Minister for State Enterprises Sasindran Muthuvel has revealed his plans to reform Papua New Guinean’s under-capitalised state utilities and telecommunications businesses. The future could involve partial privatisation, he says.

Minister for State Enterprises Sasindran Muthuvel. Credit: BAI

Papua New Guinea’s state-owned enterprises (SOE) have been struggling under ‘unreasonable debt’ over the past decade, according to State Enterprises Minister, Sansindran Muthuvel. He said the Marape-Steven government had an ‘ambitious plan’ to reform them.

‘K5.5 billion of debt has been borrowed in the last five years,’ he said, while speaking with Business Advantage International’s Publishing Director, Andrew Wilkins, at a business breakfast in Port Moresby last week.

Some of the borrowings were to build national assets such as the Coral Sea Cable and Kumul Submarine Cable System. While he said there was ‘nothing wrong’ with these projects, he questioned whether ‘we really had value for that money’.

Kumul Telikom had invested more than K2 billion in the new cable infrastructure, he said, but did not have the capacity to service the associated loans.

‘The challenge is we have not commercialised or monetised those projects.’

Governance

Kumul Consolidated Holdings. Credit: KCH/Twitter

The first focus of the planned reforms involved better governance and more autonomy for state-owned enterprises, which are managed under the Kumul Consolidated Holdings holding company.

‘We mean to bring better governance, to bring amendments to the Kumul Consolidated Holdings (KCH) Act.

‘The key SOEs that are important or struggling, in order of challenge, are: number one telecommunications; number two is PNG Power; number three is Air Niugini, then Water PNG and the list goes on.’

He said KCH Act would be amended to give more power to the its board and remove political interference.

‘We are open to that idea of partial privatisation.’

‘In order to give more power to the board, we need more credible, qualified persons running the board,’ Muthuvel said.

He explained the process has already started, with the appointment of new boards at both KCH and at PNG Ports. He confirmed the appointment of Kina Bank’s Chairman Isikeli Taureka as Chair of KCH, emphasising that the recruitment had been conducted by a third party separate from government.

‘The next one to follow will be PNG Power.’ The state-owned electricity company has been without a permanent Managing Director for several years.

He also expressed an openness to having more women on SOE boards.

Investment

Restructuring the way SOEs are financed will also be a major focus of the reforms.

‘Of course, we face our own challenges in terms of commercial loans. We owe a commercial bank about K1.8 billion on which we pay seven percent interest.

‘The agenda is to restructure those loans and also to refinance … with some concessional loans,’ he said.

Minister Muthuvel also said future investment needed to come from the private sector.

‘We are in a desperate situation to see that we also attract some private investment or industry partners to come and join us.’

‘I’m lobbying for Parliament to agree for us to go to the international market and look for serious investors and we become 49% [shareholder] and they become 51%. We could even give some to our super funds.

‘We are open to that idea of partial privatisation,’ he said.

However, to attract concessional funding and private capital, he said, ‘we need to clean our books and bring the financials up to date.’

Electricity

A PNG Power worker at the Yonki Dam hydro power plant. Credit: PNG Power

Muthuvel expects the switch from diesel to natural gas to make a big difference to Port Moresby’s power, with two gas-fired power plants to come online this year, run by NiuPower and Dirio Gas and Power.

‘The government consumes K2.8 million of [diesel] fuel every week,’ he noted.

Reliability of power supply was the priority, he said, with tariff reduction being a medium-term goal.

The PNG Electrification Partnership announced during APEC 2018 has yet to deliver significant investment in support PNG’s National Energy Roll-Out Plan (NEROP).

Muthuvel said the World Bank is due to conclude the plan, including PNG Power’s ‘least-cost’ power generation strategy, soon.

‘If someone tomorrow comes with US$300 million (K1 billion) to take over the company, we are open to consider it’

‘I’m sure by April the World Bank will be inviting businesses to have some conferences on how we can implement that master plan’, he said. ‘This would focus mainly on expanding PNG’s two major transmission networks, the Port Moresby and Ramu grids. These two grids alone have the potential to connect almost 70% of the population.’

He noted investment has already begin to take place, starting with transmission lines between Mt Hagen and Tari, and a 25 MW gas-fired power plant in Hides, Hela Province. A power plant to supply the Wafi-Golpu project in Morobe Province was also a possibility, assuming that the copper-gold project receives a green light later this year.

Telecommunications

Port Moresby power station. Credit: NiuPower

The government is considering ‘a few options’ regarding Kumul Telikom and the companies that fall within in it – Telikom PNG, Bmobile, PNG Dataco, EMTV and PNGFM.

‘I don’t want to pre-empt what we are doing … but we are very, very open to the idea of privatisation,’ said Muthuvel.

‘If someone tomorrow comes with US$300 million (K1 billion) to take over the company, we are open to consider it, as long as we are still going to be part of it, and we can ensure that the services will continue to flow.’

‘These organisations have been running like a government department for a very long period  of time. So we need to bring in a corporate culture, to make them realise this is purely business.’

Water

The Minister also commented the merger of Water PNG and Eda Ranu, with Water PNG taking the lead.

‘We are not going to compromise the service. Eda Ramu uses 170 megalitres per day. Water PNG, the smallest of all SOEs, … they only consume 75 megalitres per day for the remaining country.

‘In there last ten years, Water PNG has contributed K98.1 million as a dividend whereas Eda Ramu has only contributed K40 million.

‘Water PNG has done a good job.’