THE Bangkok-listed Tanayong Public Company is planning to spin off its US$1.3 billion elevated railway project for a separate listing later this year. Tanayong is 30 per cent owned by the Hong Kong-listed Hwa Kay Thai Holdings. The huge flotation would make it the second largest infrastructure play after Telecom Asia, to be listed on the Stock Exchange of Thailand. Assuming a prospective price-earnings multiple of 15, the new company will have a market capitalisation of about $13.7 billion. Hwa Kay Thai managing director Edward Chow said the successful flotation of Telecom Asia underlined strong market demand for infrastructure counters which provided long-term earnings potential. ''Like Telecom Asia, the Bangkok Transit System Company (BTSC) needs massive capital investment in the development stage. But huge profits will come starting from 1997 when the project is completed,'' he said. BTSC is now wholly owned by Tanayong, whose controlling shareholders include Hwa Kay Thai and the Kanjanapas (Wong) family. Tanayong signed an agreement with the Thai Government in 1992 to build, operate and transfer the elevated railway project on two routes in central Bangkok. Tanayong will operate the 23-kilometre railway project for 30 years before handing it back to the government. It will benefit from an eight-year tax holiday upon the project's completion. Mr Chow said the amount of capital to be raised from the listing would depend on market conditions, but so far the financing was in place for the project. ''The project is estimated to have a pay-back period of 12 years and an internal rate of return in excess of 20 per cent,'' he said. He added that Hwa Kay Thai would consider taking a stake in the project besides its indirect holding through Tanayong. Tanayong recently announced a Euro-convertible bond, debentures and warrants issue to raise a total of about HK$1.9 billion to finance the transit project. Officials at the company and lead manager of the issue, Swiss Bank Corporation, will be in Hong Kong tomorrow to market the issue. The road show will go to Paris, Geneva, Zurich and London. Mr Chow said the convertible bond issue had yet to be priced. Under the current market conditions, a coupon of 3.5 per cent and a 15 per cent premium on conversion are expected. He said that earnings dilution would only be in the region of between 10 per cent to 15 per cent at the maximum over a period of between seven and 10 years. Tanayong is now in the process of selecting a building consortium on a turnkey project basis. ''Four international consortia including Siemens, GEC Alsthom, Mitsui-Nippon Sharyo and Intohu-Kawasaki, are being considered. They have all expressed interest in certain equity participation,'' Mr Chow said. He said that the chosen contrac-tor would be responsible for arranging financing for the project. ''On the debt side, a total loan of US$900 million will be raised by the contractor. The loan includes export and supplier credit, commercial and long-term bank borrowing,'' he said. Mr Chow said Tanayong would be responsible for an equity contribution of US$400 million, which gave the project a debt to equity ratio of 2.25. At present, the sole shareholder of the transit project is Tanayong, which is required under the concession agreement to hold at least 51 per cent of BTSC until the project is operational. Tanayong intends to hold at least 60 per cent of the share capital on a long-term basis. This year, Salomon Brothers and the International Finance Corporation would seek to identify long-term investors to participate in the equity investment in BTSC, Mr Chow said. Current estimates showed that the project would generate a pre-tax income of about three billion baht which will be doubled in 2003, he said. Mr Chow said that the project's estimated total construction cost had increased 40 per cent due to the extension of the system to 24 km from 14 km. However, because of a longer route, the number of daily journeys is expected to leap 55 per cent to 700,000. Mr Chow said construction work had been delayed by the relocation of a proposed depot in the wake of concerns of environmental damage. The new location is about 4 km from the previous one and required four additional stations. The bidders had to re-submit their building and financial proposals. The successful tenderer will provide technical assistance to BTSC with the operation of the system for the first three years.