By Staff Reporter

Secret Deals and Skyrocketing Rates: O'Neill Exposes Dirio’s Dirty Power Play

8/10/2024

Evidence of payment documents supplied by Mr. O'Neill

Former Prime Minister Peter O'Neill has raised concerns about a K40 million payment made by Kumul Consolidated Holdings (KCH) to Dirio Gas & Energy in March 2022, despite the conditions of a 25-year Power Purchase Agreement (PPA) remaining unmet. The agreement, signed in October 2019 between Dirio and PNG Power Ltd (PPL), required Dirio to deliver the project on time, resolve interconnection issues, and disclose full financial details. O'Neill pointed out that these conditions had not been fulfilled.

In light of the delays, a Side Agreement was reportedly drafted between PPL and Dirio, allowing Dirio to supply 9MW of power without meeting the original PPA conditions. O'Neill revealed that following this, Dirio issued invoices for K40 million, but PPL was unable to make the payment. On March 4, 2022, PPL requested KCH to step in, and KCH paid the amount to Dirio on March 18, 2022. According to O'Neill, the acting Managing Director of PPL confirmed at the time that Dirio had not complied with the National Grid Code or other regulatory requirements.

O'Neill raised concerns over a discrepancy in the invoice amounts, with the acting MD of PPL stating that the total invoice for power supply amounted to K6.336 million, while KCH paid K40 million. O'Neill questioned why the remaining K33.664 million, reportedly for Dirio’s capital cost recovery related to infrastructure construction, was paid just weeks before the National General Election. He also raised questions about whether this payment was part of the original PPA or the Side Agreement.

O'Neill posed several questions regarding the situation. He asked whether the conditions of the Conditional PPA had been fulfilled and if Dirio was penalized for the late delivery of its power station. He also questioned whether the Side Agreement nullified the obligations of the original PPA and whether the government had pressured PPL into accepting certain terms, potentially allowing Dirio and its contractor PEC to avoid penalties for delayed project delivery.

O'Neill further claimed that Dirio and its contractor PEC, unable to meet the conditions of the 2019 PPA, created a new Side Agreement to access K40 million just before the general election. O'Neill suggested that the timing of this payment raised concerns about whether it was a coincidence or part of a broader strategy.

In a related issue, O'Neill highlighted Dirio’s confirmation that it had charged PNG Power up to K2.54 per kilowatt-hour (kwhr) for electricity in 2024. He expressed alarm, noting that PPL’s average tariff to consumers is only K0.91 per kwhr. O'Neill questioned the high rates, particularly given the frequent blackouts in Port Moresby that continue to affect businesses and families.

O'Neill argued that the high rates charged by Dirio could be part of a long-term plan to weaken PNG Power financially, which could allow Dirio or PEC to convert PPL's debts into equity and take control of the national electricity provider. He expressed concerns that this might be a strategy to privatize PNG Power by stealth.

O'Neill acknowledged that Dirio clarified its average electricity charge in 2024 was K1.31 per kwhr, but he maintained that the power station was producing more electricity than the Port Moresby grid required. He argued that the funds used to pay for this excess capacity could have been better allocated to other areas within the cash-strapped PPL.

O'Neill also criticized the lack of investment in the Rouna Hydro facility, which can generate 68MW of power at a cost of less than K0.15 per kwhr. He argued that funds could have been used to maintain Rouna Hydro but were instead spent on purchasing power from Dirio at much higher rates. O'Neill labeled the deal a poor financial arrangement for PNG.

O'Neill raised concerns about the involvement of PEC, a British Virgin Islands-based company, in a 10-year agreement to build, operate, and maintain the Dirio power station. He referred to previous statements by the late Sir Mekere Morauta, who had questioned whether the deal was in the best interest of Papua New Guineans.

O'Neill called for a thorough investigation into the Dirio deal, suggesting that the agreement represented a financial burden on PNG Power and questioning the government's role in facilitating it. He argued that the arrangement favored a few individuals rather than benefiting PNG Power and its consumers. O'Neill concluded by stating that the nation should not endure 25 more years of such arrangements and called for greater accountability in the energy sector.

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