Minister
for Public Enterprises, Sir Mekere Morauta, announced today that NEC had
approved a submission to raise up to K900 million to cover a shortfall in Papua
New Guinea’s funding of its share in the LNG project.
“The shortfall
has arisen because of decisions by the previous Government and previous IPBC
management when they borrowed $A1.68 billion for our share,” he said.
“The first was
to borrow in Australian dollars when the LNG project equity required payment in
US dollars, and the second was the bulk conversion of the Australian dollars
into US dollars.
“If we do not
raise the extra money, we risk having to sell some of our 19.4 per cent share
of the project at less than market value, and suffer lower revenue streams when
the project begins producing gas.
“It is
essential for PNG to meet its financial commitments to the project. It is an
opportunity of a lifetime, and we need to grasp it with both hands.
“If we as a
nation are to reap the full benefits, then we must make sure we are able to pay
for the State’s full 16.6 per cent direct interest and the 2.8 per cent direct
interest being bought on behalf of landowners.
“That is what
the K900 million will be used for, plus some potential contingencies such as
exchange rate movements.”
Sir Mekere,
who as former Opposition Leader questioned the way the original $A1.68 billion
was borrowed from Abu Dhabi by the former Government and management of IPBC,
said his warnings about dangers and irregularities had proved to be right.
Treasury was
completely shut out of the loan negotiations, he said, and this was a major
cause of the problems that arose, and the need to borrow a further K900
million.
The former
Minister and the former IPBC management were not competent to arrange the loan,
and they were not competent to arrange the conversion into Australian dollars.
“In the end, their
confusion and lack of financial expertise has cost every Papua New Guinean K136
each,” he said.
A strategic
review of the loan had revealed the shortfall and other issues with the loan.
Further inquiries are continuing.
The K900
million will be raised relatively quickly on the domestic market, starting next
month. Studies have shown that there is excess liquidity in the economy and
that potential investors are available.
Despite
knowing of the shortfall for a number of years, former IPBC management did
nothing about it. The extra money is being raised now in readiness for project
cash calls early next year.
The 2012
Appropriation Act of Parliament (2012 Budget) will authorise the raising of the
K900 million.
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