All about MorobeCoast Shipping Services Ltd

MorobeCoast Shipping Services Limited was set up by the five Members of Parliament from the five coastal districts of Morobe Province, namely: Kabwum, Tewae Siassi, Finschhafen, Nawaeb and the Huon to counter the deteriorating Lutheran Shipping services to their electorates.

Former Lutheran Shipping vessels mv Gejamsaoc and mv Maneba (pictured at Voco Point in Lae) have been bought off by MorobeCoast Shipping Services Ltd

2. Background

The sea transport to the Finschhafen, Tewae-Siassi and the Kabwum Districts (FISIKA) of Morobe Province are the main travelling mode for the people of the area for a very long time since the Lutheran Shipping (Luship) was set up by the Lutheran missionaries more than 120 years ago.
Over the years, the areas were served well by the shipping and the airlines services.
However, in the last 15-20 years the airlines services have more or less ceased except for very limited services and charter operations for those who can afford the services.

The shipping services have deteriorated very quickly over the last five years due to the ongoing management and shareholder issues with Lutheran Shipping and the Evangelical Lutheran Church of PNG (ELCPNG).
While this was going on, the people living in the FISIKA area were finding it difficult to travel and to transport their produce to the markets in Lae or for the government services to be delivered to the districts.

The deteriorating services in the shipping services become concerns to the MPs from the FISIKA area who met and reviewed the situation in their areas seriously and have requested that a proposal be put together to find alternate solutions to continue to provide the basic transport services to their people in their electorates.

In taking the lead, the Speaker of the National Parliament and Finschhafen MP, Theo Zurenuoc, requested that a proposal be put together for him and his colleague MPs of FISIKA to consider as matter of urgency.
The Speaker assembled a small group of liked-minded individuals from the Morobe Province and formed an advisory committee to advise him on the shipping situation. 

Based on the above background, a proposal was put together for the review and consideration of the MPs from the FISIKA districts.

3. Shipping Proposal

The initial proposal was to set up an independent shipping business entity for the Finschhafen, Tewai-Siassi and the Kabwum districts (FISIKA) in the Morobe Province to help provide the needed shipping services that were once adequately provided by the Lutheran Shipping in the last 40 years.

However, as the advisory committee was reviewing the various options, it was requested that the committee include the Nawaeb and the Huon Gulf districts in the shipping proposal.

The revised proposal now includes all the five Coastal Districts of the Morobe Province, thus,  the proposed MorobeCoast Shipping Services Ltd was established.

4. Possible Shipping Options

Three possible options were presented to the MPs for their consideration and action, taking into account the current situation the Lutheran Shipping was going through with its board, the management and the shareholder. The options were: 

• Provide direct financial assistance to Lutheran Shipping in terms of funding injection or the provision of new vessels to the company; 
•   Set up a joint venture (JV) Company with Lutheran Shipping to help rejuvenate the company and provide funding; and
• Set up a stand-alone shipping venture to operate and service the coastal districts of Morobe.

4.1 Option A - Provide direct Assistance to Lutheran Shipping by providing Funds and Assets

Under this option, it was proposed that the MPs from the five coastal districts of Morobe provided direct assistance to Luship in terms of funding and the provision of vessels paid for by the State and managed by the exiting KHL/Luship management.

Given the current management and the operational issues surrounding the KHL/Luship/ELCPNG, it would be in the best interest of the MPs or anybody for that matter not to get involved with Luship until it was absolutely certain that these issues were resolved and that any public funds or assets given to Luship were managed according to the Companies Act 1997 and the Public Finance Management Act.

This option would not be possible until the current issues are resolved between the ELCPNG, KHL and Luship management.

4.2       Option B – A JV with Lutheran Shipping

This option would require the coastal districts of Morobe to set up a new company under the Companies Act 1997, and enter into a JV operations with the existing Kambang Holding Ltd (KHL)/Lutheran Shipping services.

It would require a new JV company to be set up and owned 50-50 by KHL/Luship and the five districts with its own board of directors and the management to operate the JV company.

