Thailand Infrastructure News

www.pwc.com/th Thailand Infrastructure News Issue 2 12 October 2018

Disclaimer This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 2018 PricewaterhouseCoopers FAS Ltd. All rights reserved. PwC refers to the Thailand member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 2

Headlines BoI initiates two U-tapao project promotion approvals Bids set for four EEC megaprojects in short order AoT defends move to build new terminal B.Grimm chosen by U-tapao EEC committee gives nods to bidding for four infra projects 3

Headlines (cont d) AOT to propose bt72.6 bn plan for Suvarnabhumi 4 EEC projects approved for infrastructure CP Medical Centre set for 2021 debut; airport rail bid on track IEAT hustles Map Ta Phut seaport plans EEC Office and Jetro sign aid deal 4

Headlines (cont d) Infrastructure gets pre-election push MRO centre at U-tapao key to plan TFFIF IPO launches Friday Engineers join airport terminal row 5

BoI initiates two U-tapao project promotion approvals 29 September 2018 The Board of Investment (BoI) has approved in principle promotional privileges for two concessions that are vital infrastructure projects: U-tapao airport development and Digital Park Thailand. BoI secretary-general Duangjai Asawachintachit said after the board s meeting, chaired by Prime Minister Prayut Chan-o-cha, that the privileges would pave the way for the Royal Thai Navy and CAT Telecom Plc, the owners of the two projects, to be included in the terms of reference (ToR). The concession winners for the U-tapao development project will be entitled to tariff exemptions for imported machinery and corporate income tax waivers for eight years. If their operations comply with the conditions given for the Eastern Economic Corridor (EEC) already offered by the BoI, the concession winners will be allowed to enjoy a 50% reduction in corporate income tax for an additional three years after the tax holiday. For Digital Park Thailand, concession winners will also be entitled to similar tax incentives, but they will be given a corporate income tax exemption for another four years if their operations comply with BoI conditions for the EEC. The BoI s tax incentive grant is expected to make investment in the two projects more enticing to investors, Ms Duangjai said. Under the EEC scheme, the transformation of U-tapao airport into Bangkok s third major commercial airport and a regional aviation hub is one of the most important infrastructure projects. Expansion of U-tapao airport will enhance capacity to handle greater volumes of passengers, freight and flights, with concomitant promotion of multimodal connectivity to Don Mueang and Suvarnabhumi airports. The project comprises airport expansion, with the construction of the second runway and taxiway as well as a third passenger terminal, and the development of aviation-related industries in its vicinity, which include maintenance, repair and overhaul (MRO) facilities, an aviation training centre, cargo facilities, a cargo village and a commercial precinct. Upon completion, the project is expected to handle 60 million passengers annually. In addition to honing EEC development, the airport is expected to boost national competitiveness in terms of industrial, trading, investment, tourism and personnel development. The EEC meeting, chaired by the prime minister, resolved on June 4 to develop the first phase of the aerotropolis within five years to support links with the high-speed railway connecting Don Mueang, Suvarnabhumi and U-tapao airports. The first phase of the 6,500-rai U-tapao airport and aviation centre will be capable of handling 15 million passengers. Other projects include a second runway, a business zone, an MRO centre and air cargo facilities. https://www.bangkokpost.com/business/news/1548698/boi-initiates-two-u-tapao-project-promotion-approvals 6

