PNG Power’s sale advances as El Niño tests the grid

The managing director of Kumul Consolidated Holdings (KCH), the holding company for most of PNG’s state-owned enterprises, has confirmed the proposed terms for selling down the State’s stake in PNG Power Limited (PPL). The State is aiming to retain majority ownership of the power utility in a 51/49 split, using the legal framework of the Public-Private Partnership Act 2022, KCH MD David Kavanamur said at the 2026 Business Advantage PNG Investment Conference in August.

PNG’s National Executive Council made the formal decision to partially privatise PPL in 2024. The utility was made the responsibility of Richard Maru, PNG’s Minister for International Investment and Trade, in mid-2026 with the goal of resolving PPL’s position before the 2027 national elections.

“For state-owned enterprises, you either restructure and further invest state funds or you privatise.”

KCH has already completed several steps towards the sale, including solvency and director liability assessments and an initial valuation, Kavanamur told the conference. “We are [now] at the scheme of arrangement stage,” he said, “while the proposal for market is being developed as well.”

He added that “one or two court cases” would still need to be resolved before the sale can proceed. This was in reference to a 7 July National Court ruling against PPL in a payment dispute with independent power producer Dirio Power – which PPL has said it will appeal. PPL currently has sizeable debts with several such producers.

Explaining the rationale for PPL’s sale, Kavanamur said the state had little choice but to bring in private capital. “For state-owned enterprises, you either restructure and further invest state funds or you privatise,” he said. “We’re getting maxed out on the loan book, so therefore the best way forward is to privatise.”

PPL’s total revenue reached K1.05 billion in 2025, according to figures shared by Kavanamur, up from K960 million in 2023, its last audited figure. Those revenues would have been higher if not for the fact that the utility hasn’t had a tariff increase since 2013, he argued, adding that this issue would need to be addressed before the utility’s sale.

“Hopefully, with a full restructure of the regulatory environment around tariffs, a new vendor that comes in should be able to meet its costs – and pay for the power it is also buying from the market,” he said.

El Niño strain

The push to privatise PNG Power is unfolding against a strained operational backdrop. El Niño, the Pacific weather pattern that periodically brings drier conditions to PNG, has produced the country’s most severe dry spells in years. It is forecast to intensify further, with the US Climate Prediction Center estimating more than an 80 per cent probability of a very strong El Niño event in the final quarter of 2026.

Its effects are already drying out the catchment feeding the Yonki power station in Eastern Highlands Province, leading to outages on the Ramu grid, John Byrne, President of the Lae Chamber of Commerce and Industry, told the conference. “It’s a challenge for all businesses,” he said. “When the power’s out, the water’s out too, which affects the community as well.”

Tim Madgwick, Managing Director of PNG Forest Products, says the drought is affecting the company’s four hydro power stations in Morobe Province, which have a combined 26-megawatt capacity. “Our river flows are lower and we’re probably producing about 20 per cent less than normal because of that,” he tells Business Advantage PNG.

Some relief may be on the way for the Highlands and Momase regions. PPL has already built a 220-kilometre transmission line from Tari through Yonki to Lae, completed in 2025, and it is now extending that line further from Tari to Hides. Kavanamur told the conference that the extension will let PPL feed 5 to 10 megawatts of power from Hides onto the Ramu grid, relieving some of the pressure on Yonki stemming from El Niño.

Cost to business

Meanwhile, businesses in Port Moresby continue to report similar pressures to their counterparts in Lae and the Highlands. Mary Johns, CEO of the Port Moresby Chamber of Commerce and Industry, told the conference that businesses now routinely need backup power as part of their continuity planning. “You’ve got to have a backup generator – and a backup of a backup generator,” Johns said.

Running diesel-fuelled generators comes at a price – one made worse by fuel price shocks this year, which have been partly cushioned by an emergency government fuel subsidy aimed at keeping prices at March 2026 levels.

“The fuel subsidy introduced in March has continued for retail customers and PNG Power – but that will only last until December, so business will continue [to face] those challenges,” Johns said.