The districts would be required to inject capital funding, assets and personnel into the JV company to ensure that its interests were protected.
Obviously, under this option, the directors and shareholders must be fully made aware of the current financial position of Lutheran Shipping and the management issues with its shareholder.

Any JV option would depend on the board and management of Lutheran Shipping and its shareholder, ELCPNG,  willing to accept the changes to the current situation existing between the parties, which were hindering the operation of the company.

Directors and shareholders of the proposed new MorobeCoast Company must also be satisfied that any JV arrangement with Luship would be viable and would serve the purpose of their intensions to serve their people. In the long run, the JV company should be self-sustained.       

Again, this option would not be possible until the current issues were resolved between the ELCPNG, KHL and the Luship management.

4.3       Option C – A Stand Alone Shipping Entity

Under this scenario, an independent shipping entity incorporated under the Companies Act 1997, with the shareholding by the five coastal districts of Morobe Province - Finschhafen, Tewai Siassi, Kabwum, Nawaeb and Huon Gulf - to be set up with the equal share equity per district. 
The board of directors of the company is comprised of seven directors, one each from the five districts and two independent directors.

The company should be set up with a strategy in mind to diversify into other divisions that would bring together a holistic concept of serving the rural population of the districts.

Initially the shipping division would be set up to serve the immediate needs of the deteriorating shipping services in the districts.

Other divisions of the company should than be set up to address specific areas of needs in the districts, which include:

• Road Transport Division
• Set up a road construction and maintenance group in the district in Finschhafen, Sialum, Wasu and Siassi to build and maintain the road networks in the districts;
• Set up and manage road transports in the districts to provide the complete system of transport to the rural people of the districts to travel to and from their villages to the main centres for commercial or social activities.
• Air Transport Division
• Review the existing airstrips in the remote parts of the various districts with view to provide maintenance to continue to provide services to the people in the remote areas;
• Set up JV arrangements with existing third level airline operators to continue to service the rural population;
• Agriculture, Marine and Local Produce Marketing  Division
• Set up and manage the agriculture and marine commodities marketing for cocoa, coffee and fish from the local producers at their locations and selling the produce to buyers and processors in Lae;
• Set up marketing for the local market produce from various villages could be bought off the rural people and transported to Lae for sales, providing the needed cash injection into the village economy.

This is a very good opportunity to provide employment to the people in the rural areas of the districts to participate in the economic development of their districts.

The MPs decided to go with Recommendation 3 and the initial proposal was to set up an independent shipping business entity for the Finschhafen, Tewai Siassi and the Kabwum Districts (FISIKA) in the Morobe Province.

However, the advisory committee was requested to include the Nawaeb and the Huon Gulf districts into the shipping proposal to cater for the future management of the newly-acquired Huon Gulf district vessel, the mv Morobe Rainforest.

mv Morobe Rainforest lying idle  off Voco Point in Lae

    The revised proposal now includes all the five coastal districts of the Morobe Province, thus the proposed Morobe Coast Shipping Services Ltd was proposed; and on December 20, 2013, an interim board of directors and a management team were  appointed to direct and manage the incorporation of the new shipping company.

On January 21, 2014, the MorobeCoast Shipping Services Limited was incorporated with IPA. 

5.     Shareholders

The shareholders of the Company is made up of the current seating Members of Parliament for the five districts:

• Kabwum District - Bob Dadae, MP
• Tewae Siassi District  - Mao Zeming, MP and Minister for Fisheries
• Finschhafen District    -  Theo Zurenuoc, MP and Speaker of National Parliament

• Nawaeb District -  Gisuwat Siniwin, MP
• Huon Gulf District - Ross Seymour, MP

Each Member has signed a shareholders trust teed to hold one share in the company on behalf of his district and people while he is a current MP.
 When an MP is replaced during a national election, a by-election, or any other means where he or she is no longer an MP for the district, the shareholding is automatically transferred to the new MP for the Districtd.
The returning sitting MP in a general election continues to holds the share for his district.

