Petroleum Resources Kutubu (PRK) Board Chairman John Kapi-Natto is appalled at the inaccurate and misleading article titled ‘Landowner funds flushed down broken corporate pipes’ published by PNGi on its social media page on Wednesday 7 July 2021.
Petroleum Resources Kutubu (PRK) Board Chairman John Kapi-Natto is appalled at the inaccurate and misleading article titled ‘Landowner funds flushed down broken corporate pipes’ published by PNGi on its social media page on Wednesday 7 July 2021.
Mr Kapi-Natto says the gross inaccuracies in the article are a deliberate attempt by PNGi to not only portray PRK and the Mineral Resources Development Company (MRDC) in bad light, but also tarnish the reputation of members of the board and management of the company.
“PRK is a thriving trust company that is the epitome of landowner success. Since its inception in 1989, PRK has grown to become a billion kina company. It was worth K500 million in 2008. It is worth K2.3 billion now.”
“PRK’s revenue and profit have more than doubled since 2008. The company has been paying a dividend of around K40 million every year since 2014. Since its inception, PRK has paid over K500 million in dividend to its beneficiaries.”
“This success is the result of a very strong governance and trust structure put in place by MRDC Managing Director Mr Augustine Mano and his management team to guide investment.”
“While each landowner Trust Board makes independent decisions, we rely on the investment guidelines MRDC has developed to ensure prudency in our investments,” Mr Kapi-Natto said.
On each of the issues raised by PNGi on PRK, Mr Kapi-Natto makes the following statement to set the record straight:
MRDC mandate
The PRK Trustee Company was incorporated under the Company Act in 1989 to hold the landowners and provincial government equity interests in the Kutubu Petroleum Project.
The ownership of PRK is split 40/60 – the two provincial governments of Gulf and SHP owns 40 percent of PRK while and the Kikori and Kutubu landowners own 60%.
Under the Oil and Gas Act, MRDC’s role is to manage and hold in trusts benefits (equity and royalty) for the landowners of the Petroleum and Gas Projects.
The Act also provides clearly the governance framework on benefit distribution and management of each trustee company by MRDC.
Though MRDC manages PRK, the PRK Board has full control of the PRK Company and makes decisions for and on behalf of PRK guided by its Company Constitution, Company Act and Trust Deeds.
PRK Board
The composition of the PRK Board is consistent with the requirements of its Company Constitution and Trust Deed.
It’s Board comprises of eight members – six landowner beneficiary directors and two state representatives.
The landowner directors includes the two provincial governors representing SHP and Gulf and four landowner representatives – one from Foe, two from Faso and one from Kikori.
It is important to note that it is a requirement that all the Corporate Trustee Companies including PRK have beneficiary representatives on the Board.
The State is represented by the Secretary for the Department of Petroleum and Energy and MRDC Managing Director, Augustine Mano.
Mr Mano sits on all the Trustee Company boards including PRK because of his position as MRDC Managing Director and as per PRK’s constitution and trust deeds.
MRDC Management Fees
As the fund manager of PRK and other trustee companies, MRDC charges management fees to each of the trustee companies it manages.
The management fee rates are charge based on the size of the respective corporate trustee companies.
The PRK Board like other Corporate Trustee boards has the authority to decide whether to accept the fees rates.
The discretion to approve the management fees also rests with the respective Boards including PRK.
The fees that MRDC charges PRK has been approved and sanctioned by the PRK Board.
Director Fee
Director fees are only paid to landowner directors sitting on the PRK Board.
Governors and departmental heads on the board only receive a sitting allowance when they attend. They are not entitled to the Director fees. The fees are paid in PNG Kina, and not USD as alleged by PNGi. The Managing Director of MRDC is not entitled to and does not receive any director’s fees, or sitting allowance. The suggestion by PNGi that the MRDC Managing Director has received certain director’s fee from PRK is wrong and intentionally misleading.
Public Relations Funds (PRF)
Given the ownership of PRK, Public Relations is a vehicle where the company engages directly with its beneficiaries.
The level and allocation of PR funds for each Director is approved by the PRK Board which are the landowner directors and not MRDC. This is similar to the other trustee companies.
PR Funds are important funds that respective directors’ use as response to community expectations.
The funds are tied to community-supported initiatives like education, health, law & order, sports among others.
Dividend and royalties are paid occasionally whilst the expectation from the communities is a daily task the respective directors have to address on a daily basis.
PRF allocation enables the PRK directors to respond to the needs of the Community and through these funds and; the Directors have been able to build rapport with the members of the communities that they represent.
PRK – 2015 Audit Report Addressed
All related audit issues have been addressed and provided to the PRK Board.
Where there are audit issues, the PRK Board has taken steps to address them. The issues noted in the 2015 audited Financial Statements was mainly on compliance and they have been appropriately addressed, and the audit opinion have since been much better.
Land investment in Port Moresby
In 2013 the PRK board approved the purchase of a company that owned a piece of prime land at the Ela Beach in Port Moresby.
The PRK Board considered the land very valuable, and the location ideal for future property development. The land was acquired for K30 million in 2014 based on valuation done. It is part of PRK’s land banking asset. PRK has received bigger offers for the land, but the Board has declined to sell it.
The value of the land will potentially rise further in the coming years because of its prestigious location, and the development currently taking around Ela Beach and Port Moresby.
The audits by accounting firm Deloitte in 2015 and 2016 clearly stated all the facts around this asset, and does not mention any material concerns on the valuation or any illegality in the transaction.
The future of PRK
Oil has been declining substantially since 2008 but the PRK revenues have doubled. The numbers speak for themselves. The investments are contributing substantially to revenue for PRK each year.
PRK’s investments were valued at below K500 million in 2008.
Last year, the value stood at K2.3 billion. The revenue and profits have more than doubled since 2008. Thanks to the hard work and sound advice from the MRDC management team led by Mr Mano, we have grown our investment substantially in the last 12 years.
For media enquiries, contact:
MRDC Corporate Communications
Email: CorporateComms@mrdc.com.pg