April 24, 2018 / 4:04 PM / a month ago

INTERVIEW-Papua New Guinea PM says country to launch first Eurobond

LONDON, April 24 (Reuters) - LONDON-PAPUA NEW GUINEA TO SELL $500 MLN 10-YEAR EUROBOND IN 2018, WILL ANNOUNCE LEAD MANAGERS IN NEXT WEEKS -PM

PAPUA NEW GUINEA LNG PRODUCTION TO RECOVER TO PRE-EARTHQUAKE LEVELS BY END OF MONTH -PM

Papua New Guinea will launch its first Eurobond this year, as higher energy prices and a recovery in liquefied natural gas production to pre-earthquake levels ease strains on its public finances, Prime Minister Peter O’Neill said on Tuesday.

O’Neill told Reuters on the sidelines of an investment conference in London that LNG production would be fully restored by May. “We loaded one shipment ... and production will be in full swing before the end of the month,” he said.

A magnitude 7.5 quake rocked the country’s remote mountainous highlands on Feb. 26, killing at least 100 people, destroying roads and disrupting LNG production — Papua New Guinea’s main source of foreign revenue.

Fiscal pressures were already high as a result of the collapse in oil prices to $27 a barrel in early 2016. Gas prices are closely linked to oil.

Crude markets have since recovered, breaking above $75 a barrel for the first time in nearly 3-1/2 years on Tuesday. That will help make up the revenue shortfall sustained because of the devastating quake, O’Neill said.

“It certainly will affect the last couple of months, we received no revenue because of the earthquake,” he added.

O’Neill, who stayed in London to rustle up investment following last week’s meeting of Commonwealth leaders, also said the country was preparing to launch its debut Eurobond.

“In the next few weeks we will be announcing the lead managers,” he said, adding a shortlist had been drawn up for the planned $500 million 10-year bond to be sold before year-end.

Papua New Guinea’s total debt stood at 31 percent of GDP, of which almost two-thirds are domestic debt, the premier said.

“In terms of our debt management, we are comfortable,” said O’Neill, adding his country had no plans to talk to the International Monetary Fund about assistance.

But recent pressures have cast a shadow over the economic and fiscal outlook. Earlier this year, ratings agency S&P Global lowered the Pacific island nation’s credit rating to B from B+, while Moody’s downgraded its outlook to negative from stable. Both cited a deteriorating debt profile, lower economic growth and rising liquidity risk.

Once production is fully restored at ExxonMobil Corp’s Papua New Guinea LNG project, O’Neill said there were plans to add three LNG trains to the existing two and details would be announced before November’s Asia-Pacific Economic Cooperation meeting.

Apart from natural gas, the country can also earn foreign export revenue from mining, although its Panguna mine on the island of Bougainville, once one of the world’s biggest copper mines, has been shut since a civil war in 1989.

Bougainville Copper has been working to restart the mine and has contested a decision by the Bougainville government to impose an indefinite moratorium.

“The constitution and the overall legislation from the federal national government is the one that underpins all the other legislation. It’s subject to the main laws,” the prime minister said when asked about the moratorium. He declined to predict the outcome of court deliberations.

Papua New Guinea also hit the headlines over environmental protests because of plans by Toronto-listed Nautilus Minerals to mine the ocean floor.

“We are reviewing some of the environmental issues. We will continue to engage with Nautilus to see how we can mitigate that,” O’Neill said. (Reporting by Karin Strohecker Editing by Catherine Evans)

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