Bids set for four EEC megaprojects in short order 2 October 2018 The administration committee for development of the Eastern Economic Corridor (EEC) has decided to launch terms of reference (ToRs) for bids of four megaprojects worth a combined 372 billion baht. Chaired by Industry Minister Uttama Savanayana, the committee approved four projects: the U-tapao airport (200 billion baht); a maintenance, repair and overhaul (MRO) centre (11 billion); the third phase of the Laem Chabang seaport (150 billion); and the third phase of the Map Ta Phut seaport (11.1 billion). The committee approved the details of the four projects auctions and plans to propose them to the EEC Policy Committee for approve on Thursday. The cabinet is scheduled to hear the details on Oct 16. Mr Uttama said these four projects are core infrastructure for the three EEC provinces and the government expects the ToRs to attract potential investors. The government insists the EEC scheme is running on track and the development policy will remain unchanged even as Thailand transitions to a general election in February, regardless of what a new government plans to do as administrative successor, he said. The EEC Act has already been implemented and this corridor is part of the 20-year national strategy plan. Earlier the government launched ToR for a high-speed railway, linking Don Mueang, Suvarnabhumi and U- tapao airports, including the administration of Airport Rail Link, with a total value investment of 224 billion baht. Mr Uttama said all four projects are in the form of a public private partnership (PPP). The government plans to spend 650 billion baht on these EEC-related infrastructures from a total investment budget of 1.7 trillion baht for the corridor during 2017-21. Kobsak Pootrakool, the prime minister s office minister, said the government plans to have a 30% stake of each PPP contract. The government is committing to speed up the ToR launches for all EEC infrastructure projects by next February, and it wants to select all winning bidders and sign contracts for every project by 2019, he said. Mr Kobsak said the Laem Chabang seaport phase three is scheduled to start operation in 2023, while the Map Ta Phut seaport phase three is set to begin operation in 2025. The MRO centre, adjacent to U-tapao airport, is scheduled to start operations in 2022, while the U-tapao site is expected to begin full operations in 2023. Kanit Sangsubhan, secretary-general of the EEC Office, said the administration committee has agreed to a budget of 17 billion baht for digital infrastructure and service projects from 2017-21 to serve the EEC scheme. This project spans eight master plans that cover the digital realm, including the Digital Park Thailand (1.8 billion baht); advancing the big data, cloud and data centre development project (3.5 billion); an Internet of Things Smart City (815 million); a testing institution for 5G and related navigation infrastructures (310 million); the infrastructure, wiring harness fiberglass cable and i-pole project (4.3 billion); and the Asean digital hub scheme (5 billion). https://www.bangkokpost.com/business/news/1550158/bids-set-for-four-eec-megaprojects-in-short-order#cxrecs_s 7

AoT defends move to build new terminal 4 October 2018 The Transport Ministry has announced Airports of Thailand Plc (AoT) has nothing to prove in the construction of Suvarnabhumi airport s planned second passenger terminal, following criticism from engineers and architects citing the authority has deviated from the airport s original master plan. Acting permanent secretary for transport Chaiwat Thongkamkoon made the comments Wednesday after calling in the AoT to explain the controversy surrounding the new terminal. They do not need to draft any formal papers to explain the changes to the original master plan, Mr Chaiwat said. Master plans need to change to fit modern times. The amount of yearly passengers have increased, and aircraft have grown larger. The Architect Council of Thailand (ACT) and the Council of Engineers (CoE) had last month blasted the AoT for veering away from Suvarnabhumi s original master plan, which was drafted in 1993. The plan included the construction of only two terminals. This comprised the existing northern terminal and another southern terminal, identical to the existing one. However, the AoT s latest master plan -- the fifth master plan -- urgently included the construction of a new terminal to keep up with increasing passenger numbers. AoT president Nitinai Sirismatthakarn said earlier that Suvarnabhumi s 1993 master plan could only service up to 100 million passengers per year. The latest one is set to allow Thailand s largest airport to service up to 150 million yearly passengers upon the completion of all five phases by 2030. However, the ACT and CoE criticised the new terminal s location -- set to be placed adjacently to the existing passenger terminal, on the northeastern side. They said the terminal will cause bottlenecks for departing planes. Mr Nitinai said this will not happen, and the new terminal will not be in the way of any airport traffic. Responding to claims the new terminal would not be able to take in an extra 30 million passengers per year, the airports chief said the terminal s main purpose will be to directly connect passengers to planes instead of using shuttle buses. It is set to be constructed directly next to 14 remote aircraft parking spaces on the northeastern side, which have only been accessible by bus. This would allow the airport to service passengers faster, he said. Meanwhile, Mr Nitinai said auctions for Suvarnabhumi s duty-free and commercial-zone contracts can only commence once the controversy surrounding the new terminal dies down. https://www.bangkokpost.com/business/tourism-and-transport/1551570/aot-defends-move-to-build-new-terminal 8

