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Government and Chinese Firm Sign Hydropower Project
by PNG Business News - February 25, 2021
The government and Shenzhen Energy of China recently signed the K3.3 billion Ramu 2 hydropower project.
According to State Enterprise Minister William Duma, although the conditional power purchase agreement with PNG Power had been signed, there were other financing arrangements that the project consortium needed to work on with their own parties before the commencement.
“The first hurdle has been dealt with now with the signing today,” he said. “As soon as they organise their financing, we will start. We are looking at an initial investment of K200 million for the early work programme – building roads, setting up camp – an immediate capital investment of money into our country.”
Duma said Morobe and the Eastern Highlands would each own 10 per cent equity in the project. Landowners from each of these places would have a 10% share while the state, 60%.
“We are giving equity to the two impacted provincial governments and landowners plus the project will be paying the lease of K350,000 every year,” he said. “On top of that, the landowners will receive an upfront payment of K10mil for their landowner companies.”
After a strong bidding process managed by Kumul Consolidated Holdings, Duma said the National Executive Council had picked the consortium led by Shenzhen Energy.
Not only will the project supply electricity to the Wafi-Golpu mine and maybe the Ramu Nico project in Madang, but the project will also provide jobs and benefits to businesses and landowners.
“This project might even outlive the Wafi-Golpu mine,” Duma said.
PNG Business News - December 07, 2020
International Friendships Help Government
In the past 18 months, strong international friendships have helped the government in its continuing economic reform policies.According to Treasurer Ian Ling-Stuckey, this included the chance to meet with the Australian High Commission last December 3 - which included a conference call with Australian Treasury officials - to discuss the robust strategic relationship and PNG’s multi-year budget economic program. “We are now exploring other options, including making direct contact again with the Australian Treasurer Josh Frydenberg. As another Treasurer having to deal with the COVID-19 challenges, he will be putting out the Australian MYEFO later this month,” said Ling-Stuckey. “This will highlight once again the massive budget hole that the pandemic has been creating around the world.He continued, “Australia one year ago estimated its 2020/21 Australian Budget deficit would be 0.3 per cent of GDP. Because of the bushfires and COVID-19, Australia’s budget deficit estimate increased to 11 per cent of GDP – a massive increase of 10.7 per cent of GDP (PNG’s deficit in 2020 increased by 3.1 per cent of GDP – less than one-third as much). Australian debt levels as a share of GDP are expected to increase because of COVID-19 from 34.5 per cent in 2019/20 to 44.8 per cent in 2020/21 to 55 per cent in the medium-term. Sharing our experiences with friends, even across very different economies, makes it easier to understand the impacts of the global pandemic and stay true to the reform course. We cannot slow down the process of PNG’s budget repair by the Marape Government in these most difficult of COVID-19 times.”
PNG Business News - January 11, 2021
Official: Arrangements in the Resources Sector Need to be Reviewed and Updated
In his 2021 economic outlook, PNG Institute of National Affairs Director Paul Barker said that there is a need to review and update fiscal arrangements in the resource sector. He said that the requirements involved constructive dialogue with project investors and operators. “Review and updates also for individual projects when their licenses fell due for review or renewal, but this needed to be conducted in an open and orderly manner, avoiding undue disruption,” he said. “Constructive dialogue with the State using sound international reviews and evidence, and not being pushed about or spoon-fed. However, the art of making a good deal requires a readiness for compromise, unless there are very good grounds for not doing so, such as if the project is of marginal benefit, or can be advantageously deferred or rescheduled, rather than having multiple new projects simultaneously. Clearly, the costs or risks (including environmental) for some projects may be excessive and the Government fully justified in rejecting or deferring them, at least until better knowledge or technology is available.”Barker said that in the past two years, the stand of the government was “unduly rigid over some prospective resource projects, seen as potentially providing a substantial economic stimulus impact, but most notably with the Porgera mine”.“Unlike other projects, the Porgera mine was a long-operating mine in a remote part of the Highlands, in which the State had once held a significant equity, which was subsequently sold, except the province’s small but valuable share, together with the landowners’,” he said. “The investors were ready to improve the State’s and local equity and other benefits, and robust negotiations were certainly justified, but unfortunately the State’s demand seemed excessive and unduly rigid, and failed to appreciate the extent of economic and social benefits and revenue provided by the mine.”
PNG Business News - October 09, 2020
Businesses are Ready to Operate, says Business Council Executive Director
In a market survey participated by business leaders, more than 60 per cent have shown that they are not going to lay off employees during this time, according to the PNG Business Council. Executive Director Douveri Henao said that this is a good sign and that companies are now employing measures such as using a skeletal workforce and reduction of work hours to stay afloat. In a statement, he said, “It’s an increase from 12 per cent from our Q1, 2020 (first quarter) numbers where this confidence in the market on staff reduction would not occur in the next six months.”Henao added that among the strategies that companies use include employee headcount or redundancy in which 19 per cent was already applied, an increase of 12 per cent since the first quarter; and the skeletal workforce which has 18 per cent, reducing work hours was at 17 per cent. “During this period, we saw an increase in redundancy programmes but this increase has actually plateaued,” he said in a statement. “There was anxiety in the market that there will be mass redundancy programmes and they will be queued up in as fund and elsewhere to collect their entitlements after the mandatory three month grace periods are over.He added, “We haven’t seen that come out into the market place largely because there is confidence in the market to retain jobs. So those that have been laid off were not to the extent where there has been a complete increase or a sharp rise in redundancy. And that’s also reflected in our conversations with the superfunds as well. They haven’t seen the large numbers prevailing throughout the year. There’s been a period in Q1 and the beginning of Q2 but that levelled off because most of these MDs (managing directors) and CEOs (chief executive officers) are quite confident that they could retain their staff. Although people have been laid off, there has not been large redundancy across the market.”Aside from the tourism industry, Henao said that the other sectors that had employed this kind of programme included the real estate and property, manufacturing and professional services, and retail and consumer. He added that businesses have already employed such measures and are ready to continue their operations.
