O PM.h POER Ltd 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 2016 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2016 TABLE OF CONTENTS PAGE NO. Independent Auditor's Report 1-2 Statement by the Project Management Unit 3 Statement of Cash Receipts and Payments 4 Statement of Comparison of Budget and Actual 5 Notes to Statement of Source and Use of Funds 6-9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 PROJECT MANAGEMENT UNIT REPORT FOR THE YEAR ENDED 31 DECEMBER 2016 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 2016. b) The Statement of Cash Receipts and Payments and Statement of Comparison of Budget and Actual Amounts are 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 2016. 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 Management Unit are not aware of any circumstances that would render the values attributed to balances in the Special-Purpose Cash Basis Financial Statement misleading/ For and on behalf of the Project Management Uriit: Kero TOM Mqrr VILLA Project Accountant Mn ger Project Finance Mairawesi PULAYASI Bernadette OMBU Project Director Financial Controller Date this __ day of _ _ 2019 Page 3 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 Note 2016 2015 Receipts / Payments by Receipts / Payments by Payments Third Payments Third Controlled Parties Controlled Parties bythe by the Entity _Entity RECEIPTS PGK PGK PGK PGK IDA - World Bank 4 5,592,083.09 5,592,083.09 1,303,527.42 1. 182,85 107 Counterparl - GoPNG 0.00 0.00 0.00 0.00 Other - PPL Temporary Support 5, 8 79,244.10 0.00 13,926.02 0.00 Other - PPL Reimbursable Support 8 443,587.98 0.00 0.00 0.00 Total Receipts 6,114,915.17 5,592,083.09 1,317,453.44 1,182,851.07 PAYMENTS Consultant Payment 6 6,034,471.07 5,592,083.09 1,398,666.09 1,182,851.07 Training Payment 0.00 0.00 82,608.20 0.00 Bank Charges 351.09 0.00 687.62 0.00 Refund to World Bank 0.00 0.00 3,503.24 0.00 Project Overhead Payment 7 80,244.10 0.00 0.00 0.00 Reimbursements made to PPL 8 211,260.14 0.00 0.00 0.00 Total Payments 6,326,326.40 5,592,083.09 1,485,465.15 1,182,851.07 Decrease in Cash -211,411.23 0.00 -168,011.71 0.00 Cash at Beginning of Year 632,080.29 800,092.00 Decrease in Cash -211,411.23 -168,011.71 Cash at End of Year 420,669.06 632,080.29 Page 4 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT STATEMENT OF COMPARISION OF BUDGET AND ACTUAL AMOUNT FOR THE YEAR ENDED 31 DECEMBER 2016 Actual Final Budget Original Difference Amounts Budget Final Budget and Actual PGK PGK PGK PGK CASH INFLOWS IDA 5,592,083.09 0.00 0.00 -5,592,083.09 Counteipart 0.00 0.00 0.00 0.00 Other - PPL 79,244.10 0.00 0.00 -79,244.10 Other - PPL Reimbursable 443,587.98 0.00 0.00 -443,587.98 Support Total Receipts 6,114,915.17 0.00 0.00 -6,114,915.17 CASH OUTFLOWS Consultant Payment 6,034,471.07 0.00 0.00 -6,034,471.07 Training Payment 0.00 0.00 0.00 0.00 Bank Charges 351.09 0.00 0.00 -351.09 Refunds to World Bank 0.00 0.00 0.00 0.00 Project Overhead Payment 80,244,10 0.00 0.00 -80,244.10 Reimbursements made to 211,260.14 0.00 0.00 -211,260.14 PPL Total Payments 6,326,326.40 0.00 0.00 -6,326,326.40 NET CASH FLOWS 211,411.23 0.00 0.00 211,411.23 Page 5 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT NOTES TO THE STATEMENT OF SOURCE AND USE OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTE I - 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 Hydropower 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, financial, legal, economic, social, environmental (including the Social and Environmental Expert Panel, the Dam Safety 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 Page 6 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT NOTES TO THE STATEMENT OF SOURCE AND USE OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2016 