Response from Papua New Guinea Deputy Opposition Leader Samuel H. Basil to the Full Page Advertisement on the Oil Search Share Purchase

Sonja Barry Ramoi>THE ENGA POLITICS PAGE
23rd March, 2014 10:52PM

Response from Papua New Guinea Deputy Opposition Leader Samuel H. Basil to the Full Page Advertisement on the Oil Search Share Purchase

Congratulations to the Prime Minister of Papua New Guinea, Peter O’Neill, for spending the people’s money to cover his government’s corrupt practices, in relation to the Oil Search share purchase that he solely authorised, for his benefit and the benefit of Oil Search and NOT the people of Papua New Guinea (PNG).

The Opposition has clearly been providing evidence of the corrupt practices of this Prime Minister over the last 6-12 months. The Opposition, as the alternative Government, has been working on the fact and the detail of what this Prime Minister is presenting, and demonstrating for the people, what is actually occurring rather than the lies directed upon us by O’Neill. 

I think the average Papua New Guinean citizen know why Polye and Duma were sacked, in light of the pushing through of the UBS loan without any legislative checks and balances; thus, I urge them to join the Opposition ranks and by not doing so implies that O’Neill has got them in a blackmailing situation they cannot move from.

Prime Minister, the Opposition provides the response to your article with facts. You can criticise the Opposition and accuse us of all sorts of nonsense. But the nation is listening to what we are raising as you are running the Government single-handedlyfor your own personal gain. Again I repeat, you are making decisions for your own personal gain and the questions we pose in this article, we already know the answers to.
I will raise five casing points relating to the IPIC refinancing and the UBS loan that contradict your paid advertisement which PNG considers a blatant LIE. The situation called for only one transaction, NOT two manipulating transactions that are hiding the truth; The Bank of New York, the related Australian banks and UBS know all this and the relevant investigative bodies don’t have to look far, to ask the questions and find the answers.

1) IPIC Refinancing

The people of PNG deserve to know why you and your Government tendered bids for the refinancing in the last 2 months of the loan. A refinancing transaction of over US$1.6 billion or around PGK4 billion does not take two months as it takes six months and it takes numerous negotiations and settlement with IPIC. The Opposition warned you to refinance the IPIC loan in August 2013, then again when the 2014 Budget was announced last year but our pleas fell on deaf ears when international financiers would tell you that a minimum six months is the norm to finance a major transaction like the IPIC loan as it is part of the processing, to mitigate risks.

Prime Minister, you guaranteed that the country would get its Oil Search stock back, but you failed with IPIC. Again you failed to negotiate the outcome that you stated you would achieve. The reason is that IPIC gave your government a chance to finalise but you did not. I repeat, you did not and failed, thus you have LIED again to the citizens of Papua New Guinea!!

Apart from the timing issue, one of the underlying reasons behind the IPIC refinancing failure is because the Managing Director of IPBC, Wasanthi Kumarasiri, The Bank of PNG Governor, Loi Bakani, and the Acting Secretary of Treasury, Dairi Vele, did not know what they were doing in finalising this matter. You sent a “B-Grade” Team to conclude on one of the most important and historic commitments you gave to the citizens of PNG and you failed!!!

So the questions that you need to answer are:

i. When did the Government communicate in writing with IPIC that it was going to refinance the Oil Search shares?

ii. Who sent the communication and was the Prime Minister engaged and advised?

iii. Why can’t the government release the correspondence to confirm that you were actually going to refinance the IPIC loan?

iv. When did the Government interview the banks?

v. What were the terms of reference for the refinancing?

vi. Why are you not releasing the terms of the offers made by the banks you have named to confirm that UBS was the best choice?

vii. Did the advice provided to the Government from Bank of PNG, Treasury and IPBC provide an accurate report to the Government that actually sets out the facts and did the Government ask for any expert advice about the decision?

viii. Did UBS offer to pay a fee to any party connected with the Government or a Government official, including the Acting Secretary of Treasury who was very obvious in supporting UBS and no other financiers?

ix. What is the relationship between IPIC and the State of PNG like as a result of your comment that IPIC are trying to secure a further payment that you say is not legal?

x. Where are the public accounts from the banks and the Government for the extra cash in Singapore that was attached to the IPIC loan?

2) Oil Search as an investment

The Opposition says you lie about Oil Search being a strategic investment outside of the IPIC refinancing. The simple fact is, you committed to refinance IPIC and you failed! The additional investment in Oil Search is to disguise what you did at the outset of the loan with IPIC and the balance of the funds; where are these funds and have they disappeared inevitably?

Furthermore, this new investment provides value and opportunity for everyone but PNG. Oil Search has a debt level of approximately 50% of debt to equity ratio. That means that Oil Search debt needs to be paid back first before it comes to shareholders like PNG as a dividend. This is general information which is understood and released by research parties, independent of the Government.

