Kua: State Ready to Continue Talks
by PNG Business News - April 23, 2021
According to Petroleum Minister Kerenga Kua, the window for talks on the Twinza's Pasca A gas project is still open.
Mr Kua was referring to Twinza Oil Limited, saying that the current terms of the arrangement are not suitable for any investor and that the firm has asked its Pasca A project team to stand down.
Although he acknowledges Twinza's reservations about the Pasca A agreement being signed, he believes it is the government's prerogative to negotiate better terms.
In a letter to Twinza in February, the Minister said that “the Prime Minister’s policy directives come amid an impasse between the State Negotiating Team (SNT) and Twniza Oil Limited (TOL) in reaching a closure on the Gas Agreement”.
“He has further instructed me to direct the SNT to re-negotiate certain fiscal terms with TOL to achieve his policy directives and conclude a Gas Agreement signing on or before the 21st February 2021.”
According to the corporation, the state has requested a 6% Production Levy in order to sign the deal, which is 4% higher than the Production Levy that was agreed to as part of the substantive terms ('Agreed Terms') for Pasca A, signed by the State Negotiating Team and confirmed by Prime Minister James Marape on September 24, 2020.
The additional levy demanded, according to Twinza, would make the Pasca A Project unfinanceable for any investor.
Mr Kua, in response, said: “Until the signing takes place, the window for negotiation is still open. As Minister for Petroleum, it is imperative for me to seek the best outcome for PNG.
“I understand that Twinza negotiations have taken several months to reach this point and the company has invested heavily in time and resources. But given the uniqueness of the project related to other existing oil and gas projects in the country it would be negligent for the State not to demand more benefits from this deal.”
PNG Business News - April 29, 2021
Economist Says Government Giving Misleading Message to Foreign Investors
Negotiations between Twinza Oil Ltd and the Papua New Guinea government are likely to proceed, according to an economist, but refusing to change conditions at the last minute sends a disappointing message to international investors. Marcel Schroder, an economist with the Asian Development Bank's macroeconomic analysis division, was referring to the government's announcement, conveyed to the company on April 16, that a 6% output levy is now needed to sign the agreement for the Pasca A gas project offshore of Gulf. “This is four per cent higher than the production levy that was agreed as part of the comprehensive terms for Pasca A, negotiated by the State negotiating team and announced by Prime Minister James Marape last Sept 24,” he said. In general, according to Schroder, an investor will back out if the anticipated advantages of its outside alternatives outweighed the benefits of the project under discussion. “Outside options for the investor could be projects in other countries,” he said. “Outside options for the Government are leaving the resources in the ground. A new investor may come forward if they view it as financially beneficial.” Future investors will be worried, according to Schroder, that the government may want to renegotiate the deal after development has begun. “They might also be concerned about this happening in other future agreements,” he said. “Since any investor requires to be compensated for higher incurred risks, this can weaken the government’s bargaining position, and, thus, negatively affect its take in future projects. Economically, it was sensible of the negotiation team to ask for early revenues from the project. These can be used for financing development projects and they will aid macroeconomic stability.”
PNG Business News - June 04, 2021
Twinza Awaiting Response from Petroleum Minister
Twinza notes the comments regarding the Pasca A Gas Agreement made by the Petroleum Minister, the Hon. Kerenga Kua, in a media release of 25th May 2021. Twinza is currently awaiting a response from the Petroleum Minister as to whether the terms offered to the State, and outlined most recently in the Twinza media release of 19th April 2021 are acceptable or, if not, on which terms the Minister is prepared to support the signing of the Gas Agreement. An execution version of the agreement, incorporating these terms and using the State’s own template, is with the Minister for his consideration. Twinza will provide a media update once we have received correspondence from the Petroleum Minister which either confirms that the agreement is accepted for execution, or provides clarity on the terms by which the State would sign the Gas Agreement. Twinza Chairman and CEO, Ian Munro, commented that, "The Company remains committed to delivering Pasca A, PNG's first offshore oil and gas project. However, it appears the 12-month long process may be stalled yet again because the State has not communicated to Twinza the agreement terms which would be acceptable. It is time to bring this matter to a conclusion such that the Project can move forward and Twinza is on standby to execute the agreement on the Petroleum Minister’s desk”. The completion of the Pasca A Gas Agreement this month would allow the Project to move into the Front-End Engineering and Design phase, with a final investment decision in late 2022 and first production in 2025. A continued delay in concluding the Gas Agreement will impact the planned Project schedule, defer investment and see production move out to 2026.
PNG Business News - October 01, 2021
Twinza Appoints Stephen Quantrill as Chairman
Photo credit: BusinessNews Twinza is pleased to announce that effective today, Stephen Quantrill has been appointed as Chairman of the Board. Mr Quantrill replaces Ian Munro who has elected not to renew his employment contract as CEO with Twinza beyond its expiry on the 30th September 2021. Mr Munro will also be stepping down as Chairman of Twinza and resigning as a Director of the Company after 18 months in the roles. Mr Quantrill has been a member of the Board of Directors of Twinza since May 2014, representing the Clough family interests. The Clough family is the founding shareholder of the Company and the largest holder on the register. Twinza has commenced a CEO search process of both internal and external candidates and will update shareholders on progress in due course. Chairman, Stephen Quantrill commented that, “Ian has been instrumental in advancing Twinza’s Pasca A Project and we thank him and wish him continued future success. In order to ensure a seamless transition I will be travelling to Port Moresby in the very near term to meet with key stakeholders, to identify a path to the signing of the Pasca A Gas Agreement and subsequent entry to the front-end engineering and design phase of the Project.”
