Corporate Governance

Objectives

To enhance the economic and social development of Papua New Guinea through leading the development and expansion of electricity supply throughout the nation. This will be achieved through aligning, coordinating and utilising the resources of PNG Power, Government and the private sector.

Strategies

PNG Power will be the primary provider of electricity to Papua New Guinea.

1. PNG Power has extensive electricity infrastructure across the nation that can be extended or expanded to develop and improve electricity supply to Papua New Guinea.

2. For technical, customer service and economic reasons, it is critical that PNG Power continues to operate and manage the supply of power to its service areas as a single national entity.

2. PNG Power will establish strategic alliances with the private sector to deliver improved and expanded electricity supply to Papua New Guinea.

3. Whilst PNG Power is solely responsible for the provision of electricity to consumers within its service areas, it has a record of successfully working with the private sector for the provision of some upstream services to the PNG Power portfolio. PNG Power currently purchases 20% of its power requirements from Hanjung Power in Port Moresby and PNG Forest Products at Baiune near Bulolo. Where possible and appropriate, PNG Power will enter into Public Private Partnerships to achieve further private sector participation within the power sector.

3. PNG Power will align its economic development plans and activities with Government development strategies and policies.

4. Power is critical to economic and social development and the PNG Power business plans and activities will be coordinated and aligned with Government strategies and policies such as the Medium Term Development Strategy 2005-2010 and the National Energy Policy.

4. PNG Power will expand its program to provide electricity supply to rural areas through the development and implementation of a five year Rural Electrification Plan.

5. Now that it is on a sound financial footing, PNG Power is able to develop and implement a five year Rural Electrification Plan. Where external funding may be required, PNG Power will work with Government and other stakeholders to establish a medium term program to access this funding (e.g. from central Budget or donors).

5. PNG Power recognises that the potential to provide low cost hydro electricity generation is a competitive advantage to the nation and will actively promote hydro power to the developers and operators of resource and industrial projects including possible expansion of downstream processing.

6. PNG Power has successfully promoted the benefits of hydro power to resource developers such as Highlands Pacific (Kainantu Gold) and Harmony Gold (Hidden Valley). The existing Ramu hydro schemes can be rapidly expanded to supply low cost power to new industrial and resource developments. In conjunction with government agencies, PNG Power will actively promote the economic advantages of hydro power to the developers of resource and industrial projects and seek to increase downstream processing within Papua New Guinea by existing businesses.

6. PNG Power will actively participate in and contribute to Government policy development and planning activities in areas such as economic development, energy and electricity policy and Rural Electrification.

7. Through participation at a Senior Executive level, PNG Power will work with Government and its agencies to contribute to policy development, planning and implementation activities.

7. In conjunction with Government and its agencies, PNG Power will promote the competitive advantages of hydro power to global investors.

8. International investors and industrial project developers probably do not consider Papua New Guinea when seeking a source of low cost electricity necessary for the development of certain businesses. PNG Power will work with Government to promote the existing and potential hydro power generation resources to the global market. Where appropriate, PNG Power will also seek foreign investment in hydro generation facilities.

8. PNG Power will establish relationships and strategic alliances with international providers of donor and concessional funding.

9. PNG Power will engage with the international funding providers such as the Asian Development Bank and EU to outline its development strategy and to seek donor or concessional funding for projects such as hydro generation and rural electrification.

9. PNG Power will engage with other State owned enterprises, industry and community groups and other stakeholders to get input and feedback and to outline its electricity expansion and development programs.

10. With the improvement in its financial standing, PNG Power has developed business initiatives for improving and expanding electricity services and is now able to engage with the community and stakeholders to provide an outline of its activities and plans. Where necessary, the development program will be coordinated with other State owned businesses such as PNG Telikom and water authorities. Also, community input and feedback is a critical element in the development of future plans.

Regulatory Contract

The operations of PPL are governed by the Regulatory Contract signed between the Independent Consumer and Competition Commission (ICCC) in August 2002 after PPL was established. ICCC is responsible for regulating competition, controlling prices and protecting consumers for a number of industries in PNG. As such it is the regulating authority for the electricity industry.

The Regulatory Contract establishes a long-term formula for fixing tariffs, which takes into account the CPI, exchange rates, fuel prices and the capital expenditure program among other factors.

Under the Regulatory Contract PPL is also required to meet specified Minimum Reliability Standards for different defined service zones. The implication of the Minimum Reliability Standards is that various capital investments are required to meet the Standards.

Electricity Code

An Electricity Code has been issued by the ICCC that elaborates on the customer Services to be provided by PPL and specifies the detailed requirements and standards for these services.

Operating Licences

ICCC has also issued a series of operating licences for PPL to operate under. They include:

• Generation Licence
• Transmission Licence
• Distribution Licence
• Retail Licence

Corporate Governance Guidelines

Role of the Board and Executive Management

The purpose of this guideline is to define and document the respective roles and responsibilities of the PPL Board, Chief Executive Officer and the Executive Management Team. The guideline also sets out the expected communication framework between these parties to ensure that PPL is directed and managed in a transparent and cooperative environment and in accordance with its Constitution.

Code of Conduct for the Board and Executive Management

The purpose of this guideline is to provide a Code of Conduct outlining the shared responsibilities of both Board members and Executive Management Team members in ensuring professionalism, honesty and integrity in all their dealings. The guideline is intended to enable each individual member to make informed choices about their behavior and to communicate PPL's core values of teamwork, honesty and transparency.