B.Grimm chosen by U-tapao 4 October 2018 SET-listed B.Grimm Power Plc has been selected by the Royal Thai Navy as the operator for power plants and a cooling water project at the U-tapao airport. On Sept 10, B.Grimm submitted a proposal to the airport s selection committee. President Preeyanart Soontornwata said it plans to operate a hybrid power plant that creates the most power system stability for the airport. It consists of two phases. The first phase is a 80-megawatt (MW) co-generation power plant, a 15MW solar photovoltaic (PV) farm, and a 50MW-hour energy storage system. The second phase consists of a 80MW co-generation power plant and 55MW of solar PV systems comprising a farm, rooftops and a floating farm. Development and construction of the first phase is from 2018-21 and the second phase 2021-23. Under B.Grimm s proposal, it expects the commercial operation date of the first phase to be January 2021, covering a primary responsibility area at U-tapao airport and a secondary responsibility area at the Royal Thai Navy s electric welfare concession, including distribution of cold water to the airport. For construction of the solar PV systems, B.Grimm is prepared to further collaborate with the selection committee, the Royal Thai Navy and other relevant authorities to identify and procure suitable areas for project development. U-tapao airport, which is operated by the Royal Thai Navy, serves several domestic airlines such as AirAsia, Nok Air and Bangkok Airways, and a few international airlines such as Qatar Airways. Its two terminals can accommodate a maximum of 1,600 people across an area of 5,610 square meters. The airport s revamp is part of the government s Eastern Economic Corridor scheme. The government introduced terms of reference for a high-speed railway linking Don Mueang, Suvarnabhumi and U-tapao airports worth 224.54 billion baht https://www.bangkokpost.com/business/news/1551542/b-grimm-chosen-by-u-tapao#cxrecs_s 9

EEC COMMITTEE GIVES NODS TO BIDDING FOR FOUR INFRA PROJECTS 5 October 2018 Members of the The Eastern Economic Corridor Policy Committee yesterday approved a plan to open bidding for four infrastructure projects worth Bt430 billion at the Eastern Economic Corridor (EEC). The four projects are U-Tapao International Airport, Maintenance, Repair and Operating Supplies or MRO at U-Tapao, Lam Cha Bang Port Phase 3, and Industry Port at Map Ta Phut phase 3, deputy of Defense Minister Chanchai Changmongkol said after the meeting yesterday, chaired by Prime Minister Prayuth Chan-O-Cha. The bidding will be conducted under the Public-Private Partnership scheme and is aslo open to foreign investors, said the committee s secretary general Kanit Sangsubhan said. The committee expects to open bidding for the projects in February next year, Kanit said Source: THE NATION http://www.nationmultimedia.com/detail/economy/30355833 10

AOT TO PROPOSE BT72.6 BN PLAN FOR SUVARNABHUMI 5 October 2018 The Airports of Thailand Plc (AOT) will propose an investment plan to further develop Suvarnabhumi International Airport, worth Bt72.6 billion, to the National Economics and Social Development Board (NESDB) in December this year, the company s senior executive vice president of engineering and construction Anake Teeraviwatchai said yesterday. The plan will include the development of a railway and more passenger buildings. AOT plans to open bidding for the projects in the first quarter of next year with completion of construction expected by 2020, he said Source: The Nation http://www.nationmultimedia.com/detail/corporate/30355835 11

