PNG SOEs teetering and are on the brink of crashing


The bankruptcy of PNG Power Ltd under Prime Minister Peter O’Neill and State Enterprises Minister Ben Micah should not surprise anybody. It has been shipwrecked by typical PNC political interference, corruption and greed. All the other SOEs are in the same boat for the same reasons.

Grand Chief Sir Michael Somare was right to call on the Prime Minister this week to come clean on the collapse of the entire SOE system and the harm it will cause to the nation. Action needs to be undertaken immediately to try to save something from the Prime Minister’s wreckage, starting with police investigations into the activities of SOEs and Ombudsman Commission investigations into their directors and senior management. New States of Emergencies in other sectors are not the answer because all they do is allow more corruption and more mismanagement.

When the illegal and unnecessary State of Emergency in the power sector was announced, it handed personal control of PPL over to Mr Micah – who is well-known to be a bankrupt and kon man (see earlier PNG Blogs posts on his corrupt behavior). While he has been Minister responsible for IPBC and its SOEs, Micah has focussed his attention on getting rich himself. He has not focused on the national interest at all. Now it looks like he and the Prime Minister are redoubling their efforts to profit from SOEs. In the three years since O’Neill and Micah took over responsibility for SOEs after the 2012 elections, SOEs have gone from the walking dead, as former Prime Minister Mekere Morauta put it, to the unwalking dead. They are one step from the grave and about to fall in.

The destruction of SOEs is most clearly shown by PPL, which is now all but bankrupt because of the Prime Minister’s illegal K104 million genset deal with his corrupt cronies at LR Group of Israel. LR Group - headed by Ilan Weiss, son of the Prime Minister’s crony Jakob Weiss - benefitted from the deal by at least K10 million. In return, the people suffer even worse blackouts than before. It is doubtful if PPL can ever recover, leaving the door open for O’Neill to privatize it – to his cronies at LR Group. If he is successful at privatizing PPL, other SOEs will follow, starting with Air Niugini.

Grand Chief Somare made this clear in his comments this week when he called on the Government to table in Parliament full and comprehensive reports, audits and financial positions of all State-owned enterprises. Sir Michael said the Government must inform the people about the state of SOEs because Minister Micah “has been so silent on the status of the Government-owned entities. “The minister must not hide the truth about the issues of all State-owned enterprises, nor turn a blind eye on the real problems of all State-owned enterprises with a hidden agenda of selling them.” O’Neill and Micah have been able to get away with the destruction of SOEs because of their success at hiding the truth.
There is a deliberate lack of transparency and accountability throughout the Government system. SOEs are structured and managed in a way designed to disguise their shocking levels of customer service and to hide the corruption and corporate mismanagement they suffer from.

All SOE web sites talk about integrity, transparency and accountability, but no SOEs practice those virtues. There are two good ways to judge how they are being run:
  • Whether they comply with regulatory obligations in relation to accountability and transparency - including whether they publish annual reports and annual accounts as legally required, and
  • Whether they willingly make available other details of their financial status, their corporate activities and their corporate structure – especially their boards.

On these measures, all SOEs are failures. This includes IPBC, which is supposed to oversee and manage SOEs.

For the most part they do not comply with their own Acts of Parliament, the IPBC Act, the Companies Act, the Tax Act and regulations, and the Audit Act. Their directors and managers, either directly or indirectly, are knowingly breaking the laws of Papua New Guinea. As a result, under O’Neill and Micah SOEs are being financially crippled and their service levels are continuing to decline while customers are paying higher and higher fees and charges, even for essentials such as water, power and telecommunications. The role of SOEs in national development no longer exists.
Despite being taxpayer-funded monopolies working for the betterment of the nation, SOEs have been turned into private piggybanks by the Prime Minister and Minister Micah and their cronies.
O’Neill and Micah and SOE boards and senior management should resign or be sacked. There should be criminal and civil investigations into all SOEs. So what is the true state of SOEs, for the information of Sir Michael and the people of PNG? The following information comes from public sources including SOE web sites and the sole State shareholder, IPBC.

INDEPENDENT PUBLIC BUSINESS CORPORATIONThe latest audited accounts and the Annual Report, for 2013, are not available on the IPBC web site. Nor is IPBC’s Annual Plan, which is required by law to be produced and made public each year.
It is not known when IPBC’s last completed audit, annual report or Annual Plan was.
Disgraceful. The company is in breach of its own Act, the Companies Act, the Tax Act/Regulations, and the Audit Act. Its failure to provide this and other information on its web site undermines IPBC’s own management of SOEs.

