I OFFER my views in relation to your newspaper report on audit by Ernst & Young into PNG Power Ltd.
The new managing director Flagon Bekker said that the audit report should give a clear picture of where the company stands.
He said this issue affected many countries in the world but our first line of defence was our processes.
He was referring to the financial processes.
He took the wrong path which could lead to more problems for our power company.
What is needed is for the PNG Power Board to initiate a fully pledged technical audit of its generation, transmission and distribution system.
The review should be carried out by its internal audit and risk function with external support.
PNG Power Ltd is a vital state-owned enterprise and requires a committed effort from management, board and key stakeholders, especially the Government to address its shortcomings and take advantage of opportunities.
It is a fully integrated power authority responsible for the generation, transmission, distribution and retailing of electricity throughout PNG.
PNG Power Ltd was corporatised under section 3 (1) of the Electricity Commission (privatisation) Act 2002 as the successor to the PNG Electricity Commission.
Even though a financial audit on PNG Power systems of internal controls and processes is important, that should not be the main focus to steer the company away from its challenges and opportunities.
Up until now, PNG Power has not been able to meet demand from its existing customers in the major centres.
This is because of its aging generation assets.
The increasing rural-urban migration has added pressure to already-depleted systems in Port Moresby, Lae, Goroka, and Mt Hagen, not to mention our brothers and sisters in the New Guinea Islands.
I understand that PNG Power Ltd has a demand forecast policy where it can guide and influence the board to maximise supply to meet the growing demand.
This policy document is an important document that its board need to materialise it by working alongside the State Enterprise minister and the Government to appropriate funding through the Government’s budgetary process to boost its capital expenditure programme.
PNG Power needs over K500 million to refurbish its aging assets and increase capacity or availability.
However, it is still under capitalised to fully meet demand brought on by rural-urban migration and growth in economic and mining activities.
PNG Power is impeded by its inability to generate sufficient working capital to fund the construction of major hydro-based generation infrastructures identified through various feasibility studies in the country. It lacks the capability in a number of areas to support both growth and improvement of existing facilities and services.
These areas include human resources, financial resources and expert technical resources.
In general, these resources are not available.
The Government’s policy encouraging public-private partnerships is an excellent pathway for PNG Power to form strategic alliances with the private sector as a way forward in meeting the ever-increasing demand for electricity.
The question of how much will demand increase in the short, medium and long term needs to be addressed by the management and the board.
Past external market reviews showed that PNG Power faced major challenges including supplying the rapid growth in electricity demand particularly in Port Moresby, Lae and Madang.
PNG Power should have infrastructure plans to meet forecast growth in demand.
The existing hydro inventory could form the basis of supply for new developments subject to economic feasibility.
Entering into public-private partnership should be encouraged so that conflict of interests are avoided.
The Kumul Consolidated Holdings Ltd (KCHL) has a strategic role of advising the Government to inject money into the company either through counter-funding, commercial loans from financial institutions or equity partners through private-public partnership arrangements in the construction of hydro-based generation facilities which State Enterprise Minister Sasindran Muthuvel has been doing so far.
Muthuvel should be supported by Prime Minister James Marape to push the agenda of PNG Power Ltd forward.