4 EEC projects approved for infrastructure U-tapao airport main point of emphasis 5 October 2018 The Eastern Economic Corridor (EEC) Policy Committee on Wednesday approved four infrastructure projects worth a combined 432.85 billion baht, with terms of reference (ToRs) scheduled to be launched within this month. The four projects are the U-tapao aviation city (worth 290 billion baht); a maintenance, repair and overhaul (MRO) centre (10.59 billion); the third phase of the Laem Chabang seaport (84.36 billion); and the third phase of the Map Ta Phut seaport (47.90 billion). Kanit Sangsubhan, secretary-general of the EEC Office, said the Royal Thai Navy will issue the ToR for bids for the U-tapao aviation city this month and expects to be able to choose a joint venture company in February next year. The investment includes the airport s third terminal, a commercial gateway, the second phase of an MRO, a cargo village or free trade zone and a human resource training centre. The U-tapao aviation city is expected to produce an economic rate of return worth 190 billion baht, excluding the impact of 15,640 employees. Mr Kanit said the investment will enhance the capacity of the U-tapao airport to handle 60 million passengers, on par with Suvarnabhumi airport s capacity, allowing for lower congestion of Suvarnabhumi and Don Mueang airports.the project will be completed in five years, which conforms to the planned high-speed rail development that links three airports. U-tapao airport in the next five years will become the East s airport city, while Pattaya and Rayong areas will become an Eastern Aerotropolis over the next 10 years, he said. Mr Kanit said the ToR for the MRO investment project that is being handled by Thai Airways International will be introduced within this month, and the winning joint venture partner will be secured by February next year. The economic rate of return is projected at 22.1 billion baht, excluding jobs created for high technology experts, and revenue increasing from offering services to foreign airlines worth 200 billion baht. The third phase of the Laem Chabang port is estimated to generate 180 billion baht in economic returns. The ToR is scheduled to be issued this month and a joint venture with a private partner is expected to be cemented in February next year. The third phase of Map Ta Phut port is expected to generate 85.3 billion baht in economic rate returns, with the ToR due to be launched this month and a joint venture partner confirmed in January. Mr Kanit said with the high-speed railway linking Don Mueang, Suvarnabhumi and U-tapao airports, the administration of the Airport Rail Link, the government has approved a total five key infrastructure projects for the EEC. Infrastructure projects at EEC are expected to contribute 819.66 billion baht in benefits to the Thai economy, excluding the impact of 40,000 new jobs and a financial rate of return to the government projected at a combined 559.71 billion baht (446 billion baht from the public and 112.75 billion baht from the private sector). Total investment in the EEC is projected at 1.7 trillion baht, with the private investment making up for 1.4 trillion baht in both for infrastructure development and private investment in the 10 targeted industries https://www.bangkokpost.com/business/news/1552186/4-eec-projects-approved-for-infrastructure 12

CP Medical Centre set for 2021 debut; airport rail bid on track 5 October 2018 Thailand s agricultural conglomerate Charoen Pokphand Group (CP) plans to kick off construction of a 15-billion-baht healthcare and medical centre next year and expects to roll out commercial services in 2021. The 50-rai facility marks an entirely new business venture for the already diversified company that hopes to promote Thailand as an international medical hub. CP set up a subsidiary, CP Medical Centre Co, to run the medical centre operating unit, which owned by CP entirely. We are in talks with several international foundations to join CP in the healthcare and medical centre venture, said a source close to the matter who requested anonymity. Upon securing foreign investors, CP will be the major shareholder with at least a 51% stake, while the remaining shares are to be sold to partners and investors in the venture. The centre, to be built at Bang Na- Trat Road KM6, is divided into three zones: an R&D unit, a medical teaching institute and a hospital. The R&D centre will specialise in developing biotechnology specially made for the Thai market. The teaching institute will offer advanced facilities for recent graduates, which CP hopes will compete with foreign medical universities. The hospital will specialise in the treatment of specific diseases, with a focus on Asian and Thai patients. We re not quite a non-profit organisation, the source said. We need to add value to our organisation and we plan to be listed in the stock exchange market, either in [Thailand] or in a foreign country. According to the source, CP chose to venture into the medical business because the company wants to develop and improve the healthcare and medical services for Thai people and support the government s policy of promoting the nation as a hub for healthcare and medical services. The five-year project will cost an estimated 15 billion baht. CP chief executive Suphachai Chearavanont says this month the group expects to solidify a bid for a 50-year concession to build, transfer and operate a high-speed train project worth 200 billion baht, linking three airports in Bangkok. This project marks another new direction for the company. Mr Suphachai has also brushed aside criticism of the group s ability to operate high-speed trains. How can chicken vendors make phone calls? he said. If chicken vendors can make phone calls, we can make high-speed trains. CP did not initially plan to invest in the high-speed train, he said. But as the government planned for this large-scale infrastructure project, it began seeking private-sector involvement, enticing CP to place a bid. Mr Suphachai says private companies involvement in the large-scale infrastructure project will support the government s efforts to capture a second wave of foreign investment in its Eastern Economic Corridor development plan. We have to make the project feasible, he said in response to criticisms that the plan may be impractical, adding that if CP loses the bid, he has no objection to another capable developer taking the reins. According to another CP source, the group contacted Thai and foreign commercial banks for assistance to finance the 200-billion-baht project. If CP wins the bid to build the rail within five years, at least 120 billion baht of funding would come from the banking sector https://www.bangkokpost.com/business/news/1552322/cp-medical-centre-set-for-2021-debut-airport-rail-bid-on-track 13