The company’s directors are:
  • Mr Paul Nerau, chairman
  •  Mr Wasantha Kumarasiri, deputy chairman
  • Mr Peter Aitsi
  • Mr Aho Baliki
  • Mr Michael Koisen
  • Dr Mosey Sau
  • Dr Laurence Kalinoe
  • Mr Daire Vele
Mr Nerau is a Bougainvillean konman who has been involved in many scams over the years, but most notably the theft of millions of kina from the Bougainville Development Corporation, resulting in its bankruptcy.Mr Kumarasiri, formerly the failed MD of Air Niugini, is a prominent yes-man for anyone with money and power.

Dr Mosey Sau is a political appointee out of Minister Ben Micah’s office and has taken part and assisted in many Micah schemes to steal from the public purse as Minister.
Mr Daire Vele is Treasury Secretary and facilitator for the corrupt Prime Minister Peter O’Neill.

IPBC’s web site says “accountability provisions require strict reporting, adherence to standards and transparency with substantial mandatory penalties if these aspects are breached”.
IPBC’s lack of accountability and transparency, its failure to manage its SOEs honestly and effectively, and the corruption of the Minister and the Prime Minister in their dealings with IPBC and SOEs shows the board and management are ignoring IPBC’s own written standards – in some cases deliberately.

They should resign/be sacked and criminal and civil investigations should be carried out at IPBC.

AIR NIUGINI LTDThe 2013 audited accounts are not available on the company web site for 2013. The IPBC web site shows Air Niugini’s last completed audit was 2012.

The company is in breach of its own Act, the IPBC Act, the Companies Act, the Tax Act/Regulations, and the Audit Act.

The company’s directors are:

  •   Frederick Reiher, chairman
  •  James Tjoeng, deputy chairman
  •   Noel Levi
  •   Luke Minjikuli
  •   Leslie Hayward
  •   Ken Harvey
  •   Gary Tunstall
  •   Ian Tarutia
  •   Evangaline Taunao, alternate director/IPBC representative
They should resign/be sacked and criminal and civil investigations should be undertaken at Air Niugini. Sir Fredrick Reiher is a crony of the Prime Minister, and a political appointee to the board and as chairman. He was involved with the Prime Minster in the public housing scam, and has a long history of dishonesty and corruption. He has been placed at Air Niugini to serve the interests of the Prime Minister and Minister Micah. It is unclear what the other directors and the senior management do to earn their money. And what is Ms Evangeline Taunao doing on the board? She is supposed to be an independent watchdog on behalf of the airline’s owner IPBC rather than be taking part in Air Niugini board decisions. She has a conflict of interest.

It is clear from the latest panic cuts to pilot pay that Air Niugini is heading for bankruptcy just like PPL.
Other publicly available information highlights the failure of the board and management.
The airline is operating at a loss of K37.8 million, or K8 million worse than in 2013. Revenue is down and costs are up and the company underspent its quarterly capital budget of K32 million by K7 million.

This is a crash waiting to happen.

This is the re-born version of the Somare-era company that was a symbol of all that is wrong with State-Owned Enterprises. Its sole purpose was to enrich directors and management under the former Minister Arthur Somare and his bag-carrier Glen Blake. The Bemobile web site does not carry the company’s annual report and financial statements, although the latest available IPBC data shows that its last completed audit was 2013. Some of the current directors have connections to the Somare-era corruption and mismanagement, and others are yes-men and political appointees.

The board consists of:
  •    Andrew Johnson, chairman
  •    Wasantha Kumarasiri, managing director
  •    David Van Oppen
  •    Sherwin Pu
The former Bemobile was essentially bankrupt for several years while directors and management got rich and service delivery failed.


DataCo was established to operate and maintain the national communications transmission network.
Its purpose is to supply wholesale telecommunications access to network license-holders such as Digicel, Telikom PNG, BeMobile and internet service providers. Although Dataco was created in March 2014, no details are available on  the IPBC web site 12 months later, and Dataco itself appears not to have  its own web site. There is no reliable official information available on the company, its
current financial status and its board and management.


Eda Ranu does not have a web site at all, which is a low in transparency
and accountability even for SOEs. IPBC data shows that its last completed audit was 2012, so this is
another disgraceful state of affairs. The company is in breach of its own Act, the IPBC Act, the Companies  Act, the Tax Act/Regulations, and the Audit Act.