capacity, project evaluation, preparation and negotiation of power purchase agreements, procurement, financial management, social and environmental aspects and communications. NOTE 2 - BASIS OF PRESENTATION Statement of compliance This Special-Purpose Cash Basis Project Financial Statement has been prepared in accordance with the International Public Sector Accounting Standard (IPSAS) "Financial Reporting underthe Cash Basis of Accounting" promulgated by the International Federation of Accountants. Basis of measurement This special-purpose cash basis project financial statement has been prepared on a historical cost basis. Functional and presentation currency This special-purpose cash basis project financial statement 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. NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES 3.1 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. 3.2 Taxes Goods and Services Tax (GST) Expenditures are recognized net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognized as part of the expense. NOTE 4 -IDA: WORLD BANK DIRECT PAYMENT The Project is also allowed to advise World Bank via its Client Connection payment process to pay project goods and service providers directly from the World Bank headquarter. During the year a total of KS, 592,083.09 were paid. Currency Amount PGK Equivalent USD 1,397,616.42 4,387,254.78 ALTD 106,750 221,759.84 GBP 231,089.87 983,068.47 TOTAL K5,592,083.09 Page 7 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT NOTES TO THE STATEMENT OF SOURCE AND USE OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2016 NOTE 5 - PPL TEMPORARY SUBSIDY PPL subsidized a total of K79,244.10 for overhead related expenses due to GoPNG funds not received during the year to cover operational expenditures. NOTE 6 - CONSULTANT PAYMENTS During the year a total of K6,034,471.07 were paid to individual consultants and consulting firms, both local and international, of which K5,592,083.09 were paid directly offshore by World Bank via its Client Connection payment process and the remainder paid on shore. NOTE 7 - PROJECT OVERHEAD PAYMENT During the year a total of K80, 244.10 were paid as overhead expenses. PNG POWER LTD (MISC HQS PAY CASH) 2,000.00 Heliscope PNG Ltd 40,806.31 Heliscope PNG Ltd 9,961.79 PNG POWER LTD (MISC HQS PAY CASH) 18,599.00 PNG POWER LTD (MISC HQS PAY CASH) 2,250.00 PNG POWER LTD (MISC HQS PAY CASH) 2,250.00 PNG POWER LTD - bank account deposit 200.00 Dept of Labour & Industrial Relations 1,000.00 Lamana Hotel 3,177.00 TOTAL K80,244.10 NOTE 8 - UNREIMBURSED PROJECT PAYMENTS TO PPL OPERATING ACCOUNT A total of K311,571.94 were still outstanding and not yet reimbursed to PPLs' main operating bank account for project expenditure paid on shore. Initially all project payments are made against the main PPL operating bank account and then reimbursed from the Project Designated/Trust Bank Account. Onshore Payments and Reimbursement Statement Onshore Payments 442,387.98 PPL Temporary Subsidy Payment 80,244.10 Total Payments 522,632.08 Total Payments Reimbursed via SWAP Chg 211,260.14 TOTAL REIMBURSED 211,260.14 Unreimbursed Payments 311,371.94 GoPNG Bank deposit by PPL 200.00 TOTAL UNREIMBURSED 311,571.94 Page 8 of 9 PNG ENERGY SECTOR DEVELOPMENT PROJECT - COMPONENT 2 SPECIAL-PURPOSE CASH BASIS PROJECT FINANCIAL STATEMENT NOTES TO THE STATEMENT OF SOURCE AND USE OF FUNDS FOR THE YEAR ENDED 31 DECEMBER 2016 In 2016, including the temporary subsidy PPL has provided support to the project for a total of K522,632.08 which was paid directly to the suppliers. During the year the project reimbursed PPL K211,260.14 leaving an amount of K311,571.94 yet to be reimbursed as at 31 December 2016. 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. Page 9 of 9