PNG Power Loss-Making Centres Face Sale Under Government Restructure

PNG Power Limited’s loss-making service centres could be sold to private investors and provincial governments under a proposed Government restructure aimed at cutting annual losses of about K80 million.

Minister responsible for PNG Power Richard Maru announced the plan yesterday during the swearing-in of the utility’s new board of directors at its headquarters in Port Moresby, saying the move would also prepare the state-owned power company for partial privatisation.

Minister responsible for PNG Power Richard Maru

Mr Maru said he was preparing a submission to the Government seeking approval to separate and sell the company’s B and C centres, including Wewak, Manus, Kavieng, Alotau and Kimbe.

“These are centres who don’t make profits but lose money,” Mr Maru said.

He said the centres collectively cost PNG Power about K80 million each year, placing additional pressure on the company’s finances.

Under the proposed model, private-sector companies and provincial governments would be encouraged to take responsibility for the affected electricity grids through ownership or partnership arrangements.

Donor agencies could also be brought in to support renewable energy projects, including solar power, while provincial governments could participate through equity investments.

Mr Maru said the restructured PNG Power would concentrate on three major electricity networks — the Port Moresby Grid, Ramu Grid and Highlands Grid.

“The new PNG Power will consist of these three grids,” he said.

He said the company’s existing liabilities would remain with the restructured PNG Power, while the loss-making centres would be separated without adding further debt to them.

The profitable sections of the utility would remain responsible for raising funds to meet outstanding obligations.

Mr Maru said the Government’s immediate objective was to reduce losses, strengthen PNG Power’s balance sheet and position the company for partial privatisation.

“We are on the path to sell the loss-making businesses and save K80 million, make provincial and private-sector partners responsible for power,” he said.

He said private operators would be expected to improve reliability and, where possible, reduce the cost of electricity in the centres they take over.

PNG Power currently carries about K1.3 billion in debt, while its loans are approaching K3 billion.

Mr Maru said the Government would also engage lenders over the possibility of converting some existing loans into equity.

“We are going to talk to all of those who have given us loans to see whether some of them can convert their loan to equity so we can improve the balance sheet position of PNG Power and get it ready for sale,” he said.

He said new private investment would provide capital for additional hydropower developments and upgrades to the electricity network.

“The capital they bring in terms of equity should be used to build more hydros, improve our systems so the technical losses are reduced, and we can turn this business around very quickly,” Maru said.