The Naoro-Brown hydro power project has come a very long way and is getting off the ground with assessments, preparation and discussions happening between (PNG Power Ltd) PPL, consultants, donors, national government, landowners and other stakeholders.
In a recent consultation workshop held at Gateway Hotel in Port Moresby on 23 February 2016, PPL Acting CEO John Yanis explained that PPL is the implementer of the Component Two (2) of the planning phase of the energy sector development project.
“Component Two (2) involves the provision of technical assistance for preparation and planning for power supply which includes preparation of Naoro-Brown hydro power plant, and implementation and improvement planning for additional power supply for the city of Port Moresby,” Mr Yanis said.
The preparation of Naoro-Brown project commenced in 2012. Preparations involve strengthening the institutional capacity of the project implementing entity (PPL) in the areas of technical, financial, economical, legal, safety, social and environmental framework, drilling, grouting and preparation of the geotechnical baseline, assessment, communication, procurement and project management as required for the;
1. Preparation of the NaoroBrown hydro project
2. Selecting a Naoro-Brown project developer and,
3. Providing support through to financial close and any further technical assistance required for additional assessment and economic analysis.
“Some of these institutional capacity strengthening programs have been ongoing for the last two years and still continues. We are implementing Part B of Component Two (2) and that is to improve planning for alternative hydro power supply for Port Moresby and that includes the Brown, Vonapa and Angabanga Rivers. We are here to make progress and I welcome the team from Multiconsult,” Mr Yanis said.
PPL has engaged Multiconsult for the services of a transaction advisor (for 12 months) which will help with the implementation phase of the Naoro-Brown hydro power project. Multiconsult (United Kingdom) and partner King & Spalding (Singapore) are assisting PPL with project development agreements, procurement processes and financing of the project that would work for PPL, government, donors, landowners and stakeholders that could benefit from this new hydro power project in the long term.
At the workshop, the consultants emphasized on the importance of project development agreements, government support, country’s benefits, environmental and social requirements and issues relating to project development agreements for hydro power projects.
They stressed that the Naoro-Brown hydro power project was an important project and as transaction advisors, they would provide the best hydro power specialists, financial strategists, international and local legal advisors, environment and social experts.
“Hydro power is a great business. If we are talking about renewable energy, hydro power is the way to go. It’s durable, safe and sustainable but it must be done well. It’s a very long term business. A hydro power site is a unique national asset. We only get one go at it and we’ve got to do it well,” Chris Grant, Senior Hydropower Specialist of Multiconsult and acting as the Consultant’s Project Director made this statement during the workshop.
Mr Grant explained that there is a need to bring the private sector into the processes because the key to a good project is to have an appropriate balance between private sector investment and project development.
Mr Kelly Malone, partner of King & Spalding (Singapore) and acting as the Consultant’s Project Manager, spoke about the effects of hydropower in triggering investments. He said in the past five years, they have provided advice on more than 30 major hydro power projects in excess of 10,000 megawatts of installed capacity around the world.
“We bring this experience here. It’s not just legal but also commercial experience and together with Multiconsult, we have a capable team that can help PNG’s Naoro-Brown hydro power project lift off as the first major hydro power project for the country,” Mr Malone said.
PPL has divided the transaction process of the Naoro-Brown Hydro Power project into three (3) phases which would take relatively 14-16 months. The first phase basically involves working internally to share ideas, share lessons learned, get feedback, understand the local environment, identify important isses and come up with a concept that works for PPL and the government of PNG in terms of supporting this hydro project.
The second phase consists of two components including the preparation of the bid and transaction documents, and primarily involves the production of draft power purchase agreement (PPA) and power development agreement (PDA) on the transaction agreement side, and bidding and procurement processes.
Once a winning bidder is selected and PPL/PDA signing are completed, the transaction process with reach its final stage of financial close. This is where the selected bidder will raise the debt financing and the equity required to fund the project. This process would take 14-16 months before the project begins.
According to World Bank Country Director Stefanie Stallmeister, PNG is one of the countries with the least electrification rate in the world but PNG has a tremendous potential in renewable energy including hydro power ranging from small rivers to large hydro projects
“Hydro power offers the prospects of clean, renewable and sustainable as well as cost effective energy so the social and environmentally preparation for this kind of development would make a significant contribution for the economic and social development of the country. Hydro power projects, as we know from global experience, can also be catalyst for local development in the surrounding areas.
“PPL has now engaged Multiconsult for the services of a transaction advisor which will help us with the implementation phase of this project. This technical assistance in our view is really a win-win situation for government as well the private sector because the balanced project development agreement which will be developed in this process will hopefully surface a template for future investments and therefore also provide the clarity for investors which is required to move projects forward, so I think this is really a major step and will have a better outcome as expected. Maximising the development impact of a hydro power dam is a journey, not a destination so I wish everybody safe travels on this journey and I am very privileged that the World Bank is part of this process,” Stefanie said.
History - the Naoro-Brown was identified as the next hydroelectric project to be developed for the Port Moresby power grid in 1894, but customer load demand did not grow as quickly as was forecast at that time, so the capacity has not been required. Nevertheless, PPL have continued to plan (most recently in the 2014-2028 Fifty Year Power Development Plan) for Naoro-Brown as the next major hydroelectric development for the Port Moresby grid. To that end, a series of studies were undertaken over the years, culminating in a detailed feasibility study including geotechnical investigations completed in August 2015.
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