The State Railway of Thailand (SRT) is at a crucial juncture regarding the High-SpeedRail Linking Three Airports Project (Don Mueang-Suvarnabhumi-U-Tapao), after a recenttripartite meeting involving Asia Era One Co., Ltd. (the private concessionaire) and theEastern Economic Corridor Office (EECO). According to SRT Governor AnanPhonimdang, only two options remain: proceed via significant contract amendments orinitiate contract termination processes.
Asia Era One has proposed negotiations for possible contract termination, citing thedrastically changed investment environment stemming from the impacts of the COVID-19 pandemic and regional conflicts. These events have affected the original economicassumptions underlying the 2019 contract, raising concerns over investment returns andaccess to funding.
There are three primary ways the contract could conclude: 1) natural expiry after 50years of operation, 2) failure to fulfill pre-conditions such as land handover or obtainingBoard of Investment (BOI) investment privileges, or 3) early termination due to forcemajeure, contractual breaches, or for public benefit. Force majeure clauses specificallycover uncontrollable events like pandemics and war, but do not automatically include fi-nancial viability or funding problems, which require legal assessment.
SRT is currently awaiting an official proposal from Asia Era One outlining the specificgrounds for contract termination. Both parties retain the right to seek compensation,and if the contract ends, detailed negotiations will determine accountability for anydamages.Due to declining returns-reported as low as 5%-and rising interest rates, the privatepartner remains exposed to considerable financial risk. With lenders urging a projectreview, SRT is seeking pathways to address these challenges. Any recommendation fortermination or amendment will go through several committees before final EECOapproval.
If the project is re-tendered after contract cancellation, BTS Group Holdings PCL (SET:BTS) is open to participating, provided the revised tender terms reflect current eco-nomic realities and support more balanced investment conditions. The previous terms,described as challenging, may need significant revision for new entrants to considerbidding.
Bualuang Securities noted that a BTS-led bid would be a strategic fit, given BTS's in-vestment in the U-Tapao Aviation City. Control of the rail link would allow BTS to inte-grate air and rail transport, creating a comprehensive transport and commercial hub. U-Tapao International Aviation Co., Ltd., where BTS holds a 40% stake, recently boostedits capital to THB 20 billion in preparation for expanding operations in the EasternAirport City.
