PNG PM Defends NEC Decision on Kroton Shares

Prime Minister James Marape has pushed back against claims that the government mishandled the PNG LNG Kroton equity arrangement, telling Parliament the current structure was aimed at finally returning benefits to landowners and provincial governments.

The Prime Minister was responding to accusations from former Prime Minister Peter O'Neill and Sinesine-Yongomugl MP Kerenga Kua, who challenged the legality and financial implications of a recent NEC decision concerning the 4.27 percent equity option.

 PNG PM Defends NEC Decision on Kroton Shares

Mr Kua said the government should honour the original pricing formula outlined in the 2009 Umbrella Benefits Sharing Agreement signed in Kokopo.

The agreement fixed the purchase value at US$240 million for each one percent equity stake, placing the total transaction at more than US$1 billion.

“The NEC decision says they must negotiate the price again,” Mr Kua said. “Why does the government reject the contractual agreement which was signed by all parties and stakeholders on the agreed price?”

He also questioned why politicians were overseeing a Special Purpose Vehicle established to hold the shares.

“Why not put investment analysts and investment managers properly licensed by the Securities Commission instead?” Mr Kua asked Parliament.

Prime Minister Marape defended the NEC decision, arguing that the original valuation no longer reflected the current financial position of the PNG LNG project.

According to Mr Marape, when the US$240 million valuation was first agreed to, it included major bank-financed project debt which has since been substantially repaid.

“That US$240 million price tag included that 70 percent bank-financed element,” he said.

Mr Marape also stated that Kumul Petroleum had received more than K12 billion in distributions while holding the 4.27 percent equity over the past decade.

He claimed earlier governments failed to ensure beneficiary groups from Hela, Southern Highlands, Western, Gulf and Central provinces were able to participate in the ownership arrangement.

The Prime Minister’s explanation was strongly challenged by Mr O’Neill, who insisted landowners were never prevented from buying the shares.

“In 2014, we made a decision, realizing that the landowners and the provincial governments could not afford it. We discounted it to US$150 million per share,” Mr O’Neill said.

“Today, the Prime Minister is free gifting these five provinces and the landowners at the expense of the entire nation. That was not the intention of the Somare government or our government.”

Mr Marape later assured Parliament the SPV arrangement was temporary and said governors and landowner groups would later decide on a permanent independent structure for the assets.

“The SPV is an interim structure. Look at the cabinet decision, it says interim structure until the five provincial governors and the landowners themselves sit and decide what to do with it,” he said.