Departing PNG Power Chairman Peter Nupiri has called for less political interference in the state-owned utility and a ‘strong commitment’ from Papua New Guinea’s government for its reform.

The Dirio gas and power project. Credit: MRDC

After less than three years as PNG Power’s Chairman, Peter Nupiri resigned last week in expectation of the appointment of a new chair. In doing so, he released an extensive assessment of the utility’s progress.

While Papua New Guinea’s state electricity monopoly was now ‘living within its means’, he said ‘PNG Power continues to suffer from a lack of capital investment to upgrade its ageing infrastructure both in transmission and distribution and power generation,’ he said.

Power outages remain a regular feature of life for many PNG Power customers.

‘While PNG Power expects a profit uplift over the next 30 months, it can only do so with a balanced approach to the reform agenda and strong political support.’

Nupiri identified the expense of buying electricity generated with imported heavy fuel oil and gas, and the government not paying its power bills, as two major challenges facing the business.

‘Expensive Independent Power Producers (IPPs) from imported expensive HFOs [heavy fuel oils] and gas are a major cause for concern as they take up a major part of our operational costs,’ he said. ‘The ongoing lack of payment from our largest customer and shareholder, the National Government, does not make day-to-day operations easier as this affects our cash flow significantly.’

Reform

Outgoing PNG Power Chairman Peter Nupiri

Nupiri pointed to significant ‘radical’ reforms to state unity that had been pursued under his chairmanship: notably a switch to lower-cost domestic gas, refurbished and new hydropower, improved cost management, increased revenues from large industrial customers and reliability improvements to PNG’s two major power grids, Ramu and Port Moresby. He also noted a move to a ‘performance-based employment culture’.

‘The reform agenda is to change the business model; restructuring to support the operations of a modern electricity utility; a crowding in of low cost and grant financing of international donors and new partnerships with the private sector will allow PNG Power to substantially lower cost of power supply; increase reliability and safety and improve access to 70 per cent of our people,’ he said.

However, he noted that such reforms would only continue with strong government support.

‘While PNG Power expects a profit uplift over the next 30 months, it can only do so with a balanced approach to the reform agenda and strong political support.’

He also warned that ‘energy supply must be matched carefully to demand as long-term Power Purchase Agreements (PPAs) even low cost, will bankrupt PNG Power.’

Progress

Once the K350 million MRDC-owned Dirio Gas and power project is fully commissioned this year, Nupiri said that all power in Port Moresby would be gas or hydropower-generated, with older diesel power already decommissioned. New hydropower is also underway in the form the 50 MW Edevu project, which should come online in 2022. A public-private partnership for the long-considered Naoro Brown hydropower project is also being explored with World Bank assistance.

As well as improved transmission, refurbishment of existing hydropower and new substations, Nupiri identified new expected electricity generation for the Ramu grid would come from several independent power producers. These include: a proposal for a gas-fired power in Hela (first power due in early 2023), PNG Biomass (41MW scheduled for late 2022) and PNG Forest Products’ Baime hydropower project (12MW due in 2022).

PNG Power is the main implementing agency for the PNG Electrification Partnership, the multilateral donor-funded program announced at APEC 2018 with the aim of bringing power to 70 per cent of PNG’s population by 2030. Its success, Nupiri argued, depends on government support.

‘The Government must make a strong commitment in support of the reform of PNG Power including the implementation of the Least Cost Development Plan, Transmission Masterplan and PNG Electrification Plan as the drivers to new investments, financing and projects.’

However, he also pointed out that ‘PNG Power and other SOEs must be allowed to operate independently with minimal political interference.’

In spite of expressing regret at the departure of previous Acting Managing Director Carolyn Blacklock in 2019, a move which he said had ‘slowed’ the reform process, Nupiri expressed confidence in PNG Power’s recently-appointed new Managing Director, Flagon B Bekker.