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
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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
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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 ($4.12 million) – Interest rate 2.02% – Maturity 24 years – Grace period none – Second-step borrower Independent Public Business Corporation
ADF = Asian Development Fund, LIBOR = London interbank offered rate, OCR = ordinary capital resources.
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9. Disbursements
a. Dates Initial Disbursement Final Disbursement Time Interval 27 Jan 2009 18 December 2015 84 months Effective Date Actual Closing Date Time Interval 30 October 2008 30 June 2016 92 months
Disbursement Loan First Final Time Interval 2398 23 Jun 2010 18 Dec 2015 67 months 2399 25 Jun 2012 22 Jul 2013 13 months 2803 30 Aug 2013 18 Nov 2014 15 months 2804 30 Aug 2013 19 May 2015 21 months 8237 30 Oct 2012 10 Oct 2013 12 months
Disbursement Grant First Final Time Interval 102 27 Jan 2009 25 Feb 2015 74 months 9113 4 Jul 2013 27 Oct 2013 4 months
b. Amount ($ 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%
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C. Project Data
11. Financing Share
1. Project Cost ($ million) Planned Actual Foreign Local Total Foreign Local Total ($)
Cost Cost Cost Cost Cost % % % % % Cost % ($) ($) ($) ($) (K) Borrower - - 94.03 100 94.03 29.70 0.00 0.00 144.20 27.17 115.10 37.08
OCR 145.00 73.47 0.00 0 145.00 38.96 144.98 74.25 215.50 40.60 144.98 46.71 ADF 44.12 22.35 0.00 0 40.00 25.98 42.48 21.75 167.85 31.62 42.48 13.69 OFID 6.00 3.04 0.00 0 40.00 3.90 6.00 3.07 0.00 0.00 6.00 1.93 JFPR 1.50 0.76 0.00 0 40.00 0.97 1.16 0.59 2.62 0.49 1.16 0.37 Sida 0.75 0.38 0.00 0 0.75 0.49 0.65 0.33 0.65 0.12 0.65 0.21 Total 197.37 94.03 265.75 195.27 530.82 310.37
ADF = Asian Development Fund, JFPR = Japan Fund for Poverty Reduction, OCR = ordinary capital resources, OFID = Organization of the Petroleum Exporting Countries Fund for International Development, Sida = Swedish International Development Cooperation Agency.
2. Financing Plan ($ million) Cost Appraisal Estimate Additional Financing Actual Implementation Costs
Borrower financed 45.80 48.30 115.10
ADB financed 94.90 89.12 187.46
Other external financing 8.30 7.81
Subtotal 149.00 137.42 310.37
IDC Costs
Borrower financed - -
ADB financed 5.10
Other external financing -
Subtotal 5.10
Total 154.1 137.42 310.37 ADB = Asian Development Bank, IDC = interest during construction.
3. Cost Breakdown by Project Component ($ million)
Actual Increasec Appraisal Additional Component Estimate Finance Total (%) (1) (2) (3) (4) (4)/(1) A. Civil Works 1. Port facilities 106.93 124.44 231.37 286.22 116% 2. Resettlement housinga 1.53 1.53 - 3. Canoe landing 0.96 0.96 - Subtotal (A) 109.42 124.44 233.86 286.22 B. Land Acquisition 1.49 1.49 - C. Compensation & Relocation 0.31 0.31 11.13 376% D. Livelihood and Social Support 1.50 1.50 1.16 (23%) E. HIV/AIDS 0.75 0.75 0.65 (13%) F. Consulting Services 1. Support to PMU 2.94 2.94 5.16 76% 2. Construction supervision 6.00 6.00 6.05 1%
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3. Housing construction supervisiona 0.50 0.50 - 4. Audit fees 0.13 0.13 - Subtotal (F) 9.57 - 9.57 11.21 17% G. Training 0.03 - 0.03 - H. Contingencies - 1. Physical (A1) 16.47 7.82 24.29 2. Price (A2, C, and F3) 0.38 0.38 3. Price (A1) 8.90 1.51 10.41 Subtotal (H) 25.75 9.33 35.08 - I. Financing Charges 5.18 3.63 8.81 - Total 154.00 137.40 291.40 310.37 102% a In calculating, the cost increases in percentages for items A2, B, and F3 are allocated to item C. b In calculating, the cost increases in percentages for item A1, items H1 and H3 are allocated to item A1. c Training is included under Consultancy.
