Thailand’s high-speed rail project to finalise contract in July after five-year delay

The Covid-19 pandemic severely impacted numerous infrastructure investment projects in the transport sector, causing widespread delays—particularly the high-speed rail linking three airports worth 224 billion baht.

The project is owned by the State Railway of Thailand (SRT), with Asia Era One—a Thai consortium and train operator led by the Charoen Pokphand Group—holding a 50-year concession.

Beyond this, the Covid-19 pandemic had a significant impact on both the global and Thai economies, leading to an economic downturn and heightened uncertainty. This directly affected private sector financing and operations.

Meanwhile, financial institutions became increasingly cautious in approving loans for large-scale projects, leading to liquidity problems among private companies. As a result, they were unable to meet the original payment deadlines for the rights to operate the Airport Rail Link (ARL) under the contract terms.

This led to negotiations between the private sector and the government to revise the project contract, alleviating financial burdens caused by the pandemic. Consequently, the project has been delayed by over five years.

Chula Sukmanop, secretary-general of the Eastern Economic Corridor (EEC) Policy Committee, told Thansettakij that the project is currently undergoing a contract review by the Office of the Attorney General, a process expected to take approximately one month, with completion anticipated by mid-June.

He stated that the revised contract will be submitted to the Civil Service Commission for consideration before being presented to the Cabinet for approval. The signing of the contract amendment is expected to take place by July this year, he said.

A source from SRT stated that on March 27, the SRT Board approved the revised joint investment contract for the high-speed rail project, in accordance with the principles set by the EEC Policy Committee.

According to the plan, once the contract amendment is signed with the private sector, the SRT will expedite access for private contractors to the construction site at the U-Tapao airport area, which includes a runway and overlapping infrastructure with contract 4-1 of the Bang Sue–Don Mueang section of the Thai-Chinese high-speed rail project (Phase 1).

The SRT has also been coordinating with relevant agencies to accelerate the detailed design of the project before proceeding with construction.

This amendment to the joint investment agreement consists of two key aspects:

• Public investment payment method – The SRT has assured that this revised method does not compromise the interests of the state, as it adopts a build-as-you-pay system. Once construction costs are settled, the state will retain ownership of all civil works.
• Security deposit requirements – The private contracting party, Asia Era One, must provide additional financial guarantees beyond the original contract framework, amounting to approximately 160 billion baht. This ensures project completion within five years.

The revised agreement, which has been successfully negotiated with the private sector, includes five key provisions:

• Adjustment to public investment cost (PIC) payment structure – Previously, the state was to pay upon the commencement of high-speed rail operations, distributing payments equally over ten years, totalling 149.65 billion baht. Under the revised agreement, payments will be made in instalments based on the progress of construction as verified by the SRT, with a total limit of 120 billion baht. Asia Era One must provide additional financial guarantees totalling 152.16 billion baht to ensure that both construction and the high-speed rail service commence within five years. Ownership of constructed assets will gradually be transferred to the SRT according to each payment instalment.
• Revised payment terms for the ARL investment rights – Asia Era One will now pay the investment rights fee of 10.67 billion baht over seven annual instalments of equal amounts. The first instalment must be paid upon signing the amended agreement with the SRT. Additionally, the company must provide a bank guarantee equal to the value of the ARL investment rights fee and other financial costs borne by the SRT.
• Additional revenue sharing clause – If, in the future, project loan interest rates decrease significantly and Asia Era One’s internal rate of return (IRR) exceeds 5.52%, the SRT will have the right to request additional revenue sharing, subject to further negotiation.
• Waiver of notice to proceed (NTP) conditions – A memorandum of understanding will be established to exempt the NTP condition that has yet to be fulfilled, such as receiving investment promotion certificates from the Board of Investment. This will allow the SRT to issue the NTP to Asia Era One immediately upon signing the amended contract.
• Mitigating future financial risks – Contractual provisions for force majeure and relief events have been revised to align with other state-private joint investment agreements, ensuring financial stability in the event of severe disruptions.

Furthermore, the amended agreement imposes additional financial guarantees, amounting to approximately 160 billion baht, to be submitted to the SRT within 270 days of signing. These guarantees comprise:

• Civil works construction guarantee: 125.93 billion baht
• System installation guarantee: 14.81 billion baht
• Operational quality assurance guarantee: 748.25 million baht
• ARL management rights guarantee: 10.67 billion baht

On the signing date, the private sector must make the first instalment of the ARL management rights fee, approximately 1.5 billion baht, with the remaining amount to be paid in seven subsequent instalments.