deemed too high, when compared with the oil and petrochemical giant’s revenue and profit, he said.

Prapat added that when the land-rental contract was made with the SRT 30 years ago, the company was still the Petroleum Authority of Thailand, so the calculation for the rental fee was based on the fact that it was the state enterprise. But now PTT is a listed firm, so it should be subject to a higher rental fee in the renewal period, he argued.

PTT also has mulled the idea of purchasing another land plot, on which it can own the title, to erect a new headquarters to end this issue with the SRT.