With treasury centre licence, PTTEP eyes pioneering role

PTTEP is the first Thai company to have received a treasury-centre licence, a type of licence that has been promoted by the Bank of Thailand for the past decade. 

The company received the licence last week.

Penchun Jarikasem, executive vice president for PTTEP’s Finance and Accounting Group, yesterday shared the company’s reasons for applying to become a treasury centre, which she said was a widely used manoeuvre in the international market due its key feature being a tax incentive. 

However, although in Thailand there is no tax incentive for a corporate with a treasury-centre licence, PTTEP had sought a licence as it wanted to have a tool for managing the cash and liquidity of its wholly owned subsidiaries and support its future investment, she explained.

Moreover, it wants to be a Thai pioneer in using this type of financial tool, which could improve the efficiency of other companies if they were to follow suit, she added.

Penchun referred back to an earlier example of PTTEP’s financial pioneering in 2010, when it became the first non-financial institution in Thailand to place hybrid instruments on the Thai market.

Now, under the treasury-centre licence, the company can conduct liquidity management, foreign-exchange risk management, netting and act as a re-invoicing agent, with the latter being the next step that it wants to focus on.

“We want to have a world-class finance operation, in which the goal is to be an in-house bank by 2020 to support the business plan of PTTEP in doubling production volumes and sales volumes from the current 340 billion-350 billion and 317 billion barrels per day, respectively. Therefore, we have to have efficient financial management in order to ensure we can achieve this,” said the executive.

As a treasury centre, PTTEP will centralise the management of the international-currency liquidity of 20 wholly owned subsidiaries, which will cut out the need to seek permission from the central bank, thus saving time.

The company will manage the subsidiaries’ financial needs via cash pooling, which she said would enable it to allocate money from one or more subsidiaries with excess liquidity to fund a subsidiary that is lacking the cash to undertake business expansion.

PTTEP can use the units’ excess liquidity to invest in what it considers will bring a higher return, she said, adding that it can also be a lender to its subsidiaries, which could save no less than 50 satang on the borrowing spread when compared with bank loans.

Moreover, cash management via the treasury centre will also give the group more bargaining power with financial institutions, said Penchun.

PTTEP in fact initiated cash pooling in June, with US$100 million-$200 million (Bt3.22 billion-Bt6.44 billion) in dollars and Bt5 billion in local currency.

The major benefit of having cash pooling and a treasury centre is that we can save on transaction costs to the tune of around Bt60 million per year, she said.

Meanwhile, the central bank and the Finance Ministry are discussing whether to introduce a tax incentive for companies granted a treasury-centre licence, which PTTEP believes will encourage multinationals to invest more in Thailand, she added.