4. Project Schedule Item Appraisal Estimate Actual Date of contract with consultants January 2010 29 December 2011
Civil works contract Date of award 19 January 2011 26 March 2012 Completion of work 1 December 2011 1 November 2014 Equipment and supplies Dates First procurement January 2010 29 December 2011 Last procurement 19 January 2011 26 March 2012 Start of operations Completion of tests and commissioning -- 17 December 2014 Handover of facilities to the PNGPCL from Kumul -- 2 April 2015 Beginning of start-up -- 17 August 2015
PNGPCL = Papua New Guinea Ports Corporation Limited.
5. Project Performance Report Ratings Ratings
Implementation Period Development Objectives Implementation Progress From 30 Oct 2008 to 31 Dec 2008 Satisfactory Satisfactory From 1 Jan 2009 to 31 Dec 2009 Satisfactory Satisfactory From 1 Jan 2010 to 31 Dec 2010 Satisfactory Satisfactory From 1 Jan 2011 to 31 Dec 2011 Satisfactory Satisfactory From 1 Jan 2012 to 31 Dec 2012 Satisfactory Satisfactory From 1 Jan 2013 to 31 Dec 2013 Satisfactory Satisfactory From 1 Jan 2014 to 31 Dec 2014 Satisfactory Satisfactory From 1 Jan 2015 to 31 Dec 2015 Satisfactory Satisfactory Source: Asian Development Bank, project performance rating system. Note: Other rating details are partly satisfactory and unsatisfactory.
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D. Data on Asian Development Bank Missions
Specialization of Name of Mission Date No. of No. of Persons Person-Days Membersa Pre-appraisal 28 Aug–14 Sep 2007 4 17 a,b,d,f Project review 7–20 Nov 2007 2 13 a,e Inception 8–18 Sep 2008 2 10 a,f Project review 27–29 Jul 2009 2 6 a,b Special review 3–5 Nov 2009 2 6 a,f Project-specific consultation 9–10 Nov 2009 3 6 b,d,e Project-specific consultation 14–16 Dec 2009 5 10 a,b,c,d,f Project review 27 Jul–4 Aug 2010 4 7 a,d,e,f Special review 3–5 Nov 2010 2 6 d,e Project review 16–19 Jun 2011 2 4 b,e Project review 26–27 Jun 2011 4 2 a,b,e,f Fact-finding additional Financing 18 Jul–12 Aug 2011 4 15 a,b,d,f Project review 18–22 Jul 2011 3 15 a,b,g Project review 26–30 Jul 2011 2 10 a,b Project-specific consultation 27–29 Nov 2011 2 4 a,b Project-specific consultation 17–19 Apr 2012 2 6 a,b Project-specific consultation 18 Jun 2012 1 1 A Project-specific consultation 13–15 Aug 2012 2 2 a,b Project review 23–25 Oct 2012 2 6 a,b Project review 7–9 Nov 2012 3 2 a,b,g Project review (midterm) 27–29 Nov 2012 2 6 a,b Project review 15–19 Apr 2013 5 4 2a,2b,g Project review 30 Apr–2 May 2014 5 2 a,b,g,2f Project completion review 3–24 Jun 2016 4 10 a,b,g,h a a = engineer, b = financial analyst, c = counsel, d = economist, e = procurement consultant or specialist, f = control officer, g = programs officer, h = consultant.
