PTT Plc, the national oil and gas conglomerate, is considering investing in new S-curve growth businesses under its express solution and corporate venture capital fund.
Chief financial officer Wirat Uanarumit told the Bangkok Post that existing core businesses such as oil, gas, petrochemicals and electricity, plus new sectors the group will diversify into through its corporate venture capital fund, will propel the company's S-curve growth.
The first phase of the plan is to add value to core businesses including biochemical and engineering polymer ventures as well as batteries for electrical vehicles (EVs), which it has already invested in through subsidiaries PTT Global Chemical Plc, IRPC Plc and GPSC Plc.
In 2014, PTT via GPSC acquired a 17% share in Massachusetts-based 24M Technologies Inc, a research and development firm focusing on lithium batteries.
"We saw 24M's potential with the strong growth of EV business. Even though this segment is new and would take several years to develop, we don't want to miss this global trend," said Mr Wirat.
The S-curve initiative is an economic policy launched by the government in a bid to boost economic growth in an S-curve shape through its 10 industrial clusters. These are divided into existing industries (first S-curve) and future industries (new S-curve).
The first S-curve comprises five industrial clusters: next-generation automotive, smart electronics, quality tourism, agriculture/biotechnology and food processing.
The new S-curve consists of robotics, aviation/logistics, biofuels/biochemicals, the digital economy and medical services.
Before launching the S-curve, Mr Wirat said the group would set up an express solution (Espresso) unit to prepare a business model, including the size of the firm as well as the budget.
The Espresso unit will have younger employees working alongside senior staff. The model of the Espresso is likely to be a large international firm that has invested in self-driving vehicles and EVs.
Normally, major energy companies allocate 0.5-0.7% of total capital expenditure to the fund, sector or area they want to diversify into, said Mr Wirat, adding that the model of the diversified business would be completed within the next few months.
"What pushed us to find a new business is the collapse of big companies such as Kodak. We need to diversify as we want to stay in this region for more than 100 years," said Mr Wirat.
It is allocating 900 billion baht to core businesses between this year and 2020, aiming to increase the company's competitiveness. The capex excludes mergers and acquisitions.
The group has cash on hand and debt capability of 400 billion baht.
For its upstream business, PTT is planning to acquire reasonable oil and gas resources, while it plans to upgrade and raise the capacity of its oil refineries to produce more feedstock for the petrochemical sector. It also plans to invest more in high-value polymers as its shifts the focus from commodity-grade products.
With regard to downstream business, it will invest more in the domestic non-oil business as well as continue to increase the number of stations in Asean, aiming for 500 stations by 2020, up from the current 151.
As for the plan to upgrade products, PTT has set aside 3% of net profit each year for research and development, which will be done via its in-house research centre, Vidyasirimedhi Institute of Science and Technology, and a network of research houses nationwide.
Gas production and logistics facilities represent another major investment for the company.
Mr Wirat said the group has almost reached saturation point and is about to step into the second wave of growth, so it needs to be ready for new challenges.
"Since we listed on the Stock Exchange of Thailand in 2001, net profit grew nearly fivefold from 21.5 billion baht to around 100 billion baht in 2013. Meanwhile, revenue jumped from 378 billion to 3 trillion baht in 2013," said Mr Wirat.
Over the past six years, PTT had diversified into several businesses, including coal, palm oil, biofuels and electricity.
All sectors have generated good returns, with the exception of palm oil.
"The palm oil business is labour-intensive. And we jumped in when regulations and the joint-venture operation were too complicated for us. That led us to spin off the business," he said.
PTT is also making a foray into the hospitality sector with a plan to open budget hotels at selected gas stations. Mr Wirat said the idea is to optimise existing assets and the hotels would be operated by hoteliers rather than PTT itself.
A Thai flag flutters in the breeze in front of PTT headquarters on Vibhavadi Rangsit Road. PATIPAT JANTHONG