IEAT hustles Map Ta Phut seaport plans 6 October 2018 The Industrial Estate Authority of Thailand (IEAT) is speeding up development of the third phase of Map Ta Phut seaport, worth 47.9 billion baht, and has committed to issuing terms of reference (ToR) this month. The third phase occupies 1,000 rai in Rayong, one of the host provinces of the government s Eastern Economic Corridor (EEC) scheme. Somchint Pilouk, the IEAT governor, said the authority is keen on the project after the EEC Policy Committee on Thursday approved four infrastructure projects worth a combined 432 billion baht, with all ToR scheduled to be launched in the same month. The four projects are the U-tapao aviation city (worth 290 billion baht); a maintenance, repair and overhaul (MRO) centre (10.6 billion); the third phase of Laem Chabang seaport (84.4 billion); and the third phase of Map Ta Phut seaport. Yesterday, the IEAT ran a third market sounding for 100 local and foreign companies in a bid to attract them to the project. The Map Ta Phut project will also come in the form of a public-private partnership (PPP), with private entities allotted 70% ownership in total and the government owning the remaining stake. We have a time frame to sign the contract with the private side for some time in 2019, and the project will start operations in 2025, Ms Somchint said. She forecasts the third phase of Map Ta Phut seaport to generate an economic value of 85 billion baht and financial revenue of 34 billion baht for the government. Ms Somchint said the IEAT will conduct land reclamation, dredge up watercourses and construct embankments. Another project comprises two wharves for liquid goods and three more for liquefied natural gas. The IEAT will allocate 400 rai for five wharves and provide another 150-rai wharf for service cargo and containers. Map Ta Phut port has 32 wharves with 12 operators. The port has had a compound average growth rate for transferred goods of 5.3% over the past decade. Last year over 7,000 ships docked there, with more than 44.7 million tonnes of goods transferred. The port is also the largest petrochemical hub in Southeast Asia. According to the EEC Office, the government announced that overall investment in the infrastructure projects over the five-year period (2017-21) will be worth 1.7 trillion baht in the EEC scheme, separated into government spending of 300 billion baht, representing 18%, and 1.4 trillion baht in private spending, representing 82%. Separately, the EEC Policy Committee acknowledged on Thursday that the Digital Economy and Society Ministry had proposed a plan for digital infrastructure in the EEC for 17.9 billion baht. The government will invest wholly in this project during 2018-22. https://www.bangkokpost.com/business/news/1552910/ieat-hustles-map-ta-phut-seaport-plans 14

EEC Office and Jetro sign aid deal Memorandum to support Japanese investment in corridor 6 October 2018 Thailand and Japan have come to an agreement to aid Japanese companies looking to invest in the government s flagship Eastern Economic Corridor (EEC) scheme. Industry Minister Uttama Savanayana yesterday witnessed the signing ceremony of a memorandum of intent between the EEC Office and the Japan External Trade Organization (Jetro). Both parties will collaborate to promote investment in Japanese companies throughout the EEC host provinces of Chachoengsao, Chon Buri and Rayong. The corridor will focus on 11 targeted industries: cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; medical services; and defence. Japanese companies lean heavily towards automotive, electronics, medical equipment, aerospace and food. Mr Uttama said the government is speeding up many infrastructure projects in the EEC scheme to support future investment flows and build up investor confidence from local and foreign companies. The Thai government and Jetro have strong relationships with many collaborators, and the new one is expected to see actual outcomes in 2019, he said. Both parties will also establish the Thai-Mie innovation centre in Bangkok to promote the food sector and support small and medium-sized enterprises agricultural products. Mr Uttama said Jetro will bring Japanese companies from Mie prefecture to visit the EEC. The companies from Mie are interested in investing in the food industry, so this centre will improve Thai SME efficiency and increase value-added agricultural products, he said. Kanit Sangsubhan, secretary-general of the EEC Office, said both parties will carry out many activities through the collaboration and cooperate with each other, including by sharing information that will be provided to Japanese investors for new investment expansion in Thailand. The Thai government expects to gain technological know-how in higher technology and innovation from Japanese counterparts. Jetro also reported that the registered capital value for companies in the EEC provinces is being led by Japan, representing 53% of total registered capital or 363.95 billion baht as of June. China came second with 41.53 billion baht, accounting for 6%. Singapore and the US were ranked third and fourth with 28.9 billion and 26.91 billion baht, respectively. Jetro also cited Board of Investment (BoI) data from 2017 to March 2018 that showed Japanese investors making up the better part with 97.39 billion baht, representing 49% of total applications. European companies submitted BoI applications worth 23.63 billion baht, accounting for 12%, in the same period, while Singapore was ranked third with 20.36 billion baht, making up 10% of total applications. Hiroki Mitsumata, Jetro s president and chief representative for Asean, said many Japanese companies have already entered EEC provinces after many positive signs that the Thai government is keen on the corridor scheme. Jetro has 1,016 companies in the EEC provinces out of a total of 5,400 companies registered in Thailand https://www.bangkokpost.com/business/news/1552938/eec-office-and-jetro-sign-aid-deal#cxrecs_s 15

