The Papua New Guinea Electrification Partnership (PEP) is a $1.7bn aid programme financed and supported by Australia, Japan, New Zealand and the US that aims to connect 70% of PNG’s population to electricity by 2030. The international partnership was sealed during the November 2018 APEC Leaders’ Summit in Port Moresby, and is widely seen as an attempt by the US and its allies to counter the growing influence of China in the region.
One of the early beneficiaries of the partnership is likely to be national utility company PNG Power, which proposed a gas-based power station to support supply to the Wafi-Golpu copper and gold mine project, slated to start in 2025. “With Wafi-Golpu alone, we see 140 MW of demand over the next 10 years. That is a massive opportunity for us,” Mariawesi Pulayesi, senior director of strategy and innovation at PNG Power, told OBG. Officials from the four donor nations met with the PNG government to discuss the Wafi-Golpu project in Port Moresby in April 2019, however, uncertainty remains.
Laying the Groundwork
In 2018 then-Prime Minister Peter O’Neill launched the Wapenamanda Rural Electrification Project, which aims to connect more than 5000 homes in the Enga Province with electricity by 2021. Work started with New Zealand funding groundwork and surveys. The country committed NZ$20m ($13.8m), while Australia promised an initial contribution of A$25m ($18.5m). Japan and the US have not yet made their financial commitments public.
Although the partnership programme comes with a few strings attached, the donors have made it clear they expect the PNG government to ensure a transparent procurement process. Former Prime Minister O’Neill came under attack by his political opposition for allegedly awarding big energy contracts to Chinese firms without undertaking a comprehensive tendering process. Criticism grew in September 2018, when his administration awarded Shenzhen Energy Group a $800m contract to build and operate a 180-MW hydroelectric power plant in the Eastern Highlands Province.
The electrification partnership programme will be carried out under a public-private partnership model. The previous administration followed a policy that evaluated proposals on the principle of producing and distributing electricity at the lowest possible cost. This injected healthy competition in the bidding process, but also resulted in unhealthy conflicts of interest behind the scenes. Disagreements erupted between the government and the opposition about the relative merits of various options to increase power generation. For instance, while the former administration supported the expansion of hydropower, the opposition claimed its high capital costs would drive up electricity prices. Disagreements also emerged within the government itself. In March 2019 Sam Basil, then-minister of energy, and Johnson Tuke, the minister of mining, backed a proposal for a coal-fired plant in Lae in contravention to the government’s commitment to clean energy. Balancing competing interests is likely to remain a challenge for Prime Minister James Marape, who appointed Basil as the minister of national planning and monitoring in August 2019.
Keys to Success
Ultimately, the success of the PEP will come down to three factors. The first is the new government’s commitment to electrification targets set by the previous administration. Access to affordable and reliable electricity is key to overcoming PNG’s development challenges. The second factor is the administration’s ability to balance relations between China and the West. The third and most important factor is how swiftly stakeholders involved in the generation and distribution of power can access the finance that has been committed under the programme. “We have seen interest from the private sector in the programme, but there does not seem to be a cohesive plan on how they can participate at present. More clarity and guidance is needed,” Jonathan Seeto, the PNG territory senior partner at consultancy firm PwC, told OBG, adding that current power costs are a big obstacle for many firms.
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