Lorengau
Kavieng Vanimo
B IB S i Ms mA aR rC c Kk S e S a E A Wewak Project Area Kokopo Built-up Area Affected Settlement Area Wabag Madang Mt. Hagen Small Craft Landing Site Kundiawa Kimbe Tari Minj Arawa National Capital Mendi Goroka Lae Provincial Capital Project Location S o l o m o n S e a S O L O M O N S E A National Highway Kerema Main Road Popondetta Secondary Road GGuulfl f o of f P Paappuuaa Daru River PORT MORESBY City/Town Boundary Alotau International Boundary
Boundaries are not necessarily authoritative. C O CR oA rL a l S ES Ae a
PAPUA NEW GUINEA Resettlement Site LAE PORT DEVELOPMENT PROJECT (as completed)
MALAHANG OMILI
ERIKU
BUSU BUGANDI HANTA YANGA RAUNWARU
BUTIBAM
Papuan Compound
PROJECT AREA China Town BUMBU Market Stadium WAGAN Markhan River
Small Craft Voco Point Landing Site
N
H u o n G u l f 0 0.5 1 1.5
Kilometers
This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.
17-1226 16PNG ABV
I. PROJECT DESCRIPTION
A. Historical Background
1. In 1978, the Government of Papua New Guinea (PNG) requested technical assistance from the Asian Development Bank (ADB) for a detailed feasibility study for Lae Port, including the development of the tidal basin.1 In September 1980, ADB approved a loan of $20 million from its ordinary capital resources and a loan equivalent to $8 million from the Asian Development Fund to finance the Lae Port Project with an estimated cost of $30.1 million.2 Physical work began in mid-March 1982 but land ownership issues in the tidal basin area led to hostilities and to the suspension of construction in May 1982.
2. Unresolved land ownership issues, combined with traffic levels that were lower than expected at appraisal, contributed to a reduction in the project scope, including confinement of works to be within the port boundaries. The revised project was approved in 1984 and was successfully completed in mid-1989. The project resulted in the construction of a new tanker berth, the reconstruction of berth No. 2 as a fully land-backed berth for overseas and container vessels, the extension of berth No. 3 by 35 meters (m), and the improvement of back-up areas behind the marginal wharf.
3. The need for a tidal basin re-emerged when the government requested project preparatory technical assistance in 2006 to prepare the Phase 1 tidal basin works under the Lae Port Development Project.3 The resulting final feasibility study by Royal Haskoning (RHK) was submitted in October 2007. 4 In view of increasing congestion and ship waiting times, the feasibility study recommended the urgent expansion of Lae Port through the construction of one wharf in a tidal basin adjacent to the existing port. The Lae Port Development Project was therefore designed to increase port capacity by constructing a tidal basin, one berth, and a container facility. 5 On 18 December 2007, ADB approved a package of loans 6 and grants totaling $154 million for the Lae Port Development Project.
II. THE PROJECT
A. Objective and Rationale
4. The main objective of the project was to increase Lae Port’s capacity to meet expected growth in traffic. Lae Port is PNG’s largest, busiest, and most important port. It is also the major gateway to international and local trade for the country, and is connected to the hinterland
1 ADB. 1979. Report and Recommendation of the President to the Board of Directors: Proposed Technical Assistance Grant to Papua New Guinea, Lae Port Development. Manila (TA 284-PNG). 2 ADB. 1980. Report and Recommendation of the President to the Board of Directors: Proposed Loans to Papua New Guinea for the Lae Port Project. Manila (Loans 0468/0469SF]-PNG). 3 ADB. 2006. Technical Assistance to Papua New Guinea for Preparing the Lae Port Development Project – Tidal Basin Phase I. Manila (TA 4793-PNG). 4 The feasibility study was carried out by Royal Haskoning (RHK) in association with Ports & Maritime Consultancy Ltd., Papua New Guinea. 5 Further improvements to extend the berth and accommodate heavier cargo-handling equipment were envisioned under a separate and subsequent project. 6 ADB. 2007. Lae Port Development Project – Report and Recommendation of the President to the Board of Directors: Proposed Loans, Administration of a Loan from the OPEC Fund for International Development, and Administration of a Grant from the Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific. Manila.
