State must find way to help PPL

 PNG Power Limited backed off from an unpopular decision to impose a 5.9 per cent across-the-board increase in electricity tariffs in January.

While that was good news for customers who had been given a rude awakening on New Year’s Day, the decision to postpone the tariff increase has haunted the state-owned utility company since then.

Despite an assurance by Public Enterprises and State Investments Minister Ben Mi­cah that the Government would bail PPL out of its financial dilemma, nothing was forthcoming until last week.

For eight months the cash-strapped company has had to beg and borrow to keep afloat and continue supplying electricity to its mostly disgruntled consumers.

Board chairman Larry An­dagali said PPL was for­ced to obtain a K40 million overdraft limit from Bank South Pacific under the condition that it repaid K6m a month.

PPL managed for a short while before the soaring operational and maintenance costs, coupled with the high cost of fuel for power generation, short-circuited the company’s ability to repay the overdraft. The alarm bells started ringing at PPL headquarters in Hohola and echoed through the Waigani corridors of power last week when BSP issued a “show cause” letter after the company exceeded its overdraft limit. It is understood that BSP was quite concerned that PPL was getting further into debt without being able to earn sufficient revenue.

PPL would have lived comfortably within its means and would not have had to resort to a bank overdraft if it was allowed to impose the 5.9% tariff increase. 

The prolonged delay in the payment of the much-anticipated government subsidy made things worse for the company and heightened fears that it could be headed for insolvency and even bankruptcy. Thus, the onus was on the Government to come good on Micah’s initial assurance. They did so, almost at the eleventh hour, with the first K10 million payment to avert the bank debt crisis.

After the crisis meetings between PPL and the Independent Public Business Enterprise, a much-relieved Andagali was able to personally collect the first cheque of K10m from the Treasury Department on Thursday evening and pay BSP on Friday morning.

In fact, the National Executive Council had agreed on PPL’s rescue package early this year but the funds did not materialise since then for reasons known only to the political leadership.

As Andagali pointed out, PPL has weathered the storm over the past months and is confident it will be able to sustain its operations without further government funding after the 10-month period. 

Furthermore, it will be a better position to cater for the increasing demand in electricity consumption in major centres with the redevelopment projects, including the new gas turbine generators in Port Moresby and Lae.A tariff increase by mid-2015 would certainly boost PPL’s revenue earnings and place it in a strong financial position. As it is, the four major centres  of Port Moresby, Lae, Mt Hagen and Kokopo are carrying the financial burden for PPL’s nationwide operations. The small centres have been operating at a loss for much of their existence and would have been shut down under normal business circumstances. Being a state-owned entity, PPL has had to bear this burden as part of its community obligation.

Andagali’s proposal to overhaul PPL’s operations and maintenance in the small centres makes good sense, especially for the company to collaborate with other SOEs such as Post PNG to collect revenue from electricity consumers in the provinces. Moreover, significant sa­v­ings will be made from re­duced operational and maintenance costs which can then be channelled into other areas to grow the business.

We agree with Andagali that PPL, like other state agencies, must be ready primed to ensure that nothing goes wrong during the 2015 Pacific Games and 2018 Asia Pacific Economic Cooperation (APEC) summit. Both events will be held in Port Moresby and PNG will be the focus of the region and the world. It would be disastrous for the country if PNG Power could not maintain a constant supply of electricity to the city and the sporting venues during the duration of the Pacific Games. PPL’s theme during the sporting extravaganza should simply be, “No blackouts”.