WHO PAID LOSS OF K780 MILLION TO UBS?

by HOPE PNG
The sale of Oil Search shares by UBS resulted in it recovering part of its principal from the US$1.2 billion (K3 billion) loaned to PNG Government to purchase the shares initially.
Of that K3 billion loaned to PNG Government, UBS only recovered K2.22 billion from that sale. Simple math dictates that UBS made a loss of K780 million on the principal amount loaned.

• The first shipment of PNG LNG was made in the last week of March 2014 (source: PNG Business Advantage)

• PNG LNG proceeds were held in a UBS bank account as collateral in Singapore.

• The State offloaded (by directing UBS) the Oil Search shares and made a loss of US$250 million (or K780 as stated by Wapu Sonk).

• The actual loss would be well over K1.8 billion when calculating collar costs, commissions to advisors and all other costs associated with the UBS loan.

• O’Neill claimed Government made a net gain of K100 million from that sale.

• The only logical conclusion one can draw is that UBS dipped its hand into the collateral basket (LNG proceeds) to offset its loss of K780 million.

• The balance standing to the credit of Kumul Consolidated Holdings (KCH) is K100 million as proclaimed by O'Neill. This means from 300 LNG exports, all the revenue held as collateral was absorbed by losses from the UBS loan and we are left with K100 million.

• The PNG Government has fully cut off the losses from the bad UBS loan.

• On April 18, 2017, issue of The National Nixon Duban, Madang MP and Minister for Petroleum and Energy, reported that Papua New Guinea “earns US$50 million (K160 million) from every shipment of liquefied natural gas exported”.

• In the June 8, 2017, issue of The National in an interview by Shirley Mauludu on Andrew Barry (MD of Exxon Mobil), it was reported that Papua New Guinea saw off its 300th LNG cargo export.

• K160 million per shipment x 300 shipments = K4.8 billion. If PNG made a loss of K1.8 billion from the UBS loan, then where did the other K3 BILLION go to???

• There are about 100 shipments of LNG cargo per year. 100 shipments x K160 million = K1.6 billion new money into PNG every year. 50-60% of that annual money (K1.6 billion) is intended to be invested in the Sovereign Wealth Fund (SWF) for future generations.

• K8 billion over the next 5 years is new money to be cashed in by the Government. And NONE of it will be invested in the SWF with a PM and Government hell bent on heavy expenditure.

How much income? The total projected income from the project is US$31 billion. Of the one-third (US$10 billion or K30 billion) expected to remain in PNG, the vast majority is paid as tax revenue, dividends, royalties and infrastructure tax credits to the National Government, provincial governments and landowners, with around 10 percent paid as operational costs. (source: PNG Business Advantage)

• All of that K30 billion, at this rate of spending, will be used or borrowed against fully by 2025.

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