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(where half of its population lives) through a dedicated road system. Effective functioning of Lae Port is essential to support overall economic growth in PNG.
B. Project Scope
5. The project included (i) a port facilities component, consisting of a tidal basin, one berth, and a container terminal with all ancillary facilities; (ii) a resettlement and livelihood improvement component; (iii) consulting services; and (iv) gender-responsive programs for HIV/AIDS prevention. The construction of the tidal basin and berth was to provide flexibility to extend the berth by another 150 m without incurring dredging costs. These improvements also allow for rail-mounted gantry cranes, heavy mobile cranes, and equipment to handle heavier cargo.
III. EVALUATION OF DESIGN AND IMPLEMENTATION
A. Relevance of Design and Formulation
6. The project was consistent with ADB’s and the government’s sector strategies and priorities at the time of project formulation, and remains relevant today since the national development strategy continues to highlight the need for improvement and expansion of maritime transport capacities.7 Developing a new tidal basin and supporting facilities, rather than expanding the marginal wharf, also factored in the long-term development potential of the project area, including the eventual creation of an industrial estate for port-related industries. The livelihood and HIV/AIDS components were directly relevant given the project’s resettlement impacts and the high incidence of HIV/AIDS in the project area.
7. Fact finding for the project in February 2006 was followed by the preparation of a feasibility study by RHK (para. 3). The final study was submitted in October 2007; it summarized the findings and recommendations of 10 stand-alone, comprehensive reports and provided the basis for project appraisal in September and October 2007.8
8. Port facilities. The updated design for the port facilities was based on the design prepared in 1982, but modified to reflect the updated needs and expectations for Lae Port to become a regional transshipment hub, and cater to port-related industries. The updated design called for a further deepening of the tidal basin from 11 m below chart datum to 14 m below chart datum, an increase in the length of the first berth from 180 m to 240 m, and modifications for the wharf, deck, and container yard to accommodate heavier handling equipment and to enable higher stacking of containers.
9. These design modifications required larger and longer piles to be driven to 30 m below chart datum, or 10 m deeper than the 1982 design. Prior to this project, a borehole at 30 m below chart datum had not been drilled, and this was beyond the scope of the feasibility study. Additional geotechnical site investigations were undertaken and funded by PNG Ports
7 ADB. PNG: Country Strategy and Program Update, 2006–2010 and ADB. 2010. PNG: Country Partnership Strategy, 2011–2015. 8 Reports include (i) Macroeconomic and Sector Analysis; (ii) Lae Port Analysis and Assessment; (iii) Poverty Reduction and Social Strategy; (iv) Tidal Basin I Project, covering site investigations, technical feasibility, contract packages, procurement arrangements, and implementation schedule; (v) Socioeconomic Assessment; (vi) Financial Assessment; (vii) Environmental Impact Assessment; (viii) Resettlement Plan; (ix) Public Consultation; and (x) Detailed Design and Bidding Documents. 3
Corporation Limited (PNGPCL). The results of the additional geotechnical investigation were not available at the time of appraisal and completion of the bidding documents. Hence, the design was, to some extent, conceptual and based on available data but recognized that some design changes would emerge during implementation. These changes had implications for the project, as discussed in paras. 17, 18, and 26. Bidding documents for the civil works therefore incorporated a design review by the contractor.
10. All civil works were tendered for international competitive bidding in a single design-and- build contract for the reclamation, berth, and terminal works. Given the complexity of the project, which required close coordination between several smaller contractors in a difficult working environment, it was deemed prudent to opt for a single-contractor solution.
11. The feasibility study also indicated the possibility of siltation in the tidal basin, but no hydrographic research or model tests were undertaken prior to construction to assess the potential magnitude of siltation and the preventive measures required. The implications of siltation for the project’s implementation are discussed in para. 19.
