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Mayur Discusses Power Plant Project in Lae

by PNG Business News - May 13, 2021

Mayur Resources Ltd says it has formed an ongoing relationship with the State negotiation team to discuss and finalize a power purchase agreement (PPA) for its planned power plant in Lae, Morobe.

The organization was waiting for the State negotiation team's makeup to be finalized and signed off, according to managing director Paul Mulder.

After that, he said, the Enviro Energy Park (EEP) project's final discussions and negotiations will begin.

Mayur's planned 52.5-megawatt EEP project is an advanced power plant that will produce more efficient and cheaper electricity than current solutions by combining conventional thermal energy (sourced from the company's wholly-owned Depot Creek project), solar, and biomass woodchip, while also supplying co-generated steam to nearby industrial users who were burning diesel for their steam needs.

The EEP, which is near Lae, will also have steam as a by-product for local industrial uses, and potential dual fuel systems will allow for the use of diesel.

“The energy park would balance the need for new environmentally friendly technologies and reliable energy,” Mulder said.

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PNG Business News - April 08, 2021

PNG Power Receives Assistance from the World Bank

The World Bank has funded a $30 million (PGK105 million) project to help the state-owned electricity provider PNG Power boost its operational and financial efficiency. The PNG Energy Utility Efficiency and Reliability Improvement Project (EUPRIP) arrives at a crucial time for PNG, with people around the country facing big problems with inadequate access to electricity, and even for those that do, unreliable power sources and long blackouts that are affecting households, industries, and critical service delivery. Though PNG has tremendous untapped energy resources, growth is lagging, and electricity connectivity remains extremely limited, with only around 13 per cent of the country's 8.6 million population having access to grid-connected electricity. The new project, which is scheduled to be completed between 2021 and 2026, will assist PPL in establishing a stable financial base and catalyze private investments in the energy sector. The scheme includes the reconstruction, reinforcement, and improvement of utilities on PNG Power Limited's (PPL) owned and managed grids in Port Moresby, Ramu, and Gazelle. The project would also help PPL boost its management and financial stability, with an emphasis on raising service quality to reach higher expectations on a regular basis. PPL will gain assistance in developing the business reform strategy, which will include smart meter installation and emerging technology implementations. In addition, through the planning and execution of a Least Cost Power Development Plan for PPL, the initiative will lead to lowering the cost of power generation and switching to clean, renewable energy. William Duma, the Minister for State Enterprises, said that supplying inexpensive and stable electricity to the PNG community is critical to the government's growth plans and that it necessitates a well-functioning service provider. Meanwhile, PPL Managing Director Flagon Bekker noted that the World Bank-funded PNG Energy Utility Efficiency and Reliability Improvement Project would allow PPL to contribute significantly to the Government's aim of connecting 70% of the population to electricity by 2030, as outlined in the PNG 2010-2030 Growth Strategic Plan. “PPL is embarking on major corporate reform initiatives,” he said. “We look forward to working alongside the World Bank team to put in place critical improvements that will ultimately deliver stronger, more reliable energy for all Papua New Guineans.” Stefano Mocci, the World Bank's Country Manager for Papua New Guinea, also stressed the importance of access to secure, affordable electricity for economic development; companies, schools, hospitals, and clinics, among countless other facilities in PNG, all need reliable, affordable electricity to keep the country developing. “This new project builds on the groundwork delivered through the World Bank’s Energy Sector Development Project, which helped prepare PNG’s National Electrification Rollout Plan, and geospatial assessments to plan optimal approaches to provide electricity to 70 per cent of the country’s population by the year 2030,” he said.  “We’re proud to be helping ensure more Papua New Guineans can get connected - and stay connected – to reliable, affordable electricity in the years ahead.” Agriculture, health, road transport, water and sanitation, electricity, rural service delivery, and youth jobs are among the nine successful projects supported by the World Bank in PNG, totalling approximately US$455 million.