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PNG Business News - April 08, 2021
Price of Oil Recovers in Spite of COVID
According to Oil Search, oil prices have risen steadily in recent months from the initial effect of the Covid-19 last year, when prices ranged about US$43 (K150) per barrel of oil (bbl), to levels above US$60/bbl (K210) since February this year. In response to questions, a group spokesperson said,“ To date, there has been no impact to production in our Oil Search operations in PNG as a result of the recent surge in the Covid-19 cases. The increase in confirmed Covid-19 cases in PNG has prompted Oil Search to enact its crisis and emergency management plans. The health and safety of our employees remain the company’s highest priority and teams have been assembled in PNG and Sydney to deploy additional support to protect our people and to ensure the safety and reliability of our operations. At our PNG field locations, we continue to operate under precautionary protocols established in 2020, which includes redeployment of non-essential personnel, restriction of access and travel to field locations and implementation of strict preventative measures and quarantine zones.” He added, “We have enacted additional risk mitigation measures include establishing ‘cocoons’ for our field teams and extending the quarantine period for employees and contractors. To date, there has not been a single positive case recorded in our operating sites outside of quarantine. We have also conducted more than 7,500 Covid-19 tests at our medical clinics and quarantine facilities in PNG. Beyond the safety of our own people and assets, Oil Search stands ready to work with relevant Government and health authorities to assist in PNG’s overall response to the Covid-19. This includes the dissemination of accurate information around the Covid-19 and vaccinations, supporting provincial health authorities to implement an effective vaccination programme, and providing logistics and cold chain support where required and as directed by the Government.”
PNG Business News - April 08, 2021
Lae Chamber Welcomes Green Energy
The Lae Chamber of Commerce and Industry (LCCI) said it welcomes any power plan that is long-term, environmentally friendly and creates jobs in the delivery of efficient, low-cost electricity in Lae and Morobe. President John Byrne referred to concerns regarding the PNG Biomass project in the province's Markham Valley when he said, “PNG Biomass has provided a solution which ticks most of these boxes, whether it fits the plan of PPL (PNG Power Ltd) is a decision beyond our scope. The recent Ramu 2 announcement is another such solution. Our people of Lae, Morobe, and PNG, not only expect but deserve, reliable, constant and cost-effective power solutions.” According to Byrne, the Lae business group praised the Lae PPL team for their commitment, hard work, and communication in maintaining an ageing and insecure grid infrastructure operational. He said many companies that had short or long-term contracts with the government were failing because of the long-standing outstanding Government bills owing to them. “The quantum of debt is not specified but very large and this added to the impact of the Covid-19, resource debates and a lack of forex is taking a toll on the business houses.,” he said.
PNG Business News - April 08, 2021
Businesses Concerned Regarding Government Debts
With the outstanding amount of government debt owed to the sector, pending landowner fees, and rising law and order woes, businesses are concerned about 2022. According to Chey Scovell, chief executive officer of the PNG Manufacturers Board, conversations within the business community revealed that the government owed companies more than K2 billion. “I don’t have an updated list, but from general conversations with business and what is being raised with the various chambers, it would exceed K2 billion,” he said. “We hear that contractors for the Department of Works have claims for this amount alone, so the number could be as high as K3 billion. No doubt they may have paid some, technically a K1 payment would be paying at least some. The Budget hasn’t been able to be implemented properly at all. Recurrent expenditure, monthly bills for things like water, power, security, rent, are not being paid in full or in many cases at all. We’ve suggested that the Government put up an online portal/list, for all creditors to register for the Government to show full or progressive payments.” Scovell compared what the government was doing to the private community to what would happen if everybody started paying taxes for one to five years but continued to use government programs. “They wouldn’t be able to survive, so how is it that they expect businesses to carry on?” he said. “It is also a bit of a cop-out that Treasury is taking a long time and in many instances taking extensive reviews of claims to see if they will pay them and by how much.” Scovell argued that the government was required to behave in good faith and to set a precedent, but that forcing or intimidating companies to make substantial reductions in compensation due for goods and services rendered was bad form. “We note there are many dodgy claims, but there seems to be little evidence that hires car firms, public works contractors and catering firms (reported as problematic areas) are having the same scrutiny,” he said. “BOC Gas waited years to be paid for medical gases such as oxygen supplied to PMGH (Port Moresby General Hospital), it was reviewed twice that I know of and not paid. The other item of note is that debt carried is a growing debt. The older it gets the more it has cost the businesses.” He added, “Also, our currency has been depreciating, many businesses based their fees on the foreign exchange rates at that time, some even had loans Just like our tax penalties, the longer they are overdue, the higher they should become. This Government isn’t doing to others as it does for itself. We still have micro, small and medium enterprises that have suffered duress due to non-payment of bills going all the way back to our 40th Independence, same goes for the 2015 Pacific Games, we hear from the regional chambers that there are many outstanding claims for the past two elections. Again, if we had a publicly available list, the Government wouldn’t be able to hide behind confusion and people could whistleblow on dubious claims.”