6.     Directors

The shareholders at their meeting on December 20, 2013, appointed the following directors to direct the setting up of the company representing each of the five districts and two independent directors; and an ex officio shareholders' representative:

• Kabwum - David Katinge
• Tewae Siassi - Billy Amakua
• Finschhafen - Paul Isan
• Nawaeb - Fua Singin, Chairman
• Huon Gulf - Diemer Sakaing
• Independent - Raemeng Sifumac
• Independent - Dason Geveken
• Shareholders - Bob Dadae, MP

The above board members were confirmed as directors at the first joint shareholders' and directors' meeting of March 15, 2014, for a period of 12 months to see the new company being set up and will be subjected to reappointment at the first Annual Shareholders Meeting of the Company in 2015.

7.     Management

The board of directors of the company appointed the following people to form the management team and set up the company operations: 

•  Manager: Namon T Mawason 

-  32 years management experience with Mobil Oil New Guinea Ltd and the ExxonMobil Gas and LNG Projects, 1976 - 2008;   

- 3 years with South Sea Lines Ltd as Manager 2008-2011; 

- Board member Kambang Holdings Ltd 2000-2004; 

- Chairman Kambang Holdings Ltd board 2004-2008.

 

•  Financial Controller: Zabba J Kewoing

- Former acountant for Kambang Holdings Ltd, Steamships and Paradise Foods.

8.     Funding for MCSSL

The initial Funding for the company is from the shareholder districts from their  DISP Funds of K 1.15 million each and a once-off grant from the National Government of K10 million.

The board and management aims to develop and operate the shipping business to be sustainable into the future and not to rely on public funding. 

9.     MCSSL Vessels

During the liquidation of the Kambang Holdings Ltd/Lutheran Shipping, MCSSL bought through public tender two vessels, the mv Gejamsao and the mv Maneba.
The vessels were operational at the time of the liquidation and can be operational as soon as we complete the change-of-ownership process with National Maritime Safety Authority and Department of Transport, Maritime Division,  for coasting trade licences for the vessels and secure a longer-term lease of the Voco Point Wharf.

We have also tendered for another vessel, the mv Sir Zibang from the Lutheran Shipping fleet.

Furthermore, a landing craft bought by the former MP for Huon Gulf District; the mv Morobe Rainforest is to be chartered by MCSSL once the legal case between the sitting MP and the former MP was settled.

The MP for Tewae-Siassi is buying a landing craft from Indonesia and this vessel is scheduled to arrive in PNG in November to join the MCSSL fleet.

We are reviewing some options to charter vessels from West New Britain Provincial Government and other sources to build up our fleet.     

10.                           Voco Point Wharf Facility

The Voco Point Wharf facility or the Namasu Wharf as known it is known to others was the foundation of the growth of Lutheran Shipping services for more than 100 years.
This facility will continue to serve the new shipping company and therefore we are negotiating a long-term lease with option to buy the facility with current owners, NASFUND.
This wharf facility is very important for MorobeCoast Shipping Services Ltd  to grow and to serve the people of the Morobe coast.

The facility would require some renovations to the buildings and offices.
The major issue with the wharf is the silting of sand at Voco Point, which is seriously affecting the wharf.

Currently, mv Maneba can be seen with its bow sitting high up on the sand bank.

mv Maneba can be seen with its bow sitting high up on the sand bank.

The National Fisheries Authority (NFA) has approved K 2 million to fund the dredging of the silting, which is very badly affecting the NFA facility, and the former Lae Yacht Club Facility.

MCSSL will be working with NFA and NASFUND to dredge the Voco Point sand bank as soon as funds are available and a dredging contractor is secured.      

11.                        General Information

The Lutheran Shipping operations were grounded on May 26, 2014, when a liquidator was appointed.

The company that operated for more than 100 years by the Lutheran Church of Papua New Guinea finally stopped operations due to its going management problems over the last five years.

The new Shipping Company, MorobeCoast Shipping Services Ltd,  was set up in anticipation of the collapse of the Lutheran Shipping.
It  will now take on where the Lutheran Shipping left off, and will continue to serve the people on the Morobe coast and once properly establish and extend the operations into the neighbouring West New Britain, Madang and Northern provinces.