Because of the lack of transparency and accountability, it is impossible  to state with certainty who the directors are. However it is enough to know that the chairwoman is Ms Mary Karo, an  associate of rich and powerful PNC politicians, and married to the corrupt former Minister Albert Karo.

As with other SOEs, Eda Ranu's board and management should resign/be sacked and there should be criminal and civil investigations  into the company. Eda Ranu is in deep trouble, to the extent that it recently asked the  Government to announce a State of Emergency in the water and sewerage sector. According to IPBC data, the company made a net profit of about K1 million for the first quarter of 2014. This compares with a profit  target of K1.5 million.

Revenue is down against budget, costs are over budget and capital expenditure is a black hole of failure. Targeted capex was K15 million, and actual capex for the quarter was K1.2 million.

The failure in capital spending is in the real world a failure of service delivery, common across all SOEs. For the quarter, Eda Ranu made a total of only 40 new water and sewerage connections in NCD. Expansion and upgrading of the water and sewerage system is virtually non-existent, and the proposed new sewerage collection and treatment system is as far off now as it was when first proposed many years ago.

Eda Ranu recently stated that it needs K1.2 billion to rehabilitate its water infrastructure to meet the demand of the rapid growing population of Port Moresby. Because of the failure of the Prime Minister, the Minister for Public Enterprises, and the board and management of Eda Ranu, water
infrastructure rehabilitation and expansion is unlikely to occur in the near future, and service delivery will continue its decline against population growth.

The IPBC web site shows MVILs last completed audit was 2011. No financial or corporate information of any substance appears on the MVIL web site, and the names of the directors are not given. This company, which goes out of its way to hide information from its  owners, the people of Papua New Guinea, is in breach of its own Act, the IPBC Act, the Companies Act, the Tax Act/Regulations, and the Audit Act.

As with other SOEs, the company's board and management should resign/be sacked and criminal and civil investigations should be undertaken at MVIL. The latest information on the IPBC web site tells us that the company is operating at a loss (K2.9 million for the first five months of 2014, the latest figure available). It is so badly run by political appointees of the Prime Minister and
under the supervision of Minister Micah that it cannot even provide financial and operational data required by IPBC. The lack of accountability and transparency at MVIL is what led to the
loss of about K100 million in a corrupt investment in Australia organised by the former Minister, Arthur Somare, and the former CEO, Dr John Mua.
Nothing has changed.

NATIONAL DEVELOPMENT BANKThe National Development Bank also does not have a web site. Therefore no Annual Reports and Financial Statements and corporate details are easily available to the public. The IPBC web site shows that the last completed audit was for 2013.  This SOE receives millions and millions of kina - taxpayers money - and it refuses to tell people how it is spent, who receives it,  who its directors and managers are and what its financial condition is.

NDB is trying to get a banking licence. God help Papua New Guinea if it does. Some idea of the condition of the bank can be gauged from the IPBC web site. Its long-term failure is reflected in its return on assets averaged over the  10 years 2002-2012 of minus 12%. Although it seems to be running at a nominal profit for now, other  aspects of its business are disturbing. For example only K9.2 million of its capital expenditure budget of K25.5  million was spent. Of that, K6.3 million was spent on a staff housing scheme.

So staff and management are benefitting from NDB use of taxpayer funds, but customers are not. Planned operational improvements to allow the bank to deliver better services to the people at a lower cost did not go ahead: branch upgrades and the Electronic Banking system did not occur.

According to IPBC, NPC latest completed audit was for 2011. Its annual report and financial statements do not appear on its web site. It is in breach of its own Act of Parliament, the IPBC Act, the Companies Act, the Tax Act/Regulations, and the Audit Act. The failure of accountability and transparency at NPCP is especially worrying given the fact that it holds PNGs share of the LNG Project, as well as landowner equity.

As the company is now a fully-fledged petroleum company, it faces enormous risks yet its corporate governance fails the most basic test. Its web site talks about how its mission is to manage NPCP with the highest standards of governance, responsibility and transparency. Its standards of governance, responsibility and transparency are  about as low as they can get.