Somkid rips Thai-Sino rail holdup Infrastructure gets pre-election push 9 October 2018 Deputy Prime Minister Somkid Jatusripitak complained Monday that the development of the high-speed Thai-Chinese railway from Bangkok to Nong Khai is lagging behind schedule, and ordered the agency responsible to speed up the project. We want them to get things done as soon as possible. Construction of the railway on Laos side is already significantly ahead of ours, Mr Somkid said during his visit to the Ministry of Transport to follow up on the progress of government infrastructure development projects. Touted as the government s attempt to plug Thailand into China s Belt and Road Initiative, the development of the 606km high-speed has railway has already suffered from delays. The route is divided into two major phases. The first is Bangkok-Nakhon Ratchasima, which is 253km in length and set to cost 179 billion baht. The second phase runs from Nakhon Ratchasima to Nong Khai province. Only a fraction of work on the first phase has been started, while State Railway of Thailand (SRT), the developer, had admitted that it has not yet finalised investment for the second. The agency previously announced the total 606km route will be complete by 2024. The SRT only started working on the embankment of the initial 3.5-km stretch of the route from Klang Dong to Pang Asok in Nakhon Ratchasima s Pak Chong district in December last year, and the bidding for the rest of the construction work is already two months behind schedule. The SRT has not announced the details of the second phase yet, but it has insisted the deadline for completion of the whole route remains 2024 as initially scheduled. On the other side, work on began on Laos part of the railway -- financed mostly by the Chinese government -- in December 2016, a year ahead of Thailand, and the stretch is expected to open in 2022, as scheduled. The route is 409km in length and will connect Vientiane, the capital, to Kunming in the southwest of China. Aside from the high-speed train project, Mr Somkid told officials he wants to see developments in infrastructure projects materialise before the next general election, and urged officials to adhere to transparency. The deputy prime minister also instructed the Port Authority of Thailand (PAT) to complete expansion plans for the third phase of the Laem Chabang Port scheme in Chon Buri. This third phase has run into local opposition and bidding is already two months behind schedule. Locals reportedly turned against the project fearing environmental damage as the construction would require the removal of a large quantity of sand, stoking concerns of tidal changes and coastal erosion. During the four months before the planned general election in February, the Ministry of Transport will ask the cabinet to approve 18 infrastructure projects worth 723 billion baht in total, according to Transport Minister Arkhom Termpittayapaisith. Among these projects are Laem Chabang Deep Sea Port Phase III for 114 billion baht, the 109km motorway linking Nakhon Pathom with Cha-am for 79 billion baht, Suvarnabhumi airport s Passenger Terminal 2 for 22 billion baht and airplane procurement for Thai Airways worth 100 billion baht. The Ministry of Transport will also hold bids for five projects worth around 480 billion baht in total, including the much-touted high-speed rail link connecting Suvarnabhumi, Don Mueang and U-Tapao airports, and the Rama III-Dao Kanong-Ring Road expressway https://www.bangkokpost.com/news/general/1554282/#cxrecs_s 16