This investment was only to secure safety for Oil Search in a potential takeover bid by IPIC, not the people of PNG, and you are the main reason for this occurring because you did not refinance the IPIC loan earlier, as recommended to you by the Opposition! Furthermore, Pacific LNG was overvalued in the acquisition but having personal connection, Prime Minister, there is an implication that one has personally gained from this arrangement and disguised it as an investment in Oil Search for PNG.

The questions posed to you again, are:

i. How does owning Oil Search allow the people to make a gain from the investment, especially when the State does not have the money to buy a direct interest in Gulf LNG?

ii. Why is a diluted share ownership a good thing for PNG?

iii. What are the international broker values on Oil Search?

iv. What value other than PNG sits in the Oil Search company?

v. Have you been influenced by those who are associated with the asset that Oil Search is buying and that Interoil is selling off?

3) Participation

Prime Minister, you state that PNG is being fraudulently abused by resource companies and thus, this was a solution. This grand statement of a LIE only hides the fact that you gave up a free carry of Oil Search shares for the State, to purchase a diluted amount of Oil Search shares and further increased PNG’s Budget deficit by another PGK4 billion.

So many questions are raised by this:

i. How do owning Oil Search shares address the State being fraudulently abused?

ii. Have Oil Search fraudulently abused the citizens of PNG?

iii. What resource companies are fraudulently abusing the citizens of PNG?

iv. If equity ownership defeats the citizens of PNG being fraudulently abused, why have you totally failed and defaulted on an equity investment as contracted to do so, with Nautilus Minerals, i.e. the Nautilus Effect?

Most importantly Prime Minister, why would the State not own and fund its direct ownership in projects to control any fraudulent abuse, of the people’s assets? How does a diluted holding through another company address this fraudulent abuse?

4) The UBS transaction

The information that was released states that PNG completed two transactions, one was a hedge and one was a loan.

In relation to the hedge, UBS sold the shares at $8.20 a share for the State to raise the money. That means UBS had no risk in the transaction. The Opposition further understands from our advice, that a hedge has a value stop like the IPIC transaction, which means PNG does not get the full $8.20 and does not get all the share price if it was to double.

The questions the Prime Minister needs to answer, are:

i. Does PNG own the shares?

ii. Explain the hedge to the people of PNG, in terms of the actual transaction, all the costs and what interest was paid to UBS?

iii. Who is the beneficiary of the US$1.6 Billion loan?

iv. If the hedge does not allow for all share price increases being received by PNG, what is the maximum PNG can receive?

v. How is a hedge the best outcome for the people?

vi. What happens if the share price falls to AUD$4.00?

vii. What price after all the transaction costs did PNG receive?

viii. What was the interest rate difference for all the banks to do this transaction?

ix. Explain the profit scenario you raised if PNG is in a hedge and loan deal with UBS?

5) Independence, Transparency and Accountability

Prime Minister, you make a bold statement without substance about this. From our understanding, UBS advises Oil Search. It would appear that UBS had a conflict of interest in bringing this deal to PNG!

The questions posed again, are:

i. Did UBS sign off on the anti-money laundering and corruption matters required for international transactions? If so, UBS needs to release them?

ii. Can UBS state who paid it for this transaction with the Government?

iii. Did UBS get paid by Oil Search?

iv. What is the checklist that was done and given to the State that demonstrate and proves that there was independence, transparency and accountability?

v. Why won’t the Government release the final agreement and fee payments made?

vi. Was the Acting Secretary of Treasury, Dairi Vele, and his personal company, Pertusio Capital, paid by the State and did the Acting Secretary of Treasury, Dairi Vele, make any payments from the budget for him and any specific parties when the deal was done?

vii. Who is the current Investment Manager for NASFUND who are involved in the UBS loan and does the Bank of PNG know if they’ve contradicted their investment management license under the Superannuation Act, for being involved in a loan that’s not beneficial for PNG?

Prime Minister, we congratulate you on running a country for the benefit of your coalition government without any thought for the people of Papua New Guinea. When you travel in your cars and look out the window, are you laughing and smiling about your personal gain at the detriment of all the citizens you see as you speed by, or is your head down looking at the funds you have stolen from the citizens and PNG?

This is not a good transaction for the people. You give bold statements and these questions are not an exhaustive list. We can and will ask more, but we all know that you don’t answer questions that will expose your corruption.

PRIME MINISTER, RESIGN NOW BEFORE THE WHOLE NATION AND THE WORLD CONDEMN YOU FOR YOUR ACTIONS!

Your past and future is shaped around fraudulent allegations from the days of NPF Saga, the current Paraka Gate Issue and now the UBS Loan, your credibility and standing as the CEO of PNG is questionable and has always been questionable. The country is standing still and is financially bankrupt, your style of leadership will always be a threat to our future generations and against the best interest of the majority of the citizens of PNG.

THE OIL SEARCH DEAL WAS THE BEST DEAL FOR YOU, PRIME MINISTER! PLEASE RESIGN!

Bulolo MP and Papua New Guinea Deputy Opposition Leader, Sam Basil