PNG ENERGY SECTOR DEVELOPMENT PROJECT: COMPONENT 2 TECHNICAL ASSISTANCE FOR THE PREPARATION AND PLANNING FOR PORT MORESBY HYDROPOWER SUPPLY SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 Street Address: Cnr Wards Rd/Gordia St. Hohola Postal Address: PO Box 1105, Boroko, NCD, PNG General Enquiries: Telephone : (675) 324 3200 Facsimile : (675) 323 5239 Ref: PSMOOI/2016/091123 Date : 9 November 2016 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 PROJECT MANAGEMENT UNIT REPORT FOR THE YEAR ENDED 31 DECEMBER 2015 STATEMENT BY THE PROJECT MANAGEMENT UNIT In the opinion of the Project Management Unit: a) The Special-Purpose Cash Basis Financial Statement of the Project is drawn up so as to exhibit a true representation of the Project for the year ended 31 December 2015, b) The Statement of Sources and Uses of Funds is drawn up so as to exhibit a true representation of how the funds are used as per the Project Agreement and Subsidiary Project Agreement between PPL, World Bank and the Government of PNG respectively. c) The Notes to the Special-Purpose Cash Basis Financial Statement including the Accounting Policies are drawn up so as to exhibit true representation of the operation and state of affairs of the Project for the year ended 31 December 2015. Additional Statutory Information The results of the Project during the financial year have, in the opinion of the Project Management Unit, not been materially affected by items of an abnormal nature, other than those disclosed in the Special-Purpose Cash Basis Financial Statement. No contingent liability has arisen since the end of the financial year, which continues to exist at the date of this report, other than those disclosed in the Special-Purpose Cash Basis Financial Statement. At the date of this report the Project Manageme t Unit are not aware of any circumstances that would render the values attributed to balances in the Special-Purpo e Cash Basis Financial Statement misleading. For and on behalf of the Project Management Ui ero Tom Muy Villa Project Accountant Ma ger Project Finance Togaro Asiba 4ames Kuma Project Advisor A/Chief Finance Officer Date this 09th day of November 2016 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2015 In PNG Kina Note 2015 2014 Opening Cash Balance IDA Trust account 4 800,000 GoPNG Trust account 92 Other source . Total Opening Cash Balance 3 800,092 Add: Sources of Funds IDA Credits - World Bank 4 1,531,888 800,000 GoPNG Counterpart fund - 172 Other source 3,748 - Total Sources of Funds 1,535,636 800,172 Less: Uses of Funds Consultancy service 5 1,384,985 - Training 6 82,608 - Bank charges 2,161 80 Others 7 233,894 - Total Uses of Funds 1,703,648 80 Surplus/(Deficit) (168,012) 800,092 Closing Cash Balance IDA Trust account 631,743 800,000 GoPNG Trust account 92 92 Other source 245 - Total Closing Cash Balance 3 632,080 800,092 (The notes on pages 7 to 9 are an integral part of this statement of source and uses of funds.) 5 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT STATEMENT OF COMPARISON OF ACTUAL AND BUDGET AMOUNT FOR THE YEAR ENDED 31 DECEMBER 2015 Variance 2015 (In PNG Kina) Actual Final Budget Original Budget Actual vs Final _ _ _ (_Unaudited Unaudited Budget Sources: IDA 1,531,888 1,531,888 Counterpart - Other 3,748 - 3,748 Total 1,535,636 1,531,888 - 3,748 Uses: Consultancy service 1,384,985 2,794,726 2,133,778 (1,409,741 Training 82,608 91,743 363,761 (9,135) Bank charges 2,161 - - 2,161 Others 233,894 - - 233,894 Total 1,703,648 2,886,469 2,497,539 1,182,821 Net Surplus (Deficit) (168,012) (1,354,581) (2,497,539) 1,186,569 Variance 2014 (In PNG Kina) Actual Final Budget Original Budget Actual vs Final (Unaudited Unaudited Budget Sources: IDA 800,000 800,000 _ Counter art 172 - - 172 Other - - Total 800,172 800,000 172 Uses: Consultancy service - 722,362 - (722,362) Feasibility study - 1,138,470 - (1,138,470) Bank charges 80 - 80 Others - - Total 80 1,860,832 - (1,860,752) Net Surplus (Deficit) 800,092 (1,060,832) - 1,860,924 6 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT NOTES TO THE STATEMENT OF SOURCES AND USES OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2015 NOTE 1 - DESCRIPTION OF THE PROJECT In February 2012, the World Bank (WB) Board of Executive Directors approved the Energy Sector Development Project - P101578 (The "Project"), an approximately US$8 million technical assistance financed by an IDA credit and a grant from the Global Environment Facility. The Project became effective on November 27, 2013 and comprises two components, as follows: Component 1 to be implemented by the Energy Division at the Department of Petroleum and Energy (DPE), and Component 2 to be implemented by PNG Power Ltd (PPL). Component 1: Institutional and Policy Development for Renewable Energy and Rural Electrification. (a) Energy Policy Development i. Development of a renewable energy policy for the GoPNG. ii. Development of a rural electrification policy for the GoPNG. (b) Institutional and Strategy Development i. Strategic environmental and social assessment of the policies to be developed. ii. Development of a rural electrification strategy for the Recipient, including inter alia (A) initial data to define resources and demand for rural electrification; (B) an analysis of alternative models of community and rural electrification initiatives, including cost structure, as input to the process for developing tariffs for electricity supply; and (C) a methodology for screening social and environmental aspects of rural electrification initiatives. (c) Capacity Building i. Strengthening the capacity of GoPNG's institutions, for their role in oversight of the preparation and the development of electricity projects in the medium term including the Naoro Brown Hydropower Project, with inter alia the environmental and social safeguard aspects. ii. Strengthening Project management through effective and efficient operational management, procurement and financial management, including through initial operation of DPE regional offices and training. Component 2: Technical Assistance for Preparation and Planning for Port Moresby Supply. a) Preparation of the Naoro Brown Hydropower Project for Port Moresby Strengthening the institutional capacity of the PNG Power in the areas of technical, fin economic, social, environmental (including the Social and Environmental Expert Panel, the Expert Panel and the Environmental and Social Management Framework, further feasibility study work including drilling and grouting trials, preparation of a geological baseline assessment), communications, procurement, and Project management as required to: (i) prepare the Naoro Brown Hydropower Project; (ii) select a Naoro Brown Project Developer; and (iii) provide support through financial close and technical assistance required for additional assessments and feasibility studies and economic analysis. b) Improved Planning Related to Hydropower Supply for Port Moresby i. A three-basin inventory study of the Brown, Vanapa and Angabanga Basins; ii. Institutional strengthening and capacity building for the Project Implementing Entity, the Electricity Management Committee and supporting staff, in areas critical for implementation of improved performance and implementation of hydropower projects, such as planning capacity, project evaluation, preparation and negotiation of power purchase agreements, procurement, financial management, social and environmental aspects and communications. 7 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the special-purpose cash basis Project's statement sources and uses of funds are set out below. These policies have been consistently applied to both years presented, unless otherwise stated. 