New THAI boss envisions turnaround MRO centre at U-tapao key to plan 9 October 2018 Sumeth Damrongchaitham, 53, was officially appointed last month as president of Thai Airways International Plc (THAI). His challenge is to turn around the loss-making national carrier, one of six financially ailing state firms that have been placed in business rehabilitation as required by the State Enterprise Policy Commission. The others are the State Railway of Thailand, the Bangkok Mass Transit Authority, TOT Plc, CAT Telecom and the Islamic Bank of Thailand. Mr Sumeth sat down with the Bangkok Post to talk about his plans for his new role and the progress of a new joint venture: a maintenance, repair and overhaul (MRO) facility at U-tapao airport. When do you expect to propose THAI s rehabilitation plan to the government? We expect to finish the rehabilitation plan before December this year, as required by Deputy Prime Minister Somkid Jatusripitak, who visited THAI s office in September and ordered the plan s conclusion within three months. THAI s rehab plan aims to raise income from the airline business, catering, and the MRO facility at U-tapao airport, aiming to develop one of the most advanced MRO centres in the world. The airline business sees relatively stiff competition because of rising numbers of airlines and air routes. The market share of THAI fell to 27% this year from 37% in the past five years. The rehab plan needs to increase market share, which is possible as the airline business grows by only 3% annually. Thai catering has high potential thanks to increasing aircraft numbers and Thailand s status as an aviation hub in the foreseeable future. What about THAI s plan to buy 23 aircraft worth up to 100 billion baht? I cannot yet reveal any details because the company is in the process of revising the purchase plan. The company s aircraft purchase needs to be revised to conform with a business plan. The company expects to conclude the purchase plan in 45 days before undergoing vetting by the National Economic and Social Development Board s and cabinet approval. The plan to buy new aircraft is a vital part of THAI s restructuring plan. The purchase is deemed essential to increase the potential of THAI s airline business. How is the MRO progressing? The Eastern Economic Corridor Committee chaired by Prime Minister Prayut Chan-o-cha approved the project on Oct 4. The project is expected to be endorsed by the cabinet next week. Terms of reference for the project will be introduced within this month, and the winning joint venture partner will be secured by February next year. Although THAI has already signed a memorandum of understanding with Airbus on the MRO in June, the auction is still needed because Boeing has expressed interest in joining the project. Total investment in the project is 10.58 billion baht. The government s investment is estimated to account for 6.33 billion baht, with the remaining 4.25 billion baht from the private sector. What are the economic returns of the project? The economic rate of return is projected at 22.1 billion baht, excluding jobs created for high technology experts, and revenue from offering services to foreign airlines worth 200 billion baht over 50 years. The estimated 200 billion baht worth of income over 50 years will play a key role in supporting THAI s ambitious plan to become a national premium airline. The MRO will become significant in generating income to THAI, while the internal rate of return is estimated at 14%, which is quite high. The MRO is business has less competition compared with the airline business. The aviation industry is likely to have steady growth over the next 5-10 years, while at the global level aircraft are expected to increase by 50% during the period, Asia is expected to account for 20% of them. Due to its geographical position Thailand is expected to become the aviation hub for the region, for which the MRO facility is considered an appropriate investment. The development of U-tapao aviation city is also expected to attract many companies to set up in the MRO. When will the MRO at U-tapao airport open? The project will begin operating within the next five years. THAI will remove the existing maintenance and repair centre at U-tapao to allocate an area for the airport s second runway and new passenger terminal. The MRO facility will be on a larger scale, using technology called a smart hanger that can offer services to five wide-body aircraft and two narrow-body ones. It is to include heavy air-frame maintenance and base maintenance, line maintenance, aircraft painting and other modification, and component maintenance https://www.bangkokpost.com/news/transport/1554510/new-thai-boss-envisions-turnaround?utm_source=bangkopost.com&utm_medium=article_news&utm_campaign=most_recent_bottom_box 17

