Kasikorn Securities (KS) has published a quick note on the situation of Thai Oil Public Company Limited (SET: TOP) following the announcement to terminate its main contractor this morning.
KS noted that the management confirmed that the project will be completed by Q3 2028 and remains within the approved construction budget of $7.2 billion as agreed by shareholders.
The project consultant (Bechtel) and licensor (Chevron) remain unchanged, but the process of sourcing a new main contractor is underway. A list of new contractors has already been established.
The target is to secure a new contractor by Q3 2025 with a detailed construction plan and a new cost structure. This plan aligns with previous discussions that anticipate knowing the new contractor by late Q2 2025 or early Q3 2025.
Any pre-existing damages will be addressed according to the contract, with remaining guarantees to be enforced. Post-COD damages will be assessed based on whether the issue lies with technology or construction quality of the original contractor. If non-compliance with the contract is observed, the original contractor will bear responsibility. If the issue lies with the technology, the licensor will be accountable.
The new contractor will only be responsible for new construction work and will need to establish a performance bond in accordance with the remaining contract value under standard contracting terms.
Liquidity remains sound as no payments have been made recently. Therefore, if construction resumes, it is expected that a perpetual bond will be issued in H2 2025, or asset monetization will be conducted to deleverage and reduce the risk of a credit rating downgrade.
The upside involves the enforcement of additional guarantees from the previous contractor, while the downside involves potential lawsuits from the previous contractor.
