KFM Weekly Investment Update: Friday, 05 April 2019

  • Prime Minister Peter O’Neill announced the appointment of Andrew Baing as
    the new Chairman for Kumul Petroleum Holdings Limited (KPHL), effective for
    a three-year term. Mr Baing replaced Sir Moi Avei, who retired from the KPHL
    Board in October 2018. PM O’Neill said Mr Baing brings to the Board significant
    knowledge in the government and business sectors, being an experienced
    statesman, having held years of numerous ministerial positions including
    Deputy Prime Minister. This would lead to ongoing growth for KPHL as the oil
    and gas industry is entering the next phase of developments in the country.
  •  According to Bank of Papua New Guinea (BPNG), approval of tax concessions
    to the country’s major project developers have resulted in lower forex and tax
    revenue to the Government. BPNG’s Monetary Policy Statement released this
    week stated that current policies relating to extractive industries gave a lot of
    tax concessions to project partners for the development of major projects.
    BPNG supported the Government’s medium term revenue strategy from 2018-
    2022 to review tax concessions so that much needed revenue for the
    Government could be raised.
  • Furthermore, BPNG Governor Mr Loi Bakani said, real gross domestic product
    (GDP) growth for this year projected by BPNG is to be higher than
    Government’s 2019 Budget forecast of 4.0%. PNG’s GDP growth was expected
    to be driven by full-year production of LNG and crude oil. Mineral production is
    also expected to contribute to this growth with higher production of nickel,
    cobalt, gold and copper. Non-mineral GDP growth is circa 2.0%. The
    commerce, construction and services sectors are expected to grow at a lower
    pace following the completion of APEC meetings last year. Over the medium
    term, growth is expected to be driven by the non-mineral sectors while the LNG
    production is expected to be around levels before the earthquake last year.
  • Oil Search (OSH) advised that the PNG LNG Project co-ventures have entered
    into a mid-term LNG sale and purchase agreement (SPA) with Unipec
    Singapore Pte Ltd (Unipec), for the supply of about 0.45 million tonnes of LNG
    per annum (MTPA) over a four-year period commencing April 2019. OSH
    Managing Director Mr. Peter Botten, said the SPA with Unipec, is one of PNG
    LNG’s original long-term customers and is the final mid-term LNG SPA that the
    Project was seeking to secure. Following the signing of SPAs last year with
    PetroChina and BP, totaling 0.9 MTPA over 2018 to 2023. These SPAs add to
    the 6.6 MTPA committed under long-term contracts to JERA, Osaka Gas,
    Sinopec and CPC and take total contracted volumes from the Project to
    approximately 7.9 MTPA.
  • Kina Bank Limited (KBL) has been given full regulatory approval by the
    Independent Consumer & Competition Commission (ICCC) to acquire ANZ
    PNG’s Retail SME. KBL Chief Executive Officer Mr Greg Pawson said this
    proposed transformative acquisition will provide PNG with two very strong
    domestic retail banks, giving customers a better alternative and real choice.
  • PNG Biomass is working with PNG Power to lower the power purchase
    agreement (PPA) tariff and reached an agreement that will half the price of
    power on the Ramu grid. The cost to PNG Power of electricity generation from
    diesel on the Ramu grid is close to being greater.
  • Project-owner OSH therefore supports PNG Power in wanting to sell power to
    its consumers at a much more affordable tariff. As a project that delivers
    renewable, domestic and clean energy. PNG Biomass has been classified as
    the best large-scale renewable power project in the Pacific by international
    lenders, multilateral finance institutions and regional infrastructure development
  • This week’s BPNG auction in Central Bank Bills were under-subscribed by
    K59.0m from the K710.0m offered. This indicated that there were no appetite
    for shorter dated securities. The weighted average yields for 28, 63 and 91 days
    all remained unchanged at 1.39%, 2.34% and 2.51% respectively. There were
    nil offers for 182 days.
  • This week’s BPNG auction in Treasury Bills were over-subscribed by K17.74m
    from the K290.94 offered. This indicated that there was an increase in appetite
    for longer dated securities. The weighted average yields for 182 days and 364
    days remained unchanged at 4.64% and 6.60% respectively from the prior
    week. There were no bids for 63, 91 and 273 days.
  •  The Kina Securities Index increased by 0.10% to close at 5,186.07 points, while
    Kina Securities Home Index also up by 1.10% to close at 11,772.95 points. The
    increase was underpinned by rise in share price of CCP and OSH.

pdf KFM Weekly Investment Update: Friday, 05 of April 2019