2.1 Basis of preparation and accounting policies Statement of compliance This Special-Purpose Cash Basis Project's Statement of Sources and Uses of Funds has been prepared in accordance with the International Public Sector Accounting Standard (IPSAS), "Financial Reporting under the Cash Basis of Accounting" promulgated by the International Federation of Accountants. Basis of measurement This special-purpose cash basis Project's statement of sources and uses of funds has been prepared on a historical cost basis. Functional and presentation currency This special-purpose cash basis Project's statement of sources and uses of funds is prepared in Kina (K), which is the Project's functional and presentation currency. All values are rounded off to the nearest Kina, unless otherwise indicated. Foreign currency transactions and translation Transactions in foreign currencies are recorded by the Project at the respective functional currency rates prevailing at the date of the transaction. Receipts (Sources) Includes amount withdrawn from the World Bank IDA Credits through Client Connection and direct payments intended for the Project's expenditures. Payments (Uses) Includes payments of various Project related expenditures such as consultancy fee, trainings and refunds made to the World Bank. Taxes Goods and Services Tax (GST) Expenditures are recognized net of the amount of associated GST, unless the GST ot recoverable from the taxation authority, In this case it is recognized as part of the exp NOTE 3 - PROJECT'S AVAILABLE CASH FUNDS I The cash funds available for the Project as at 31 December follows: 2015 2014 (K) (K) Opening cash fund balance as at 31 December 800,092 - Add/(Deduct) Surplus (Deficit) (168,012) 800,092 Closing cash fund balance as at 31 December 632,080 800,092 8 NOTE 4 - WORLD BANK IDA CREDITS WITHDRAWAL AND DIRECT PAYMENTS The Project initiated the following withdrawal application and the amount was deposited in the Project's IDA Trust Account on its designated bank under the bank account name Naoro Brown Trust Bank Account - IDA Credits No. 5201 - PG with bank account number 7000958111 as detailed below: 2015 Equivalent Commitment Date Reference currency currency US$ Equivalent 08 October 2015 PPL-DOCOO1 PGK117,173 XDR29,272 US$41,245 Further, in 2015, the Project, being allowed to advise the World Bank via its Client Connection processed payments to pay for goods and service providers directly from the World Bank Headquarter as detailed below: Equivalent Commitment Equivalent Date Reference Currency in PGK Currency in SDR Foreign Currency 09/01/2015 PPL-002 116,500 30,405 US$43,455 09/01/2015 2014-PPL-003 33,142 8,650 US$12,362 24/02/2015 2015-PPL-004 77,506 20,223 US$28,546 21/07/2015 2015-PPL-005 181,922 46,084 US$64,018 28/07/2015 2015-PPL-006 82,608 21,377 23/10/2015 2015-PPL-007 232,723 55,066 AU$106,750 04/11/2015 2015-PPL-008 231,864 54,675 AU$106,750 17/11/2015 2015-PPL-009 458,450 110,582 AU$213,500 1,414,715 347,062 2014 Equivalent Commitment Date Reference currency currency US$ Equivalent November 2014 WA-001 PGK800,000 XDR217,919 US$320,800 NOTE 5 - CONSULTANCY SERVICE During the year, a total of K1,384,984 were paid to the individual consultants and consulting firms, both local and international, of which K1,182,851 were paid directly offshore through the World Bank via its Client Connection payment process as mentioned in Note 4 and the remaining K202,133 were paid onshore. NOTE 6 - TRAINING In 2015, a total of K82,608 was directly paid by the World Bank via Client Connection as a tra for the procurement of training held in India. NOTE 7 - OTHERS This consists of the refund made to the World Bank amounting to K3,503 due to the delay in the held in India as stated in Note 6, and another refund of K230,391 to the World Bank due to a direc payment made to a foreign consultant which has an invalid beneficiary account and with a Transaction Reference 2015-PPL-008. 9 NOTE 8 - BUDGET INFORMATION The Project's budget information is developed on the same accounting and classification basis and for the same period from 1 January 2015 to 31 December 2015 as for the statement of sources and uses of funds. On an annual basis, the PNG Power Limited, the Projects Implementing Agency prepares two sets of Budgets, which consist of the Operational Expenditure Budget and the Capital Expenditure Budget. Included in the Capital Expenditure Budget is the Project's budget for the period which is submitted to EMT and Board for approval. NOTE 9 - SUBSEQUENT EVENTS From the end of the financial year to the date on which the report was authorized for issue, there were no material subsequent events. 10