FNPF, Fiji Airways Deal, What It Means

The Fiji National Provi­dent Fund investment of $93.1 million in Fiji Airways is a new capital injec­tion.

The Fund’s chief executive officer Viliame Vodonaivalu said this was part of a larger effort to capture the travel component of the tourist value chain, this in addition to the hotels that FNPF currently owns.

Mr Vodonaivalu provided a thorough up­date on Fiji Airways and FNPF share acqui­sition during a press conference on Friday.

Mr Vodonaivalu outlined the following:

• These shares were acquired following a new capital raising by Fiji Airways.
• It is not a debt-to-equity swap of the commercial loan that the airline took from FNPF several years ago.
• That loan continues to run its full term with the conditions being followed to the lat­ter; while this is a new capital injection into our national carrier.
• This is part of a larger effort to capture the travel component of the tourist value chain, this in addition to the hotels that FNPF currently owns.
• Fiji Airways has long been on our list of potential Equity investment and we recog­nise this as an opportunity and also believe that our investment would be fully recov­ered.
• Fiji Airways serves as a gateway to Fiji and is a vital national asset.
• Apart from the obvious tourism syn­ergies, it offers a strong return potential in terms of both interest income and capital appreciation.
• Fiji Airways also facilitates additional investment options such as medical tour­ism, aged-care, and commercial agriculture operations for export, while also collaborat­ing with FNPF’s considerable hotel network.
• FNPF has a history of producing strong returns, which means we make sound in­vestments and can continuously pay out good interest rates to our members.
• The Fund is the only local financial institution that has been able to pay 5% or higher interest during the pandemic.
• After the Board established a 6% credit­ing interest rate, for members for the finan­cial year ended 9 days ago; the Fund credited a total of $371 million to over 392,000 mem­bers’ accounts.
• We have a fiduciary duty to protect our member’s funds by ensuring that decisions are made in their best interest all the time, and every time.
• This investment is part of our long-term investment strategies to generate great returns for our members in the many years to come.
• As the sole superannuation fund and long term investor, FNPF will continue to show dedication in our efforts to support our return to economic normalcy and growth.

Mr Vodonaivalu added that FNPF was en­thusiastic about the collaboration and all it has to offer.

“Our members have received $92 million in interest from our current lending agreement with Fiji Airways to date. Now that we hold shares, our members will benefit from the airline’s profits in this post-pandemic expan­sion period.”

Process of acquisition

He said the investment was not something that they did overnight. Neither was it forced on them, as claimed by some.

“Rather this investment is a result of ex­haust due diligence procedure that began in September of last year, conducted by re­nowned local and international consultants with considerable expertise of the aviation sector.

“These included experts in valuation, ac­quisition advising, financial and tax due dili­gence, legal due diligence, Aviation techni­cal due diligence, and also due diligence was peer reviewed by independent specialists.

“The team, led by ANZCorporate Advisory in Australia, includes IBA, one of the world’s top aviation advisers, Norton White, a pio­neer in transport law, McGrathNicol, Hall & Wilcox, Howard’s Lawyers, and Molony Advisory, all of which are leaders in their disciplines.”

He added that the FNPF was certain that its members would benefit from the airline’s returns in this post-pandemic boom cycle.

Apart from the Fijian Govern­ment and FNPF, other sharehold­ers in Fiji Airways are Qantas, the Unit Trust of Fiji, Air NZ, and other Pacific Island governments.

“I want to reassure our members that the FNPF Board and Manage­ment take seriously our roles as custodians of members’ funds,” Mr Vodonaivalu said.

“It is not something we take lightly.”

Political Parties:

The acquisition prompted mixed reactions from political party leaders.

Gavoka

Opposition leader and leader of the Social Democratic Liberal Party, Viliame Gavoka said he was not aware of the announce­ment until it was reported in the media. However, he said the partnership was an advantage to FNPF members and sharehold­ers.

“You don’t want to be holding everything alone. You want to be comforted with confidence that a major airline is in partnership with you.”

Mosese Bulitavu

Opposition member, Mosese Bu­litavu said the deal was a great in­vestment move by the FNPF.

“It is an investment based strat­egy to simply capture the travel component of the tourism value chain and we all know that FNPF has its hotels plus other property investment.

“Fiji Airways as I said when I supported the motion for a gov­ernment guarantee last year dur­ing the COVID lockdown that we need to prepare ourselves for post - COVID and the planes will carry in the tourists to fill our hotels. Our people will return to work and it will be vital for our eco­nomic recovery path post-Covid.

“The travel component the air­line enables opens up opportu­nities such as medical tourism, aged-care and commercial agri­culture ventures for export, all linked to FNPF’s substantial Ho­tel share in Fiji’s tourism.

“At the end the investment will gain much needed returns result­ing in more dividends dropping in all FNPF members accounts.”

Mr Bulitavu highlighted that the National Federation Party leader Biman Prasad was

putting a political twist to the acquisition.

“He is trying to arouse member’s feeling that their money is being used with his “secrecy theory.”

“This is just another wild shot in the dark by Biman not seeing the property investment status of FNPF and its current financial strength. Sadly, FNPF tables its Annual report’s in Parliament and as a member of Parliament he should be most well informed on it.”

Rabuka

People’s Alliance Party leader Sitiveni Rabuka in a statement calls for transparency in the sale of Fiji Airways shares.

“I urge the Prime Minister Voreqe Bainimarama to wake up and take control of his Minister for Economy who seems hell bent on treating the FNPF as his own petty cash.

“How could anyone sell off shares of Fiji Airways just like that because the last time we checked, the Government used to own 51 percent of the airline, so if the Fiji National Provident Fund now owns 30.02 percent and Unit Trust of Fiji 1.58 per cent, at what price were these new shares sold for and was an independent share evaluation done.

“Is this a sneaky way to redeem FNPF of debts owed by Fiji Air­ways?”

The Managing Director of Fiji Airways Andre Viljoen should be the last person to be making such a huge announcement, for the ramifications of such a sale would be felt for years to come, long after he has left the country.

Chaudhry

Fiji Labour Party leader Ma­hendra Chaudhry questioned the lack of transparency in the acqui­sition.

“I see it as a direct debt-to-equity swap because no organisation in its right mind would think of in­vesting in an airline at this time. It is too risky,” Mr Chaudhry said.

“The entire exercise is highly questionable. The acquisition was announced indirectly by the airline’s chief executive Andre Viljoen when he mentioned that the airline has three new direc­tors on its Board – two of them from FNPF which had bought eq­uity into the airline.

Given the significance of the ac­quisition, why has there been no direct statement either from the government or the FNPF regard­ing the sudden move?

“The manner in which the gov­ernment is using the FNPF to bail out quasi government companies in financial trouble, is deplorable. It is a pension fund of the workers held in trust for their retirement. And must be protected from pred­ators,” Mr Chaudhry said.

Feedback: laisa.kabulevu@fijisun.com.fj