2012 Budget focused on service delivery
By Brendan Raftery, Chief Financial Officer
PNG Power’s theme for the 2012 financial year is the improvement in service delivery of electricity into key areas of Port Moresby, Ramu and the development of the rural electrification program.
PNG Power has experienced significant growth since 2006 but the challenges in maintaining and sustaining profitability and reinvestments into system growth and reliability remain. Fuel prices and containing operational expenditure also remain an issue for PPL.
The key to the growth is the association with the Mining industry and the PNG LNG Project.
Economic activities remain strong with new investment increasing and employment has been strengthening.
Tariffs have tried to keep pace with the increasing operational costs and the recent ICCC approved increase of 14.6% is part of improving the organisations financial health but we also need to be mindful of containing operational costs within budget guidelines.
Year on year growth in costs need to be within the key theme of growth of revenue and generation against a backdrop of increasing capital expenditure to service key plant.
The plan for 2012 addresses the five key objectives or Pillars for 2012 in improving Asset Performance, Human Resource Performance, Customer Services, Financial Performance and improving the planning process.
The challenges will remain in the delivery of reliable power along with managing key operational expenditure and the delivery of the major capital works in Yonki, Ramu, Town Electrification Investment Program, and the Port Moresby network.
In completing the 2012 financial plan against the key theme of improvement to service and with increased demand, the plan takes into account the increase in electricity sales (including Hidden Valley) combined with the tariff increase for regulated supply and the associated roll out of Easipay networks which will see electricity sales revenue increasing to K700 million in 2012, an increase of 16% over the projected 2011 financial year.
Profit outlook for the 2012 financial year of K38.5 million represents a significant lift on the 2011 financial year result. The 2012 outlook also includes a significant lift in fuel volumes and costs to match demand combined with a modest increase in operating expenditure.
A summary of PNG Power’s performance is captured below which highlights the significant growth since 2006. The outlook for the new budget year is that revenue will have grown close to 90% but this is also matched with similar growth in operational costs.
Capital expenditure for 2012 has been formulated with the key strategic theme of asset performance through better utilisation of PNG Power’s key assets.
2012 sees the primary capital works being the completion of the Yonki Toe of the Dam (YTOD), Ramu 1 upgrade combined with ongoing capital work in Rural Services and Town electrification programs.
The key theme in PNG Power’s financial health is tight budget control around operating expenditures and cash flow management with continued uncertainty in global oil markets a key risk.
With budget controls being a key theme, all business units are required to look at how we manage essential and non-essential expenditure so that going forward we can all prosper from the financial gains that will come as our revenue base continues to grow.