Papua New Guinea: Lae Port Development Project

Completion Report Project Number: 40037 Loan Numbers: 2398, 2399, and 8237 Grant Number: 0102 Additional Financing Loan Numbers: 2803 and 2804 April 2017 Papua New Guinea: Lae Port Development Project This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011. CURRENCY EQUIVALENTS Currency unit – kina (K) At Appraisal At Additional At Project Completion Appraisal 31 July 2007 11 October 2011 16 December 2015 K1.00 = $0.3487 $0.4500 $0.3855 $1.00 = K2.810 K2.221 K2.600 ABBREVIATIONS ADB – Asian Development Bank EIRR – economic internal rate of return FIRR – financial internal rate of return IPBC – Independent Public Business Corporation JFPR – Japan Fund for Poverty Reduction KECC – Korean Engineering Consultants Corporation LIBOR – London interbank offered rate m – meter MPG – Morobe Provincial Government OFID – OPEC Fund for International Development OPEC – Organization of the Petroleum Exporting Countries PMU – project management unit PNG – Papua New Guinea PNGPCL – PNG Ports Corporation Limited PPP – public–private partnership PSC – project steering committee RHK – Royal Haskoning RRP – report and recommendation of the President Sida – Swedish Development Cooperation Agency SDR – special drawing right WACC – weighted average cost of capital NOTES (i) The fiscal year (FY) of the Government of Papua New Guinea and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Country Director M. Minc, Papua New Guinea Resident Mission, PARD Team leader F. Ramos, Project Officer (Energy), PARD Team members J. Bego, Project Analyst, PARD D. Hill, Unit Head, Portfolio Management, PARD M. P. Pena-Ojera, Executive Assistant, PARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page BASIC DATA i MAP viii I. PROJECT DESCRIPTION 1 A. Historical Background 1 II. THE PROJECT 1 A. Objective and Rationale 1 B. Project Scope 2 III. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 4 C. Project Costs 7 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 9 G. Conditions and Covenants 9 H. Consultant Recruitment and Procurement 10 I. Performance of the Borrower and the Executing Agency 11 J. Performance of the Asian Development Bank 11 IV. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 12 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 13 E. Impact 13 V. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 14 APPENDIXES 1. Project Framework 16 2. Chronology of Main Events 17 3. Resettlement Progress 20 4. Project Cost 22 5. Implementation Schedule 23 6. Organization Structure for Project Implementation 24 7. Status of Compliance with Loan Covenants 25 8. Traffic at Lae Port 31 9. Evaluation Methodology 33 10. Economic Internal Rate of Return Calculation 43 11. Financial Internal Rate of Return Calculation 44 12. Weighted Average Cost of Capital Calculation 45 13. Project Evaluation Matrix 46 SUPPLEMENTARY APPENDIXES A. Traffic Forecast and Economic Analysis 47 B. Financial Evaluation 53 BASIC DATA A. Project Identification 1. Country Papua New Guinea 2. Loan and Grant Numbers 2398, 2399, 2803, 2804, 8237, 0102, and 9113 3. Project Title Lae Port Development Project 4. Borrower Government of Papua New Guinea 5. Executing Agency Independent Public Business Corporation 6. Amount of Loan $195,000,000 7. Project Completion Report Number 1612 Loan or Grant Currency Amount Loan 2399 SDR 25,242,000 Loan 8237 USD 6,000,000 Loan 2803 USD 85,000,000 Loan 2804 SDR 2,650,000 Grant 0102 USD 750,000 Grant 9113 USD 1,500,000 B. Project Data Original Loan (2398/2399/8237) 1. Appraisal – Date started 18 August 2007 – Date completed 14 September 2007 2. Loan Negotiations – Date started 22 November 2007 – Date completed 23 November 2007 3. Date of Board Approval 18 December 2007 4. Date of Loan Agreement 12 June 2008 5. Date of Loan Effectiveness – In loan agreement 10 September 2008 – Actual 30 October 2008, 27 January 2009 (OFID) – Number of extensions 0 6. Closing Date – In loan agreement 30 June 2012 – Actual 30 June 2016, 30 June 2014 (OFID) – Number of extensions 3 ii Additional Financing (2803/2804) 1. Fact Finding/Appraisal – Date started 18 July 2011 – Date completed 12 August 2011 2. Loan Negotiations – Date started 6 November 2011 – Date completed 7 November 2011 3. Date of Board Approval 10 November 2011 4. Date of Loan Agreement 30 April 2012 5. Date of Loan Effectiveness – In loan agreement 29 July 2012 – Actual 21 June 2012 – Number of extensions 0 6. Closing Date – In loan agreement 