THE ILLEGAL UBS LOAN MATURES ON 13 JUNE 2016


THE LNG LANDOWNERS OPPORTUNITY TO BUY 4.22 % EQUITY FROM THE STATE ENDS ON 30 JUNE 2016;
WILL PETER O’NEILL FIND THE MONEY TO MEET THE OBLIGATIONS?
by ANDRE BILAK STEVEN

PNG is already having a serious cash flow problem, and nothing can be more evidenced than the Minister for Finance James Marape’s statement few weeks ago that all MPs (who supposed to receive K15m DSIP funds) will receive K1 million each for this year. The cash flow crisis is affecting business houses, government departments and households like never before. The Bank of Papua New Guinea has about less than US$1.4 billion in reserves against pending foreign exchange orders of around K4 billion plus and the situation is not improving any sooner. The endless cue for sending funds overseas is unbearable and killing many import reliant businesses in this import-reliant economy. Many learned experts in economic management have advised O’Neill, since early signs of doom emerged, to take remedial actions immediately including passing of supplementary budgets and cutting down on unnecessary costs. These fell on deaf years and O’Neill recklessly continued to captain this ship (PNG Economy) despite the obvious signs of mechanical failure. To heedless O’Neill, we just have to continue to sail until we breakdown and sink and this fate is not far. Against this economic distress, PNG economy is now on its way to the slaughterhouse –thanks to economic imprudent O’Neill. Wednesday 13 June 2013 is already marked out and Wolfish UBS Bank is already counting the numbers. THE UBS K3B LOAN AND ITS BENEFITS The UBS loan does not benefit Papua New Guinea by measure. In fact we made a loss on the day O’Neill signed the deal. The collar forward-sale of about a fifth of the Oil Search shares meant that we lost about $18 million (K42m) on the day it was signed. See SMH report. Well over K40 million was made available by Secretary Daire Vele to pay for consultants including himself through his company, Petusio Capital, and Jimmy Maladina’s law firm –Pacific Legal Group. Then there is this bridging loan of A$330 million (K770m) that National Petroleum Company (NPCP) to pay UBS and at the same time, around January 2015, K415 million was borrowed by NPCP to pay for ‘advance dividend’ (a financial concept unique to O’Neill) to the State when the country faced financial shortage at the beginning of 2015. See SHM report. The O’Neill Government purchased 10% of Oil Search shares at A$1.2billion. Today, the State stake in Oil Search is valued less than A$800 million. A loss of more than A$400 million (K933m) just by being on the stock market for more than two years. Thanks to O’Neill’s economic witlessness. So what was the real benefit the State of PNG was poised to derive from this deal that that State has made a loss of State K2.2billion (42+40+770+415+933) so far? A short answer to this question will be provided later on. That loss of about K2.2billion excludes the A$1.2 billion principal amount of the loan plus the interest at 13.3% p.a. That is due on 13 June 2016 and according to well-placed sources, the State does not have the money for refinancing arrangement. The Oil Search announcement to purchase Interoil was yet another impossible stunt by O’Neill and Botten to see if that would improve the financial situation. The State had already committed the proceeds of the LNG to UBS through a Singapore escrow bank account. Under the collar arrangement, the Oil Search Shares had been used as collateral. As an Investment Bank, UBS is likely to takeover these shares come 13 June. So is PNG likely to be deprived of the Oil Shares plus the funds in the Escrow account? Yes. That means that we have already made a loss of K2.2billion and now we will be making a staggering loss of the proceeds of LNG and Oil Search Shares. Given that the Oil Search prices is lower than forecasted, imagine how much more can it be? Again did the State benefit from this deal? NO!!!! Fugitive Daire Vele (has a pending arrest warrant on him) when explaining the Oil Search share purchase back in February 2014 said “The State looks forward to maintaining a material shareholding in Oil Search with a view to participating in the additional upside of Oil Search's existing projects and the Elk-Antelope project.” O’Neill’s explanation to the NEC when presenting the submission said Oil Search was a largest employer of Papua New Guineans. Well, just