TFFIF IPO launches Friday 11 October 2018 The long-awaited Thailand Future Fund (TFFIF) will launch an IPO tomorrow, offering retail investors 4-4.47 billion investment units at a price of 10 baht per unit. The subscription period runs Oct 12-19, and the minimum investment subscription is set at 1,000 units, with no limit capped on investment units per one subscription certificate. Interested investors can obtain the prospectus and subscription certificates and subscribe to TFFIF investment units at the headquarters and branches of Krungthai Bank, Bangkok Bank, Finansa Securities, Phatra Securities, Krungthai Asset Management and MFC Asset Management. The TFFIF has received approval from the Securities and Exchange Commission for its first capital increase after the fund s financial advisers and underwriters submitted the fund s prospectus and IPO filing, said Anuwat Ruamsuke, managing director of Phatra Securities. Retail investors who subscribe to the TFFIF s IPO units will get rights to the first allotment for a 10,000-baht investment, a move meant to offer the fund to as many individual investors as possible. The fund s first-year return is projected in a range of 4.75-5.3%, which is expected to lure investors because the underlying assets are government projects deemed to carry lower risk than other infrastructure investments. Chavinda Hanratanakool, chief executive of Krungthai Asset Management, said the TFFIF has a policy to make dividend payments twice a year, provided that the fund generates sufficient profits. Dividend payment for first-year unit holders at the end of September 2019 is 4.75-5.3%, Mrs Chavinda said. For each fiscal year, the TFFIF will pay no less than 90% of adjusted net income, she said. A cabinet resolution called for 45% of future revenue from the Chalong Rat Expressway and Burapha Withi Expressway, both owned by the Expressway Authority of Thailand (Exat), to be used to back TFFIF s first batch of units. Proceeds from the fund s IPO will be used to finance construction of the expressway linking Rama III Road-Dao Khanong and the Western Outer Ring Road, worth 30.4 billion baht, as well as the third stage of the long-delayed northern expressway linking the Kasetsart intersection and Nawamin Road, also known as the N2 section, worth 14.4 billion baht. The TFFIF is expected to receive 2.2 billion baht in revenue from both expressways next year, according to Charnwit Nakburi, deputy director-general of the State Enterprise Policy Office. The expressways have a combined length of 83.2km and revenue is expected to continue rising because they are core roads linked with the Eastern Economic Corridor. From September 2015 to September 2017, the two expressways had average combined traffic of 369,464 car units a day, according to Exat. Total revenue for both expressways was 4.67 billion baht for fiscal 2017 and 3.59 billion for the first nine months of fiscal 2018 to June https://www.bangkokpost.com/business/news/1555718/tffif-ipo-launches-friday 18

Engineers join airport terminal row 11 October 2018 The Council of Engineers (CoE) has waded into the row over a second terminal at Suvarnabhumi airport, saying the proposed new facility is poorly located and that the existing building should be expanded upon. If the new 42-billion-baht terminal, set to be built between Concourse A and Thai Airways maintenance centre goes ahead, the airport will shoulder a wide-ranging impact on infrastructure, transport and facilities, it said. Above all, the airport may need to compromise its services and could lose credibility, deputy council chairman Krai Tungsanga said yesterday as he petitioned the premier via the state complaint centre at Government House. The engineering group is the latest to comment on the controversy after government anti-corruption committee member and ex-airport of Thailand (AoT) board member Tortrakul Yomnak voiced concern over the plan. Besides the CoE, the Architects Council of Thailand has also blasted the AoT for veering away from the original Suvarnabhumi master plan drafted in 1990. The plan foresaw the construction of only two terminals -- the existing northern terminal and an identical southern one. However, the AoT s latest master plan -- the fifth -- hastily included the construction of a new terminal to keep up with increasing passenger numbers somewhere else. Mr Tortrakul said expansions should really be done at both ends of the existing terminal rather constructing a new one. Mr Krai said changes can be made only after a new round of impact studies and opinions from the experts. The proposed construction is in the wrong place, he said. Though the masterplan can be adjusted, it should be made in a way that improves on the old one, he said. We believe the prime minister should listen to us because we are a professional group that cares for this nation, Mr Krai said https://www.bangkokpost.com/business/tourism-and-transport/1555606/engineers-join-airport-terminal-row#cxrecs_s 19

For further information please contact: Krieattisak Sriaram : +662 844 2163 : Krieattisak.sriaram@th.pwc.com www.pwc.com/th 2018 PricewaterhouseCoopers FAS Ltd. All rights reserved. PwC refers to the Thailand member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 37