The ADB, in its Finding Balance: benchmarking the Performance of State-Owned Enterprises in Papua New Guinea report, says the technical performance of PNG Power is on par with other utilities in the region, however, lags behind in others.
It has combined transmission and distribution losses of 20%, but a lower load factor of 41% compared with an average of 66% for the other utilities.
“Because of PNG’s difficult topography, a relatively-low proportion of the country has access to power; and a rapidly-growing demand in the capital city has forced PNG Power to implement rolling blackouts,” the report said.
“Most businesses maintain back-up diesel generators to compensate for the unreliability of the power supply.”
The report said PNG Power’s operating ratio – which records total operating costs as a percentage of total operating revenue – was comparatively high at 90%, particularly as it generates 83% of the power for its main grids from hydro sources.
“Most of the other power utilities in this study, including PNG Power’s smaller grids, are either solely or largely reliant on diesel generation,” it said.
“Tonga Power, with 100% diesel generation, achieved an operating ratio of 87%.
“PNG Power’s cost structure does not seem to benefit from economies of scale.
“Fiji Electricity Authority (FEA), with similar annual power-generation volumes, operates at a cost per kilowatt-hour (KWH) of power sold at US$0.12.
“PNG Power’s cost of power sold at US$0.30 per KWH is more in line with the much-smaller power utilities.
“Marshall Islands Energy Company and Solomon Islands Electricity Authority, which generate just 20% of the power generated by PNG Power, operate with costs of production of US$0.41 and US$0.54 per kWh.
“The Electric Power Corporation of Samoa, which generates 13% of the power generated by PNG Power, has a cost of power sold at US$0.43 per KWH..
“PNG Power also has comparatively low load factor of 41%, compared with an average of 66% for the other six utilities, indicating that its generation resource management is comparatively less efficient.”
The report says PNG Power bought 163,517 megawatt-hour (MWh) from an independent power producer in 2010, about 20% of total production.
“Although the cost of purchasing this power at US$0.97 per kWh is higher than PNG Power’s cost of production at US$0.83/kWh, it would appear to be a cost-effective source of power as the transaction carries no capital cost for PNG Power.”