 The board of directors is:
  •        Mr Frank Kramer, chairman
  •        Mr Larry Andagali
  •        Professor Benedict Yaru
  •        Dr Ila Temu
  •        Mr Mark Soipang
  •        Mr Wapu Sonk, managing director
They should resign/be sacked and criminal and civil investigations conducted into the regulatory failures at NPCP. Earlier this year, as reported by PNG Blogs, NPCP paid a dividend to the State of K415 million at the direction of the Prime Minister. This money has gone directly into MPsE28099 slush funds as a bribe to keep the Prime Minister in office.
This payment needs to be investigated by the Fraud Squad, the Ombudsman Commission and the Auditor-General and appropriate action taken against directors. The company is profitable (and so it should be as it has significant income from its shareholdings in petroleum projects including PNG LNG) but the big question is whether it can sustain profits once it becomes engaged in its own right as an independent petroleum company. Given its record on transparency and accountability and regulatory compliance, that is unlikely.

OK TEDI MINING LIMITEDThe O'Neill Government seized control of OTML from PNG Sustainable Development Program Ltd in September 2013. After little more than 12 months the Prime Minister and his cronies have
destroyed the company. It formerly turned out dividends of about US$350 million a year. Now it does not pay a dividend, and it is barely profitable. Despite the fact that it has been an SOE since September 2013, it is not  listed as one on the IPBC web site and no information is given. The directors are Prime Ministerial cronies, political appointees and  yes men for the Prime Minister, led by a corrupt former politician:
  •  Sir Moi Avei, chairman
  •  Dr Roger Higgins
  •  Glen Kuri
  •  Dairi Vele
  •  Dr Modowa Gumoi
  •  Dr Jacob Weiss
Sir Moi Avei was found guilty of fraud by a Leadership Tribunal while  he was an MP. Dr Gumoi is facing fraud charges in his role as Provincial  Administrator of Western Province. The new board and management are running the mine into the ground - huge  expensive contracts are being handed out to cronies, friends of the  Prime Minister and by indirect means to companies owned by the Prime
Minister. Essential maintenance and upgrades to the mine itself and to operating infrastructure is not being carried out and mining and milling efficiency is declining.

Ok Tedi is turning into a Tolukuma-style SOE disaster on a grand scale, its profit falling to a mere $US17 million for 2014, with severe  infrastructure and operational failings. The result of the Prime Minister's greed is that development  projects in Western Province funded out of OTML profits have all but stopped, leaving the people of the province without any hope for future generations.
As with other SOEs, OTMLs board and management should resign/be sacked and criminal and civil investigations should be undertaken into  their activities and the company's corporate affairs.

According to IPBC, the last completed audit of PNG Ports Corporation was for 2011. Annual reports and financial statements after 2011 do not appear on the companys web site. PNGPL is in breach of its own Act of Parliament, the IPBC Act, the  Companies Act, the Tax Act/Regulations, and the Audit Act. Its directors should resign/be sacked and face criminal and civil investigation.

The directors are:
  • Nathaniel Poya Chairman
  • Job Suat, deputy chairman
  • Patrick Amini
  • Professor John Pumwa
  • Luke Niap
  • Eddie Hesingut
  • Igo Oala
As with other boards, the directors have been carefully chosen by the Prime Minister for their political loyalties and financial value in terms of sharing the proceeds of contracts. That they are not doing their job is evidenced by the fact that although  being notionally profitable, over the long term PNGs return on assets is a very low 5%. This is despite the fact that the company is a monopoly business and  charges fees far higher than those of comparable overseas port corporations.
Total revenue for the first quarter of 2014, the latest figures available from the IPBC, was down 1% despite increases in tariffs and the sale of motor vehicles. The increased fees and charges resulted in a profit of K37 million for the first nine months of the year.

PNG POWER LTDThe last audited accounts were for 2011, and no annual reports and financial statements appear on the companys web site. Nor do the names of the board members or senior management - who will be
the usual mix of the PMs cronies and yes-men. PPL is in breach of its own Act of Parliament, the IPBC Act, the  Companies Act, the Tax Act/Regulations, and the Audit Act. Its directors should resign/be sacked and criminal and civil investigations should be launched into PPL.

As all of Papua New Guinea knows, PPL is bankrupt because of corruption, financial mismanagement and corporate incompetence. Prior to the corrupt deal ordered by the Prime Minister to buy two new diesel generators from the Israeli company LR Group, PPL was in
financial crisis. The K100-million-plus deal was the trigger for the complete collapse of
the national power company. All aspects of this deal should be investigated and appropriate action
taken against the responsible politicians and directors and management. Although the company made a nominal profit of about K200,000 in the  first nine months of 2014, the latest results available show that it is  bleeding to death.