PNG Business News - April 12, 2021

Independent Power Producers Concerned Over PNG Power Opening Up Contracts

Independent Power Producers (IPPs) in Papua New Guinea have expressed concern about PNG Power Limited's (PPL) unilateral analysis and renegotiation of existing contracts and contractually agreed rates to supply power to the grid. The task of IPPs, according to David Burbidge, Chair of the IP3 Industry Group for Independent Power Producers, is to collaborate with PNG Power to provide affordable and secure power to the grid and thus to end-users and consumers. “The intention of the Utility to renegotiate the price defined in a contract is problematic for IPPs; it will also have sector-wide ramifications. The price at which IPPs sell their power to PPL is a contractual agreement between the IPP as a power generator and PPL as the Utility, which is captured in PPA – a power purchase agreement. These PPA contracts are generally for a period of 15 to 25 years to ensure both parties know in advance that there is a market for the power generated (for the IPP) and a consistent power supply (for the Utility) at a mutually agreed price level. This gives financiers certainty over the debt repayment and allows the IPPs to recover the cost of capital employed in what has to date been perceived as a high-risk environment,” added Burbidge. The IP3 Industry Group criticized the way PNG Power Managing Director, Mr Flagon Bekker, framed the subject in a recent statement.  “We see it as misleading that Mr Bekker speaks of subsidies to IPPs. IPPs are paid a mutually agreed price for the power they provide, just like any other commercial arrangement,” said Burbidge. “IP3 emphasises that the generation industry is open to working with PPL to implement the lowest cost possible for future generation, which will help reduce the major liquid-fuel bill that currently affects PPL’s net revenue. However, PPL also needs to improve its financial position by reducing the major financial losses due to power theft and billing losses, over 20%. The State and other large non-paying customers also need to consistently pay for power used, as this revenue shortfall is directly responsible for PPL’s losses,” said Burbidge. “Setting the precedent that PPL can reopen PPAs at any time to renegotiate prices will be devastating for the power generation industry in PNG. It will increase the cost of any financing and the future cost of power from IPPs as it creates an environment of major contractual uncertainty and major sovereign risk in terms of all contracts with State-Owned Enterprises in PNG. This will increase the prices offered by IPPs, which is the opposite of what PPL is trying to achieve, and it will not encourage foreign investment in PNG’s energy sector” stresses Burbidge. “We have seen analysis that reveals the fixed generation costs from IPPs represents less than 20% of PPL’s costs, and a focus by PPL on revenue collection and movement away from expensive liquid fuels is fundamental for PPL to improve its operating position for the short, medium and longer-term. “As an Industry Group, we also underline and fully endorse the critical nature of transparent and open tendering for future IPP projects. A number of expensive un-tendered previous PPAs have now expired or will expire relatively soon, they can be replaced by lower-cost IPPs, a number of which have already passed through a transparent tender process. “We support the statement by the PPL Managing Director that we need a ‘win-win situation for the people of PNG and independent power producers while positioning the sector for lower tariffs going in the future. Unfortunately, the approach taken by PPL cannot be characterised as creating a win-win for IPPs, PPL, customers, and the people of PNG, and is more likely to result in power shortages and high power prices, due to increased diesel usage, or the unrequired commitment to large power generation with major capacity charge obligations over 15 years on PPL of over 10 billion Kina,” said Burbidge.


PNG Business News - April 19, 2021

Bekker Says Contract Reviews Are Important

According to PNG Power Ltd, renegotiation and reviews of current contracts with independent power producers (IPPs) make the business healthier and more competitive (PPL). PPL managing director Flagon Bekker made the statement in response to questions raised by IPP industry groups (IP3) about PPL unilaterally reviewing and renegotiating current contracts and contractually negotiated prices to supply electricity to the grid. IPPs, according to Bekker, must be adaptable enough to evolve as fiscal, technical, and environmental factors change with time. “We asked IPPs to respond to a survey late last year where we asked them for their suggestions and next steps in dealing with the current commercial status quo,” he said. “In fact, we offered four or five alternatives to renegotiation. None responded.” According to Bekker, analysis shows that in terms of pricing, spending, and the overall economy, it is best to keep IPPs' share of the total market minimal. “Egypt is the best example of countries that have kept IPPs to a smaller share of the total (market) and found it easier to weather macro-economic shock and have greater freedom in deciding where to source finance for power investment in the future,” he said. “The IPPs not only make the macroeconomy weaker, but they are also the cause of their own problems. “PPL is leading to change this. “IPPs should not resist. “They should partner by suggesting solutions for the future. “PPL will send the survey out again and we hope they respond this time.” According to Bekker, there was a lot of analysis and support focused on post-negotiation evaluations, which shows that the renegotiation process contributes to the discovery of lessons and eventually the execution of those lessons. “Off the top of my head, here is a list of countries that have renegotiated PPAs in full or in part over the years: Philippines, Brazil, India, Argentina, Mexico, Turkey, Poland, China (among others),” Bekker said.

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PNG Business News - June 15, 2021

