DEPARTMENT OF TREASURY
OFFICE OF THE SECRETARY
Level 4, Vulupindi Haus, Waigani Drive
P 0 Box 542, Waigani 131, NCO
Papua New Guinea
6 March 2014
Memo To: Treasurer
FINANCIAL ARRANGEMENTS FOR STATE ACQUISITION OF SHAREHOLDING IN OIL SEARCH LIMITED AND STATE BORROWING
As you will be aware, on 6 March 2014, the National Executive Council (NEC)
approved for the State to purchase 10.1% of Oil Search Limited (OSH).
In the discussion, you raised the issue of exactly where the liability was going to sit,
with the implication being that it was an unplanned borrowing that would affect the
State's debt program over the fiscal year 2014.
NEC then amended the recommendation to approve for Petromin Holdings (PNG)
Limited (Petromin)as the eventual subscriber and nominee.
After legal advice from the external legal counsel was that under the agreed
structure, the State would ·conduct the borrowing in the first instance and then
transfer both the asset and the liability to Petromin by no later than three months
from date of commencement which is 11 March 2014.
This will mean that it is no longer on the State's Balance Sheet and therefore cannot
affect the State's debt program for the year 2104.
You have also stated your preferred outcome is for Treasury to on-lend to Petromin.
We can now commence those discussions as a matter of urgency so that we can
pass the liability to Petromin in an orderly but deliberate manner.
In this regard, (in accordance with Approval No. 3) which confirms the Minister for
Treasury as the authority to agree and finalise on behalf of the State any terms of the
Transaction Documents prior to submission to the Head of State;
You are then required required to (in accordance with Approval No. 4) advise the
Head of State (without limiting the authority of any other person as may be
authorised to do so on behalf of the State) to:
1. approve the Borrowing for the purpose of the purchase of shares in Oil Search
and for the purpose of meeting the expenses of the Borrowing and for the
services of the State, and to agree with UBS the manner and the terms and
conditions of that Borrowing, pursuant to section 2(1) of the Loans (Overseas
Borrowings) No.2 Act ; and
2. execute under his signature on behalf of the State those of the agreements,
deeds and other documents to which the State is party listed in Part 2 of
Schedule A pursuant to section 47 of the Public Finances (Management) Act
1995.
These attached documents then allow for you to (in accordance with Approval No. 5)
to:
a. issue a direction pursuant to section 2(11) of the Loans (Overseas
Borrowings) No. 2 Act that sections 13 and 14 of the Public
Finances (Management) Act 1995 do not apply to the State in
relation to the Borrowing; and
b. execute under his signature on behalf of the State those of the
agreements, deeds and other documents to which the State is a
party listed in Part 1 of Schedule A pursuant to section 2(7) of the
Loans (Overseas Borrowings) No. 2 Act.
Once these documents are executed, the documents related to the Governor
General will be presented to him for execution also.
Please let me know if there are any further queries.
SIGNED
DARI VELE
OFFICE OF THE SECRETARY
Level 4, Vulupindi Haus, Waigani Drive
P 0 Box 542, Waigani 131, NCO
Papua New Guinea
6 March 2014
Memo To: Treasurer
FINANCIAL ARRANGEMENTS FOR STATE ACQUISITION OF SHAREHOLDING IN OIL SEARCH LIMITED AND STATE BORROWING
As you will be aware, on 6 March 2014, the National Executive Council (NEC)
approved for the State to purchase 10.1% of Oil Search Limited (OSH).
In the discussion, you raised the issue of exactly where the liability was going to sit,
with the implication being that it was an unplanned borrowing that would affect the
State's debt program over the fiscal year 2014.
NEC then amended the recommendation to approve for Petromin Holdings (PNG)
Limited (Petromin)as the eventual subscriber and nominee.
After legal advice from the external legal counsel was that under the agreed
structure, the State would ·conduct the borrowing in the first instance and then
transfer both the asset and the liability to Petromin by no later than three months
from date of commencement which is 11 March 2014.
This will mean that it is no longer on the State's Balance Sheet and therefore cannot
affect the State's debt program for the year 2104.
You have also stated your preferred outcome is for Treasury to on-lend to Petromin.
We can now commence those discussions as a matter of urgency so that we can
pass the liability to Petromin in an orderly but deliberate manner.
In this regard, (in accordance with Approval No. 3) which confirms the Minister for
Treasury as the authority to agree and finalise on behalf of the State any terms of the
Transaction Documents prior to submission to the Head of State;
You are then required required to (in accordance with Approval No. 4) advise the
Head of State (without limiting the authority of any other person as may be
authorised to do so on behalf of the State) to:
1. approve the Borrowing for the purpose of the purchase of shares in Oil Search
and for the purpose of meeting the expenses of the Borrowing and for the
services of the State, and to agree with UBS the manner and the terms and
conditions of that Borrowing, pursuant to section 2(1) of the Loans (Overseas
Borrowings) No.2 Act ; and
2. execute under his signature on behalf of the State those of the agreements,
deeds and other documents to which the State is party listed in Part 2 of
Schedule A pursuant to section 47 of the Public Finances (Management) Act
1995.
These attached documents then allow for you to (in accordance with Approval No. 5)
to:
a. issue a direction pursuant to section 2(11) of the Loans (Overseas
Borrowings) No. 2 Act that sections 13 and 14 of the Public
Finances (Management) Act 1995 do not apply to the State in
relation to the Borrowing; and
b. execute under his signature on behalf of the State those of the
agreements, deeds and other documents to which the State is a
party listed in Part 1 of Schedule A pursuant to section 2(7) of the
Loans (Overseas Borrowings) No. 2 Act.
Once these documents are executed, the documents related to the Governor
General will be presented to him for execution also.
Please let me know if there are any further queries.
SIGNED
DARI VELE