Publicly funded Hilton Hotel at the centre of a financial black hole

Publicly owned: Zero Transparency

The entire Star Mountain Plaza complex is 100% Papua New Guinea owned. The construction costs were funded from landowner royalties received from three different mineral and petroleum extraction projects and by the State, which contributed K100 million of tax payers money in return for a 20% stake.

Yet, despite the public financing and ownership of the Plaza complex, there has been zero transparency, accountability or independent governance oversight of the hundreds of millions of Kina spent on the design and construction, and there is zero information available on the income being generated or on any profits that are being made.

Despite all its architectural splendour, the Star Mountain Plaza sits in an enormous financial black hole.

Star Mountains Plaza Limited, which owns the whole complex, is managed by the State owned Mineral Resources Development Company Limited.

The only Annual Returns that MRDC has ever filed with the Registrar of Companies on behalf of Star Mountains Plaza were for the years 2013, 2014 and 2015.

These were all ‘nil returns’ that declared ‘nil’ assets’, ‘nil’ liabilities and ‘nil’ employees. No annual returns or audited accounts have been filed for any year since construction of the Plaza begun.

Instead, in February 2022, MRDC filed with the Registrar of Companies the latest in a long series of requests for extensions of time in which to file the annual returns for SMPL. In this latest set of requests the MRDC stated the annual returns for 2016, 2017, 2018, 2019 and 2020 would all be filed by 30 June 2022. That deadline has now passed with no new filings appearing on the IPA system.

These requests for extensions of time, follow similar requests made by the MRDC in March and July 2020 and January and July 2021. In each case the MRDC promised the missing returns would be filed within six months. None of those promises were kept.

PNGi contacted the MRDC for comment on its failure to file annual returns for Star Mountains Plaza but the MRDC declined to give any substantive response, citing confidentiality requirements and the need for Board approval of any public disclosure (the full response from MRDC is copied below).

The four companies that own Star Mountains Plaza Limited, which are all also managed by the MRDC, have similarly blank financial histories.

Petroleum Resources Kutubu Limited, which owns 45% of Star Mountains Plaza Limited, has not filed an annual return since 2015. According to MRDC, auditors are still working on the 2016 financial statements.

Mineral Resources Ok Tedi No.2 Limited, which owns 21% of Star Mountain Plaza Limited, has not filed an annual return since 2014. Its auditors are still working on its 2015 financial statements.

Mineral Resources Star Mountains Limited, which owns 14% of Star Mountain Plaza Limited, has not filed an annual return since 2016 and auditors are still working on its 2017 financial statements.

In total, Star Mountains Plaza Limited and the three landowner trustee companies that own 80% of its shares, have failed to file their twenty-four most recent annual returns and audited financial statements.

This dearth of financial reporting by the landowner investment companies for Kutubu, Ok Tedi and the Star Mountains, means that the rural people whose royalties have been used to fund the construction of the Star Mountains Plaza, have no information on the use of their monies. They have no information on how much money their companies have received over the past six years or more, no information on how much of that money has been spent, how much has been invested in the Plaza and what, if any, returns have been received.

As a consequence, the rural landowners who monies have funded the opulent splendour of the Star Mountains Plaza, a splendour that most can have very little hope of ever sampling for themselves, have no idea how much of their money has been spent, whether it was used wisely and whether they will ever see a single toea returned.

APEC Infrastructure & Investment

The final shareholder in Star Mountains Plaza Limited is the State owned APEC Infrastructure & Investment Company Limited.

APEC I&IC was created by the MRDC in May 2018, when MRDC decided to change the name of another of its subsidiaries, Mineral Resources Ok Tedi No.3 Limited, and rebrand it as APEC Infrastructure & Investment Company Limited.

Rather bizarrely, although APEC I&IC did not exist prior to May 2018, some ten-months earlier, in July 2017, Star Mountains Plaza Limited issued APEC I&IC with a 20% shareholding. This share issue coincided with an investment by the State of K100 million into the company.

APEC I&IC has only ever filed one annual return with the Registrar of Companies. That was for the year 2020 and was a ‘nil return’. That document described the company as ‘insolvent’, and declared its principal business to be ‘oil and gas’, rather than tourism, hospitality or property investment. The return was signed by MRDC Managing Director, Augustine Mano.

PNGi asked the MRDC to confirm if APEC I&IC is indeed insolvent and whether its principal business was correctly described in its annual return but the MRDC declined to give any further information.

Despite APEC I&IC being State owned, it has never featured in the reports of annual audits conducted by the Auditor General on government owned companies. APEC I&IC did not not even get a mention in the Auditor General’s special report on APEC expenditure, published in April 2021.

This is all the more surprising given the Auditor General did highlight in that APEC report as a ‘significant matter of concern’ the State’s contribution to the construction of the Hilton hotel:

“US$30 million (K100 million) was paid by the State through Kumul Petroleum Holdings Limited (KPHL) as the State’s contribution for the construction of Hilton Hotel but this was not disclosed in the APEC Authority financial reports”.

This raises the question of whether the Auditor General is even aware of the existence of the State owned APEC Infrastructure & Investment Company Limited and its shareholding in the Star Mountains Plaza?

Again, MRDC was approached for comment but declined to give any further information citing confidentiality requirements.

The Hilton Hotel

And what of the international Hilton Group, whose brand name is emblazoned on the Star Mountain Plaza’s five star hotel and which manages both the hotel and the convention centre under an agreement with Star Mountain Plaza Limited.

Based out of the United States, the Hilton Group proudly trumpets its commitment to good governance:

“Cascading from our Board and executive leadership, we are committed to best-in-class governance practices, ensuring we operate with accountability, integrity and transparency in everything we do.”

Hard to square that statement with the complete lack of accountability or transparency and clear failures in good governance practice displayed by both Star Mountains Plaza Limited and its shareholders.

But perhaps it is a little tough to hold the Hilton Group to account for the failures of its partners, or it would be except that this is what the Hilton Group itself says about its partnerships:

“We hold ourselves and our partners to the highest ethical standards. We are committed to pursuing the most responsible business practices, acting with integrity, and managing risk, with appropriate Board oversight.”

PNGi contacted Hilton Group to ask how they square their public commitments to accountability and transparency with the complete opacity surrounding the financing of the Star Mountains Plaza. Hilton did not respond beyond acknowledging receipt of the questions.

MRDC Response

PNGi contacted the Mineral Resource Development Company Limited asking for comment on the issues raised in this article, many of which relate to information that is legally required to be publicly disclosed.

This was their response:

Thank you for your interest in the Star Mountain Plaza project.

The MRDC management is happy to have an in-person meeting with your team to respond to questions and queries.

However due to the confidentiality requirements under the governance framework which encompasses MRDC and its affiliates the management is required to obtain prior board approval before disclosing company information to third parties.

In the interim we will require the PNGi Portal Editorial Team to sign a Non-Disclosure Agreement (NDA) prior to the meeting so that once board approval is given any information and access to any relevant document will be kept confidential save for matters which the board approves for disclosure.

We at MRDC value accountability and believe that being transparent builds trust and promotes engagement with our stakeholders and the general public however we are also equally bound by legal governance requirements relating to disclosures. We trust that PNGi appreciates these important considerations.   

Please let me know if your Team can sign the NDA prior to any further disclosure from us regarding SMPL.