Total sales for the first quarter were 12% below target and capital expenditure was a tiny K16.6 million, K60 million under budget. The failure in capex is the reason why service standards are falling and people are suffering more and more power blackouts. The first-quarter report from IPBC shows that the reasons given by the  Prime Minister and Minister Micah for the State of Emergency they declared in the power sector were lies. The main problem was an under-achievement in revenue collected from industry of K33.2 million. This was 47% below target.

Grassroots people were not to blame and there was no need for the State of Emergency. Fuel costs, largely driven by the need to keep the new LR Group gensets  operating as much as possible, were K14 million over budget. The IPBC reports do not provide any indication of any need for a State
of Emergency for any of the reasons given by the Prime Minister or Mr Micah. Rather, the problems of PPL have been caused by political interference,  corruption and corporate mismanagement - and the responsibility lies with Mr O'Neill and Mr Micah.

POST PNG LTDThe company appears to be up to date with its audited accounts, although no annual reports are available on its web site, and neither is there any other relevant financial or corporate information, including details of its board. Post PNG has been bankrupt a number of times in the past 10 years, but
appears to have managed a small profit for the first nine months of 2014.
But overall costs in the first quarter were 7% higher than budget and IPBC is concerned that they are increasing. Post PNGs service standards are declining and fees are rising, which is in line with the Post PNG long-term trend. It made a return on assets of minus 6% for the 10 years 2002-2012. In
other words it is a constant burden on taxpayers.


Telikoms last audited accepts were for 2012, and no annual reports and financial statements appear on the companys web site. Telikom is in breach of its own Act of Parliament, the IPBC Act, the
Companies Act, the Tax Act/Regulations, and the Audit Act. Its directors should resign/be sacked and criminal and civil investigations of Telikom should be carried out.

The directors are:
  • Mahesh Patel, chairman
  • Cedrick Rondoke, deputy chairman
  • Avia Koisen
  • David Cox
  • Esau Wareh
  • Dr. Samuel Kopamu
  • Malcolm Lewis
The company is a wreck, with declining service standards and rising fees and charges. For the first nine of 2014, IPBC figures show Telikom made a loss of  K8.6 million, following on from a loss of K35.2 million in 2013. Total sales for the quarter were K74 million, K43 million less than
expected and K2 million less than quarter one in 2013. Both fixed-line and broadband sales were K42 million below target.

Service standards continue to fall, with customers cancelling contracts and the number of unplanned service interruptions exceeding expectations. There is no light at the end of the tunnel for Telikom and it is only being kept alive as a vehicle to promote the most corrupt Prime Minister in PNG history through its Kalang/FM100 subsidiary and the newly purchased EMTV.


The last completed audit of Water PNG was for 2010. There are no annual reports and financial statements on the Water PNG web site. PNGPL is in breach of its own Act of Parliament, the IPBC Act, the  Companies Act, the Tax Act/Regulations, and the Audit Act. Its directors should resign/be sacked and criminal and civil investigations should be initiated. There is no official list of directors on either the IPBC or the Water PNG web sites. According to the latest information from IPBC, Water PNG appears to have made a profit for the first nine months of 2014.

But the long-term performance trend, measured by return on assets of just 1%, is unacceptable and highlights the fact that Water PNG is a constant drain on taxpayersE28099 funds.
The low levels of customer service provided by Water PNG are demonstrated by the fact that it underspent its capital budget of K8 million for the first quarter by K5 million.


Extra information on SOEs is available from the Auditor-General's web site, at

What the AG's site reveals is another scandal the AG's Annual Reports and Special Reports stop at 2012 now three years out of date. But the AG is not to blame. The fault lies with the Prime Minister
refusing to allocate sufficient funds to the AG to do its job, and the deliberate actions of Minister Micah, IPBC and almost all SOEs in not supplying statutory information to the AG so it can conduct its audits.

Then, when the AGs audit reports are ready, O'Neill and Micah delay tabling them for as long as they can. The Auditor-General's report on Government agencies, including SOEs, is scathing. It covers the period July 1 2012 to June 30 2013, and earlier years. 85 agencies were covered in the report, and 55 failed to meet  legislative and regulatory obligations concerning Annual Reports and Accounts. Almost all audits were qualified, including those of IPBC, which is responsible for overseeing all SOEs.
A copy of the report is attached by selecting this link.. All citizens should read it.

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