Transit renaissance
Keeree Kanjanapas revives a transport empire and his own fortunes.
After going off t he rails, Keeree Kanjanapas has revived a transport empire and his own fortunes. The single-minded son of one of East Asia’s wealthiest men, Mr Keeree founded the first and only privately-held rail track in Thailand.
His company, Bangkok Mass Transit System Plc (BTSC), the operator of the skytrain, plunged into a critical financial condition in the wake of the 1997 financial crisis, with debts of up to 100 billion baht.
The investment in Thailand’s first elevated mass transit project was ill-timed, as its opening in late 1999 coincided with a sharp decline in purchasing power.
Mr Keeree lost most of his fortune during the late 1990s and nearly lost control of BTSC in 1999, the company he founded seven years earlier to ease Bangkok’s notorious traffic congestion.
The company was an extension of his property development business. Because of its debts, borrowed to finance the expansion of the mass transit system, the company was put into debt rehabilitation.
Mr Keeree spent nearly 10 years not only battling insolvency but also defying the government, which tried to bully its way into taking over the skytrain sytem, citing national interest and the necessity for future mass transit system expansion.
He started to see a glimmer of hope after BTSC, which shared a huge portion of its debt, exited its rehabilitation plan in 2008 and merged with Tanayong, the property development firm Mr Keeree founded in 1968. It became BTS Group Holdings in 2010, which focuses on four core businesses: mass transit, property, media and services.
BTS Group Holdings led Asia’s largest initial public offering in 2013 and the third-largest globally when it launched the 62.5-billion-baht BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF), Thailand’s first infrastructure fund. Backed by future passenger fares, the fund invests in extending train lines in Bangkok and the region.
The offering drove Mr Keeree into the billionaire ranks. Forbes Lists ranked him 13th-richest in Thailand as of Aug 25, with net worth of US$1.55 billion.
“From the outset, we strongly believed in a mass transit system that would help ease Bangkok’s gridlocked traffic and offers a good investment opportunity for extending existing property development,” said Mr Keeree, now 66. “We are confident the mass transit project will generate huge future income. Despite the earlier crisis, our creditors, investors and employees all believe in the company’s growth potential as long as it is up and running.”
He believes the company’s previous financial problems did not stem from mismanagement, but rather from external risks that were beyond his control.
“Most of the previous loans were slated for investment in skytrain development. The borrowing was for quality machinery ahead of operation, not for gambling or speculation,” said Mr Keeree. “We survived the difficult period because creditors and investors were not hysterical about the crisis. They had the foresight that the company was building a ship that could generate lucrative income once it started sailing.”
The BTS Group’s four core revenue drivers have fared quite well over the last four years, he said, with even more promising prospects ahead. The group is committed to heavy investment this year, notably in mass transit projects the government favours.
“Fiscal 2016 [beginning April 1 this year] will be the start of years of heavy investment,” said Mr Keeree. “For mass transit in particular, we’re now ready to join in rail network development nationwide. We estimate spending up to 150 billion baht in the segment over the next three to five years.”
BTSC, a subsidiary of BTS Group, is the sole concessionaire for the original skytrain network, comprising 23.5 kilometres of elevated tracks and 23 stations built on single-column support structures. This network forms the Silom Line (Dark Green) and Sukhumvit Line (Light Green) that run through the heart of Bangkok’s commercial, business and tourist districts.
BTSC has also been awarded the operation and maintenance agreements by Krungthep Thanakom Co, a wholly owned subsidiary of the Bangkok Metropolitan Administration (BMA), for two skytrain extensions: the 2.2km (two stations) extension to the Silom Line and the 5.25km (five stations) extension to the Sukhumvit Line.
The company is bidding for the 31.4km Green Line extensions (13km from Bearing to Samut Prakan and 18.4km for Mor Chit-Saphan Mai-Khu Khot), branching off from its core network.
He is quite confident BTSC will be awarded the Green Line extension operating contract this year, with the first extension due to start partial operation in the beginning of 2017. Mr Keeree cited the cabinet’s endorsed guidelines that require the entire Green Line network to be run by a single operator to ensure smooth operation.
He also feels optimistic about winning operation of the Pink Line (Khae RaiMin Buri, 34.5km) and Yellow Line (Lat Phrao-Samrong, 30.4km), which are the first lines expected to be awarded under a public-private partnership (PPP) concession as announced recently by the government. The government’s goal is to expand Greater Bangkok’s rail network and promote PPPs to ease the state’s long-term financial burden.
The 39.6km Orange Line (Taling ChanMin Buri) and BMA’s planned extensions and other feeder systems such as the Grey Line, the 26km monorail that will link Watcharapol and Tha Phra via Rama IX Road, a 15km monorail linking Bang Na and Suvarnabhumi airport, and the Green Line extension (Bang Wa-Borommaratchachonnani, 7km) are all on the company’s investment radar.
These lines are expected to be in operation by 2019–20.
“We believe we are in a strong position to win these contracts. We have longterm experience in running a mass transit system, skilled human resources and a positive financial status,” said Mr Keeree. “We are a debt-free company and domestic financial institutions, which have a better understanding of the nature of infrastructure investment, are ready to fully support our investment projects.”
BTS Group is also looking for new rail investment opportunities in Asean, particularly in Vietnam and Indonesia, as well as China, he said.
The company tried to dabble in overseas expansion previously without much success. It signed memorandums of understanding on mass transit development projects in Vietnam and Indonesia that were later scrapped.
BTS Group also bid for Line 16 of the Beijing subway in 2014, but failed to win. Line 16 in western Beijing is a northsouth route from Bei’anhe to Wanping, totalling 29 stations and spanning 50km. The line is expected to commence operations in 2018. This project is a PPP investment scheme.
Mr Keeree said BTS Group is also committed to expanding and investing more in its three remaining business units.
“The media business, which is operated via our majority owned subsidiary, VGI Global Media Plc, will now diversify into an online and digital-based service provider, expanding from handling advertising space on the core BTS stations and commercial buildings in Bangkok,” he said.
“Meanwhile, property development, in which we have over 40 years of experience, will continue with its robust expansion, particularly led by condominium development that is handled by a joint venture firm with Sansiri.”
In October 2014, BTS Group and SETlisted property developer Sansiri Plc entered into an exclusive strategic alliance framework agreement with plans to develop about 25 condominium projects for sale within 500m of mass transit stations. The joint venture, BTS Sansiri Holding, has already successfully launched four condo projects and is scheduled to launch the fifth project next month. Five more condominium projects are in the development pipeline for this year.
The joint venture firm has collected 12-13 billion baht worth of land plots for future condominium development. If undeveloped land plots now held by BTS Group are included, the values should exceed 20 billion baht.
Mr Keeree vowed to be more engaged later this year or early next year in overhauling U City Plc, the property developer in which the group holds a 37% stake, aiming for the company to generate more recurring income through higher investment in hotels and rental offices.
“Over the next three to five years, we expect our growth will still be driven by the existing four revenue drivers and our business size will continue to grow even larger,” he said.