PNG Business News - October 26, 2021
Australia buys Digicel, PNG’s mobile monopoly
Photo credit: Devpolicy by Stephen Howes Yesterday, Telstra announced that it was buying Digicel Pacific. Telstra itself is only paying $270 million, and the Australian government $1.33 billion. Yet, Telstra is obtaining 100% ownership. The deal is certainly an attractive one for Telstra. But does it make sense for Australia, and for the Pacific? Digicel has had a transformational impact in the Pacific, but now has too much market power. As the Telstra release explains, it holds the dominant position in all the Pacific countries in which it operates, except for Fiji, where it is in second place. In Papua New Guinea, which I know best, and which is by far Digicel's biggest market, the company has a 92% share of the mobile phone market. That makes Digicel effectively a monopoly in PNG. And that is why it is so profitable: like any monopolist, it exploits its market power. Australian and PNG researchers have been tracking mobile internet prices in PNG since Australia gifted it a new underwater cable . Their conclusion is that since the completion of that cable in December 2019 to today there has been no decrease in mobile internet prices. The reason is simple: the lack of retail competition. Michelle Nayahamui Rooney, Martin Davies and I last year exposed Digicel PNG’s predatory loan scheme. Digicel lends phone credit to its customers. They pay it back when they next top up. Our estimate is that Digicel made a 17% return from such loans every week, which is equivalent to an unbelievable 351200% a year. Is this really the way in which Australia want to engages in the Pacific – owning an enterprise that keeps prices high for consumers, and rips them off when they are desperate to make a call? Any monopolist is necessarily engaged in a battle between the consumer and their profits. At some point, Telstra will end up going toe-to-toe with the PNG telecom regulator, NICTA, as Digicel has done several times. It’s going to be awkward for both Telstra and the Australian government. Many will welcome the investment as a sign of Australian commitment to the Pacific. However, if we want to invest in the telecom sector in the Pacific, we should be backing alternatives to Digicel, to push prices down and improve services, not buying out the dominant player. Amalgamated Telecom Holdings based in Fiji is the Pacific’s second biggest telecom provider. It is currently planning to enter the PNG mobile market with support from the Asian Development Bank. This is the sort of investment we should be financing. That Australia has bought Digicel shows the extent to which the Pacific is now viewed through a China lens. That’s unfortunate. China is a massive economic power. Its companies will have increasing stakes in economies around the world. That is a fact we have to accept. The Australian government also needs to decide if its only goal is to counter China or if it is still seeks to promote Pacific development. When I was AusAID's Chief Economist, Digicel was the new kid on the block in the Pacific, and it was successfully challenging state-owned telcos that until then had been dominant. In 2006, in Foreign Minister Alexander Downer's flagship Pacific 2020 report, we wrote glowingly about the competition that various Pacific countries had recently started allowing in the mobile phone sector. Our analysis was right then, and remains relevant today. Yet here we are, in 2021, doing the opposite: rather than supporting greater competition in the telecom sector, subsidising the purchase of the incumbent monopolist. The decision to buy Digicel Pacific should be reversed. If it is too late for that, the Australian government should at least – in return for all its cheap and risk-reducing finance – oblige Telstra to operate Digicel for the benefit of the people of the Pacific rather than solely for its shareholders through an agreement that makes it clear that the Australian company is not only expected to return the cheap loan it has been given, but also reduce prices, and end rip-offs. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.