a couple of months back, Oil Search laid off more than 200 Papua New Guineans and where was O’Neill????? Nowhere! This deal benefited O’Neill (who collected a lot of commissions and structured payments) and his cronies like Maladina, Vele etc. Oil Search secured itself against a potential takeover bid from the IPIC and mostly UBS AG. The destructive effects of this controversial deal has and will continue to undermine any economic recovery process. THE LANDOWNERS 4.22 % EQUITY PURCHASE Under the PNG LNG Project Umbrella Benefit Sharing Agreement, the affected landowners and provincial governments can exercise their option to acquire 25.75% of the State’s stake in the LNG project. This is equivalent to 4.22o/o indirect interest in the PNG LNG Project. The "option price" per percentage is US$240 million, which is valued at USl.01 billion (US$240 million x 4.22o/o). The period in which the affected landowners and provincial governments can exercise their option is between 1 January 201 6 and 30 June 2016. The US$1 .01 billion will be paid to IPBC and these proceeds will be used to repay the loan. We are only two weeks away from the 30 June 2016 and there is no indication that the landowners will have the funds to purchase that stake. Firstly, the landowners’ royalties and equity share from the PNG LNG proceeds had been tied to this same UBS loan hence “all” the funds are diverted to this escrow account. BPNG (Bakani), O’Neill and Marape have lied to their people by saying that the funds are safely kept in a trust account. To avoid the pressure, they continue to drag an unusual landowner identification exercise headed by a judge of the National Court.
Secondly, O’Neill tried to hijack the fundraising exercise by instructing Augustine Mano (MRDC) and Wapu Sonk (NPCP) to assume the role of landowners in seeking the funds in the capital markets. That was vehemently opposed by the landowners (ably supported by late Anderson Aigiru) in a court case and the whole arrangement failed. Failing that, O’Neill sponsored convicted criminal, Francis Potape to overthrow late Anderson as the Governor of Hela so that Potape would facilitate the landowners deal. That again failed when Anderson challenged it in court successfully but came at a prize –Anderson’s death. When Hon Kerenga Kua asked Peter O’Neill in Parliament about the landowners proceeds, Peter O’Neill, as usual with a total shameless demeanor rose to answer the question. As he stood up, Late Anderson rose and stormed out of the Parliament –clear sign that Agiru didn’t want to hear O’Neill’s lies. That was the last time he was seen and that was the cause of his death. With the limited knowledge, the landowners demanded the LNG funds together with late Anderson’s body but the sugary leaders of Hela and SHP watered it down. The date is fast approaching and given that nobody in the global financial markets trust O’Neill and his government, the chances of raising the finance to assist the landowners purchase the 4.22% are very limited, if not nil. A big letdown of the landowners –his own people, if ever he truly identifies himself with them.
O’NEILL FAILED THE ECONOMY O’Neill failed the country by not raising the IPIC refinancing when the maturity date was approaching. He had all the opportunity to raise the finance to repay the IPIC loan but he failed miserably and IPIC took over State’s Oil Search Shares. There was no need and economic viability for PNG in obtaining the loan in UBS to buy Oil Search shares. None at all!! The State and its peoples’ resources had been used by O’Neill to benefit O’Neill himself, his cronies and his crony companies. O’Neill is again failing the country big time by not raising the funds to refinance the UBS loan. He is again allowing the loan to mature so that UBS would take over State assets. So one wonders why was the State used to borrow this huge loan. It seems a one-way traffic to benefit these corporate vultures. He is again failing the Landowners of the LNG project. The Landowners are now positioned to be mere spectators in the project that they had so much hope. How shattering it is. Meanwhile O’Neill continues to triumph with total impunity. He is not worried at all that his actions are causing substantial financial ruin to the country.
The Sydney Morning Herald story contains the details of the UBS deal. Please read to understand further on this.


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