PNG Vanilla Company Partners Expo2020 Team

Dr. Nancy Irwin (left) with the Deputy Commissioner General for Expo2020 and Head of the PNG Expo2020 Secretariat, Mrs. Jacinta Warakai-Manua began the partnership to tell the PNG Vanilla story in Dubai, by exchanging ideas in Port Moresby last week. A vanilla production and export company is partnering with the PNG Expo2020 Team to promote their products in the Dubai World Exposition that starts in October this year. KAMAPIM, a company working with landowners in the Madang and Morobe Provinces produces top quality vanilla beans and is already exporting to the EU market. The Managing Director of the company Dr. Nancy Irwin, met with the PNG Commissioner General to Expo2020 Ambassador Joshua Kalinoe and his Deputy Mrs. Jacinta Warakai-Manua in Port Moresby last week to firm up the arrangements. Dr. Irwin said Kamapim (pidgin for develop and to improve) concentrates its efforts in producing the best quality bean for the international market through quality assurance production methods. “PNG farmers can grow anything, they have instinctive ability to grow well any crops. When I first started the project, the quality of the beans were poor, full of fungus due to lack of processing knowledge. We saw huge potential of the organically grown beans and started working with landowners through a cooperative production and marketing structure to improve quality” “The company provide extension services to farmers and buy the beans directly, ensuring farmers are paid a fair price for their efforts”, she said. Dr Irwin said the beans are tested internationally and are consistently classed as the top-quality A grade level. “While PNG has a good perception of growing environment friendly organic vanilla beans, the challenge is for the relevant Government authorities to work with farmers to improve quality. I believe the cooperative production methods applied by our company, Kamapim, could be used nationally as one of the models to improve quality for the export market as well as to maximize revenue gain for farmers”, Dr. Irwin said. She said the company is looking forward to partnering with the PNG Expo2020 Team to tell the PNG story and to connect with niche importers in Dubai and the Arab world in general. Dr. Irwin said the company would promote its products in specially branded PNG Expo2020 containers to create visibility for the country as well as to preserve quality at the company’s cost.


PNG Business News - June 15, 2021

PNGEITI Praises Open Dialogue to Reopen Porgera Mine

The PNG Extractive Industries Transparency Initiative (PNGEITI) has praised the open stakeholder dialogue culminating in reaching consensus to re-open the Pogera Mine in Enga.  Parties in April this year sanctioned a “Framework Agreement for the New Pogera Project” which spells out the roadmap to reopen the mine. Mark Bristow, CEO and President of Barrick Gold last week explained key elements of “Framework Agreement for the New Pogera Project” at a public forum at the Piam Oval in Pogera witnessed by PNG Prime Minister James Marape, landowners and other leaders. In the new agreement, PNG stakeholders will together own a 51 % equity stake in the mine while Barrick Niguini Limited (BNL), a joint venture company in which Barrick and Zijin Mining Group each own 50% will hold 49 %.  BNL will remain the mine operator. At the end of the first ten year period, the PNG stakeholders will have the option to purchase BNL’s 49 %    PNGEITI Head of Secretariat Lucas Alkan remarked that the open discussion throughout the negotiation process on the part of the mine operating lead, Government and landowners has culminated in this agreement signed happily by all parties.   “We at the PNGEITI congratulate the Government and the project lead Barrick Gold and other stakeholders for reaching a consensus decision to reopen the mine. “Pogera has been an economic powerhouse for many years and people in the country have been waiting for the outcome. “We commend the Prime Minister, the President and CEO of Barrick Gold Mr. Mark Bristow for the leadership in ensuring that the negotiations were done in the transparent and open manner. “PNG Extractive Industries Transparency highly encourages such openness in the negotiating process for resources benefits and importantly the responsibilities that each stakeholder must take on to ensure smooth flow of proceeds. “We look forward to working with the Government and the project operator in the areas of transparency and accountability to help derive best value for all stakeholders. PNGEITI commitment to reporting on developments in the mining and petroleum space is becoming stronger with new reporting dimensions taking shape as we making progress in promoting transparency and accountability in the PNG mining and petroleum industry” Mr. Alkan said.


PNG Business News - June 14, 2021

BPNG Goes For Review

Treasurer Ian Ling-Stuckey has revealed the terms of reference for a review of the Bank of PNG, as well as the members of the review panel. Former Chief Secretary Robert Igara will lead the study, which was planned in the Supplementary Budget for 2020. Former central bank governor Sir Wilson Kamit and Australian professor Dr Stephen Howes are the two members. “These very eminent people, all of whom have detailed experience of the PNG financial system and reform, will be working to a term of reference approved recently by the NEC,” Ling-Stuckey said. “It is the first review of the central bank and the Central Banking Act 2002 since Sir Mekere Morauta’s financial system reforms when he was prime minister from 1999 to 2002.  “Much has changed since then, and the effects of the coronavirus pandemic, along with substantial technological advances, have made the need for a review even more urgent.  “The aim is to modernise the bank and the legislation in line with international developments, and make it more responsive to prevailing circumstances while preserving its independence.”  The study is scheduled to be finished in time for Parliament's November session. “An independent advisory group was also established by the late Sir Mekere when looking at the changes that led to the Central Banking Act 2000,” he said. “Igara, currently the University of Papua New Guinea chancellor, was chief secretary at the time, and Sir Wilson was the governor of the Central Bank. “Prof Howes, head of the Development Policy Centre at the Australian National University, has long been involved in PNG research and advice and consultation, particularly in relation to national development.”   Reference: The National (8 June 2021). “BPNG going for review”.

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