PNG Business News - October 26, 2021
Taureka Replaced As Managing Director
Isikeli Taureka's position as managing-director (MD) of Kumul Consolidated Holdings (KCH) was terminated by the National Executive Council (NEC) recently. Professor David Kavanamur has been appointed as interim MD until a permanent appointment is made, and Moses Maladina, the current chairman of PNG Power Ltd, has been named as acting chairman. Taureka was removed after 20 months, according to Prime Minister James Marape, due to poor performance by KCH and State-Owned Enterprises (SOEs) and missed national project deadlines. “The reforms of the SOEs were endorsed by the Government in October 2019,” he said “We see it as the most-significant reform programme to be undertaken by any Government since the corporatisation of the state utilities and the creation of the Independent Public Business Corporation (IPBC), now KCH. “Building governance and accountability must go hand in hand with successful project execution. These are viable projects that can fundamentally change the accessibility and affordability of services and benefit the welfare of our people. “Extensive unexplained delays to major projects by KCH and SOEs are not acceptable. The Government understands that SOE issues cannot be immediately resolved as they take time. “That is why the NEC provided well over a year for KCH to work with SOEs to support the development and execution of strategies. We had hoped more would have been achieved during Taureka’s tenure. We regret to take the difficult step of severing the MD’s appointment. However, the NEC felt it had to be done. “The Telikom merger and partial privatisation with majority ownership and board control to be passed onto the super funds, for example, is one major issue the Government has been pushing since 2019 when we took office. “The merger of Water PNG and Eda Ranu is another matter that has been outstanding and not yet resolved. This merger is to take on a subsidiary structure where 20 percent of Eda Ranu is to be owned by Koiari landowners and 10 per cent each by Central Province and the National Capital District. “This decision was taken in 2019 but has not been implemented to date. “As for PNG Power and its continuous performance issues, these have been ongoing and evident. “These are badly-needed reforms within the SOEs and responsive policies have been launched by the Government, yet, very little or no progress have been made. “Out of respect to Taureka as a leading Papua New Guinea son, I had reached out to him for a meeting but there was no response forthcoming. Hence, the announcement of this decision (termination),” he added. Those nominated to crucial positions, according to Marape, must grasp the larger picture and act quickly to fulfill the government's goals.“For others in key leadership roles, whether as chair, members of boards, departments or agency heads, you are not here to pass the time or warm seats. Everyone must step up. “The Prime Minister’s Department is working to take stock of work done. So, if you feel you have not met your key performance indicators, I suggest you start thinking about resigning before the NEC asks you to leave.” According to Marape, Kavanamur had previously served as the chairman of KCH and had a thorough awareness of the organization's issues as well as the government's goals. Reference: The National (22 October 2021). “Cabinet Axes Taureka”.
PNG Business News - October 26, 2021
Digicel Pacific to be Acquired by Telstra
Telstra has announced that it will buy Digicel Pacific for $US1.6 billion, plus up to an additional US$250 million based on business performance over the next three years, subject to government and regulatory approvals. In its six South Pacific markets – Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu – Telstra, Australia's leading telecommunications and technology company, will continue to invest in and operate the business under the Digicel brand name. Telstra International CEO Oliver Camplin-Warner said the agreement will allow Telstra to expand on Digicel Pacific's regional leadership and increase mobile connectivity in Papua New Guinea. “Denis O’Brien and the Digicel team have built a phenomenal business that’s centred on providing exceptional customer service, the best coverage and leading digital experiences. Telstra will add to these strengths and the team’s local knowledge with our more than one hundred years’ experience connecting the vast expanses of Australia to continue delivering great experiences for Digicel’s customers across the Pacific.” “We have 19.5 million retail mobile customers in Australia and our 4G network is the largest and most reliable in country. It covers some of the remotest parts of Australia – from the coast, to the outback and the Torres Strait Islands, just off the coast of Papua New Guinea. And we’re in the process of building Australia’s largest 5G network that now stretches to more than 240 towns and 75 per cent of the population,” Camplin-Warner said. There will be no employment losses in the region as a result of the transaction, and the present Digicel Pacific team will continue to manage the company on a day-to-day basis. Denis O'Brien, the current owner of Digicel, will continue on the Board of Directors. “We will invest our know-how and capital to further expand coverage and over time bring the benefits of 5G to Papua New Guinea. But we’ll retain the same Digicel brand the people of PNG know and love today with the same team and services they have come to rely on,” Mr Camplin-Warner said. The purchase, according to Camplin-Warner, is in line with Telstra International's expansion plan, which now comprises operations in 20 countries outside of Australia and thousands of clients, including businesses, governments, and some of the world's largest technology firms. “Beyond Australia Telstra also has the most extensive subsea telecommunications cable network in the Asia Pacific. And we’re one of the biggest providers of voice and data services connecting the South Pacific to the rest of the world through our Southern Cross cable.” “Network traffic is growing faster than at any other period of time and digital technology is changing our world. We are at the centre of this, and so is Digicel Pacific. We are committed to delivering the best technology on the best network for PNG,” Mr Camplin-Warner said. The people and businesses of PNG will benefit from Telstra's experience rolling out a world-class 5G network and connecting diverse geographies, according to Colin Stone, CEO of Digicel Papua New Guinea. “Telstra’s network innovation has played a critical part in Australia being ranked first in the global Mobile Connectivity Index which assesses networks based on performance, affordability and availability. We look forward to working with Oliver and the Telstra team,” Mr Stone said. The two firms' ideals, according to Camplin-Warner, were likewise matched. “Digicel Pacific and Telstra are both committed to building a connected future so everyone can thrive and this includes supporting some of the most vulnerable in our communities.” “Digicel Pacific has taken community development to the next level through the Digicel Foundation’s investment in health, education and community-based programs. We look forward to continuing this work, just as we do today with the Telstra Foundation and its commitment to using technology to support young people and help to reduce the digital divide.” “We will also bring a commitment to addressing climate change to help drive better environmental outcomes for the people of PNG,” Mr Camplin-Warner said. Despite the fact that the transaction is funded by the Australian government, Telstra will remain the only owner and operator of the company. Reference: Loop (October 25, 2021). “Australia’s biggest telecommunications company to acquire Digicel Pacific”.