PNGSDP announces increase in Long Term Fund to K3.9 billion

PNG Sustainable Development Program’s (PNGSDP) Long Term Fund continues to return excellent results with the Fund increasing to K3.9 billion according to its Annual Report tabled in Port Moresby this week.

PNGSDP presented its Annual Report and Financial Statements to its Annual Results Meeting in Port Moresby on Wednesday June 28.

Chairman Sir Mekere Morauta said 2015 was a year of continuing consolidation of the new-look company following the State’s illegal expropriation without compensation of its shareholding in Ok Tedi Mining Ltd in 2013.

“Most importantly, PNGSDP has protected and preserved the funds held in the Long Term Fund,” he said. 

“The fund remains stable at $US1.3 billion, an excellent result given the loss of dividends following the expropriation and the continuing uncertainty in international markets. In kina terms, the fund increased from K3.4 billion to K3.9 billion.

Sir Mekere said the stability of the Long Term Fund was a testament to the efforts by PNGSDP to preserve and protect it for future sustainable development spending in Western Province. The Long Term Fund is not only safe, it is well managed, the former prime minister said in a statement.

The security of the Long Term Fund remains the company’s first priority so that sustainable development spending can resume as soon as PNGSDP’s independence, structure and rights and powers are confirmed by the legal proceedings it is engaged in.

The company is continuing to review its investment strategy to improve returns and manage risks, including maintaining its focus on divesting PNG assets to minimise exchange rate risk. PNG assets during the year were subject to deteriorating domestic market conditions, including a decline in the value of the kina, caused by waste and economic mismanagement. As a result, PNG assets contributed a foreign exchange loss of $US13.5 million in 2015. The forex loss contributed to an overall reduction in net investment income from $US16.1 million in 2014 to $US4.6 million.

PNGSDP increased its cost-cutting efforts during the year through a new Cost Management Sub-Committee, achieving a 48 percent reduction in expenses from $US20.5 million in 2014 to $US10.7 million in 2015. Administrative costs were reduced by 63 percent from $US14.2 million in 2014 to $US5.3 million. Governance costs declined owing to a renegotiation of audit fees and targeted reduction in directors’ travel and board-related costs. The board also elected not to increase directors’ fees since taking a 10 percent reduction in 2013.

Sir Mekere reaffirmed the company’s commitment to resuming sustainable development in Western Province and was investigating a number of possible ways to do this as quickly as legally possible. Spending from the Long Term Fund cannot commence until mine closure, defined as the “permanent cessation of all mining and milling activities at or in association with Ok Tedi”. That point has not been reached.

In the meantime, court action against the expropriation is continuing in Papua New Guinea and Singapore. Although PNGSDP remains confident about the strength of its cases, it is unlikely that a decision will be made this year in either jurisdiction.

“More recently, as a private citizen, I have begun legal proceedings in the PNG Supreme Court seeking to have the Ok Tedi Tenth Supplemental Agreement Act 2013 declared unconstitutional and invalid,” Sir Mekere said.

“This is the Act through which the State expropriated PNGSDP’s shareholding in the Ok Tedi mine, and purports to give the State the right to restructure the company into a State entity.

“The case is based on my belief that there are serious Constitutional flaws in the Act, and that it is harsh, oppressive and unjust. Although it is very early days in this case, it is possible that a decision could be reached this year.”

Until the matters before the courts are clear, PNGSDP will continue to focus on protecting and preserving the money in the Long Term Fund so that it can once again be applied to social and economic development in Western Province. The company also remains committed to protecting itself from outside interference and attacks on its independence, governance and integrity.

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