IPPs facing cash-flow issues

INDEPENDENT power producers (IPP) are facing cash-flow issues because of payment problems from PNG Power Ltd, according to IPP PNG (IP3) chairman Dave Burbidge.
He said IPPs had hoped for timely payments by PPL to avoid any interference in existing contracts.
“We would be pleased to see a stable management structure based on a new structure and a long-term managing director for PPL,” Burbidge said.
The IP3 power producers are PNG Forest Products Hydro, NiuPower, Dirio Power, New Britain Oil Palm, POSCO and Edevu Hydro (PNG Hydro Developments).
“There have been no new ones due in part to a number of issues IPPs have had in the past year,” he said.
“In fact there are fewer IPPs since PPL cancelled the PNG biomass power purchase agreement and the associated solar farm.”
PNG Power, the National Energy Authority (NEA) and the Independent Consumer and Competition Commission are associate members of the IP3.
“We are working towards the common goal of electrification and security of supply,” Burbidge added.
He said there had been more challenges than progress last year for the IP3.
“The PPL attempted to renegotiate the price on binding contracts, the implication being that financiers base their lending criteria on a fixed term price with CPI (Consumer Price Index) escalations,” Burbidge said.
“If the price changes downwards, the financiers will have a major issue since it affects the project viability.”
He said the second issue was PPL failing to pay the IPPs which then could not meet its own operational costs including fuel.
“This is mainly due to the Government not paying PPL for the power it uses. The Government provides around 70 per cent of PPL’s revenue.”
He said the third issue was the cancellation of the PNG biomass power purchase agreement and the associated solar farm project.
“The NEA is aware of all the issues above and we are certain they will do their best to sort things out.
“But they are not funded by the Government, rather, by a levy on the IPPs.
“This is an additional cost on IPPs who are currently experiencing cash flow issues due to payment problems from PPL.
“So we possibly end up with an underfunded NEA which is not a good outcome.”