Plan to revive loss-making SRT

“In fact, the debt-ridden SRT is super rich. About 80 per cent of its total assets of Bt600 billion are land banks. But the enterprise has yet to fully utilise its assets,” Pichit said in an interview with The Nation. 

He said the SRT had total equity of Bt300 billion, showing that the enterprise had high potential to get out of the red and into the black.

The SRT bore an accumulated debt of Bt180 billion for the fiscal 2015 year, according to the State Enterprise Policy Office. It is one of seven financially-ailing state enterprises undertaking a rehabilitation plan required by the State Enterprise Policy Commission or so called “Supper Board”, which was set up by junta government.

“If the SRT is supposed to gain a return rate of 5 per cent annually on only one-third of its total assets of Bt600 billion, this could make it cover all of its debts,” said Pichit, adding that the SRT was now posting a 0.5 per cent return on its asset annually. Pichit, 61, who has great experience in the capital market and is known for delivering outstanding performances, was asked by Deputy Prime Minister Somkid Jatusripitak to take the chairman’s seat at SRT with expectation he would help confront the enterprise’s mounting debt situation using capital-related financial tools. 

Pichit is known to be among a close circle of operators that Somkid trusts. He is chairman of Asia Wealth Securities’ board of directors and was president of MFC Asset Management Co Ltd, the country’s first asset management firm.

After his appointment to the SRT was approved by the Cabinet on August 23, Pichit set a target for a three-phase turnaround plan for the country’s flagship railway operator. 

The plan comprises stopping the bleeding, debt restructuring, and reorganising. 

The first priority, Pichit said, was the enterprise needed to stop losing money, with its cash flow a negative Bt9 billion a year. He aims to do that by increasing income and reducing expenditure. 

Last year, the SRT posted Bt27.4 billion in total expenditure and Bt14.2 billion in total revenue for a net loss of Bt16.4 billion. About a third of total expenditures was non-operating costs such as the pension fund (Bt3.7 billion), loan interest (Bt3 billion), and depreciation (Bt3 billion).

Adjusting fees to rent out its land, covering around 36,000 rai (5,760 hectares) nationwide with more than 10,000 contract leases, is one way to earn more income, while managing leftover inventories was likely to cut costs, Pichit said.

He said debt restructuring would be put in place for the next step in the overhaul. Currently, the SRT has debts of Bt110 billion, of which Bt61.1 billion is retaining debt and Bt33 billion is debt of the Airport Rail Link, operated by its wholly-owned subsidiary SRT Electrified Train Co Ltd. 

Although the dept-to-equity swap plan – in which the SRT will rent out its land in the prime Makkasan location to Treasury Department in exchange for clearing Bt61 billion in debt – has been hamstrung legally, the SRT chairman believed that the enterprise would still be able to clear all of its debt without the swap plan. 

“Now the SRT’s land rental rate is only based on the percentage of land valuation. So, there should be other methods in line with the market’s benchmark to be applied in a bid to make it more efficient. If this is supported by the politics, the SRT will have much more benefits than before,” he said. In addition, he said under the current plan, the SRT would commercially develop many prime plots, especially in Bang Sue and an area near the Mae Nam Railway Station in Klong Toei. 

For plots in the provinces, he said the SRT would work with the Department of Public Works and Town and Country Planning on transport-oriented developments, delivering rail networks, transport logistics services and city expansion. 

To be in line with the government’s plan to develop more dual-track intercity railway projects, he said the SRT would finally shift its transport mode to shipments. Inland container depots would also be connected to dual-track railways. 

For the third phase of the overhaul, Pichit said the SRT would restructure its organisation, focusing on human resources by having staff better trained. However, whether the SRT would focus on becoming a regulator or operator was dependent on government policy. The new structure would be in accordance with it.

“Personally, I do not think about reducing jobs. In fact, there is still a shortage of workers in some areas,” Pichit said.