31 December 2014 – Actual 30 June 2016 – Number of extensions 2 Grants Grant 0102 (Sida) 1. Date of Effectiveness 18 December 2007 2. Actual Grant Closing Date 25 February 2016 Grant 9113 (JFPR) 1. Date of Effectiveness 12 June 2008 2. Actual Grant Closing Date 4 December 2015 7. Terms of Loans Loan 2398-OCR – Loan amount $60 million – Interest rate LIBOR-based interest rate + 0.60% less credit of 0.40%, 0.15% commitment charge – Maturity 24 years including grace period – Grace period 4 years Loan 2399-ADF – Loan amount SDR25.242 million ($40 million) – Interest rate 1.0% during the grace period and 1.5% thereafter – Maturity 32 years including grace period – Grace period 8 years Loan 8237-OFID – Loan amount $6 million – Interest rate 1.5%, plus a 1.0% service fee – Maturity 20 years including grace period – Grace period 5 years Loan 2803-OCR – Loan amount $85.0 million – Interest rate LIBOR-based interest rate +0.60% less credit of 0.40%, 0.15% commitment charge – Maturity 24 years including grace period – Grace period 4 years iii Loan 2804-ADF – Loan amount SDR2.65 million ($4.12 million) – Interest rate 2.02% – Maturity 32 years including grace period – Grace period 8 years 8. Terms of Relending Loan 2398-OCR – Loan amount $60 million – Interest rate 4.5% – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation Loan 2399-ADF – Loan amount SDR2.65 million ($38.42 million) – Interest rate 1.0% during the grace period and 1.5% thereafter – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation Loan OFID – Loan amount $6 million – Interest rate 4.5% – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation Loan 2803-OCR – Loan amount $85 million – Interest rate LIBOR-based interest rate + 0.6024% – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation Loan 2804-ADF – Loan amount SDR2.65 million ($4.12 million) – Interest rate 2.02% – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation ADF = Asian Development Fund, LIBOR = London interbank offered rate, OCR = ordinary capital resources. iv 9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 27 Jan 2009 18 December 2015 84 months Effective Date Actual Closing Date Time Interval 30 October 2008 30 June 2016 92 months Disbursement Loan First Final Time Interval 2398 23 Jun 2010 18 Dec 2015 67 months 2399 25 Jun 2012 22 Jul 2013 13 months 2803 30 Aug 2013 18 Nov 2014 15 months 2804 30 Aug 2013 19 May 2015 21 months 8237 30 Oct 2012 10 Oct 2013 12 months Disbursement Grant First Final Time Interval 102 27 Jan 2009 25 Feb 2015 74 months 9113 4 Jul 2013 27 Oct 2013 4 months b. Amount ($ million) Last Loan or Grant Original Revised Amount Net Amount Amount Undisbursed Amount Allocation Allocation Canceled Available Disbursed Balance L2398-OCR 60.00 60.00 60.00 60.00 0.00 L2399-ADF 40.00 38.42a 38.42a 38.42 0.00 L8237-OFID 6.00 6.00 6.00 6.00 0.00 G9113-JFPR 1.50 1.21 1.21 1.16 0.06 G0102-HIV/AIDS 0.75 0.75 0.75 0.65 0.10 LCoop2803eration-OCR Fund 85.00 85.00 85.00 84.98 0.02 L2804-ADF 4.12 4.06a 4.06 4.06 0.00 Total 197.37 195.44 195.44 195.27 0.17 ADF = Asian Development Fund, JFPR = Japan Fund for Poverty Reduction, OCR = ordinary capital resources, OFID = Organization of the Petroleum Exporting Countries Fund for International Development. a Due to foreign currency exchange rate variation between special drawing rights and US dollars, the ADF availability was reduced by $1.64 million. 10. Local Costs (financed) - Amount ($ million) 115.1 - Percent of local costs (appraisal) 29.7% - Percent of total cost (actual) 37.1% v C. Project Data 11. Financing Share 1. Project Cost ($ million) Planned Actual Foreign Local Total Foreign Local Total ($) Cost Cost Cost Cost Cost % % % % % Cost % ($) ($) ($) ($) (K) Borrower - - 94.03 100 94.03 29.70 0.00 0.00 144.20 27.17 115.10 37.08 OCR 145.00 73.47 0.00 0 145.00 38.96 144.98 74.25 215.50 40.60 144.98 46.71 ADF 44.12 22.35 0.00 0 40.00 25.98 42.48 21.75 167.85 31.62 42.48 13.69 OFID 6.00 3.04 0.00 0 40.00 3.90 6.00 3.07 0.00 0.00 6.00 1.93 JFPR 1.50 0.76 0.00 0 40.00 0.97 1.16 0.59 2.62 0.49 1.16 0.37 Sida 0.75 0.38 0.00 0 0.75 0.49 0.65 0.33 0.65 0.12 0.65 0.21 Total 197.37 94.03 265.75 195.27 530.82 310.37 ADF = Asian Development Fund, JFPR = Japan Fund for Poverty Reduction, OCR = ordinary capital resources, OFID = Organization of the Petroleum Exporting Countries Fund for International Development, Sida = Swedish International Development Cooperation Agency.

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