Vendor finance Kroton Equity: KPHL

KUMUL Petroleum Holding Limited has proposed to the Government to vendor finance the Kroton Equity for the landowners and the five provincial governments in the PNG LNG project, says managing director Wapu Sonk (pictured).
“KPHL has proposed to the Government to vendor finance, meaning KPHL to finance the option for them,” Sonk told The National yesterday.
“That proposal is before Cabinet for approval.
“If the National Executive Council can approve the proposal from KPHL, all the beneficiary groups will exercise the option before the extended due date.”
Vendor-finance is a form of lending in which a company lends money to the borrower to buy the vendor’s products or property.
It is usually in the form of deferred loans from, or shares subscribed by, the vendor.
The Kroton Equity, which represents a 4.27 per cent in the PNG LNG to provincial governments and landowners, is stipulated under the Kokopo Umbrella Benefits Sharing Agreement executed in 2009.
Sonk said in a statement: “It’s not a must for any group to exercise that option if the price is not right, or if the economic conditions are not right.
“At the end of the day, it’s not free – hence a commercial decision need to be made by the beneficiaries that have the option rights.
The price of the Kroton Equity is as stated and agreed to in the UBSA and there is no review clause to allow for reconsideration should economic conditions change.”
The Kroton Equity is additional equity offered over and above what the State has already offered for free – 2 per cent in the PNG LNG project now held by the Mineral Resources Development Company.