12. Resettlement component.9 The government prepared a resettlement plan to relocate 482 households totaling 2,912 persons and occupying the area to be dredged for the tidal basin. This original resettlement plan was not implemented because of disputes with the host community over land ownership, cultural differences, and the inability of the Morobe Provincial Government (MPG) to find affordable alternative land. The executing agency for the project, Independent Public Business Corporation (IPBC), in consultation with the affected persons, subsequently prepared a supplementary resettlement plan to implement a cash assistance package (CAP) and in-kind transitional support. The CAP was deemed to be the most feasible alternative that would allow physically displaced persons to self-relocate to areas of their choice. The CAP was also intended to assist affected persons wanting to return to their provinces, reintegrate into their clans, and start their own income-generating activities.
13. The supplementary resettlement plan also defined the livelihood impacts on the Labu people, who reside about 2 kilometers from the project area. Access to their small-craft landing site would be restricted by increased shipping traffic in the fishing grounds near Lae Port and stricter enforcement of the International Shipping and Port Security Code. The original plan was to develop another beach area in Lae into an alternative small-craft landing site, but acquiring the land proved unsuccessful. Subsequent consultations with the affected people resulted in improvements to the existing landing site as well as an action plan to develop an alternative landing site (paras. 20 and 21).
14. Livelihood component. The livelihood program10 for the physically displaced persons focused on providing health and sanitation services, teaching income-generating skills, and offering personal development activities. Livelihood support for the Labu villages considered a more diversified approach of assisting their existing fishing activities and other potential non- fishing income sources through various training programs.
9 The resettlement and livelihood components were funded by the project loan and a grant from the Japan Fund for Poverty Reduction (JFPR 9113). 10 The Lae Port Livelihood and Social Improvement Project (JFPR 9113) funded the livelihood restoration component of the overall project. The Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific provided additional support under the HIV/AIDS component.
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15. HIV/AIDS component. PNG, and the Lae area in particular, had a high incidence of HIV/AIDS infections. The project therefore included a program to prevent the spread of HIV/AIDS. The program activities involved (i) developing a HIV/AIDS code of conduct, (ii) renovating the seafarers’ support center at Lae Port, (iii) providing institutional strengthening of clinical structures, (iv) building the capacity of nongovernment organizations, (v) enhancing the outreach and impact of the HIV/AIDS site committee at Lae Port, (vi) establishing HIV/AIDS site committees and women’s help desks at police stations around Lae Port, (vii) caring for people living with HIV/AIDS, and (viii) establishing an integrated response center for HIV/AIDS. This program was supported through the Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific.11
B. Project Outputs
16. The project scope at appraisal had three main components: (i) port facility improvements, consisting of (a) construction of a tidal basin (700 x 400 m) northwest of the present port facilities with a dredged depth of 14 m below chart data to accommodate vessels with an overall length of 200 m, a beam of 32.2 m, and a fully laden draft of 12 m; (b) construction of a multipurpose berth, 240 m long and 45 m–50 m wide; (c) terminal works, including all buildings, storage areas, roads, drainage, water, electricity, and sewerage services; and (d) development of an alternative small-craft landing site. (ii) resettlement and livelihood improvement; and (iii) gender-responsive programs for HIV/AIDS awareness and prevention.
17. Port facilities. Design changes to accommodate the vision of Lae Port eventually becoming a regional transshipment hub were expected, as the tender documents only provided a conceptual design. The design changes were included in the quantity and cost estimates of the feasibility study, but their magnitude was underestimated. In October 2009, IPBC requested that RHK be retained to carry out further geotechnical field investigations so as to obtain more realistic data and to update the cost estimates, which ADB approved and which required additional financing. Field investigations found that suitable and sufficient quantities of rock material for slope protection could not be identified within an economic radius around the project site. As a result, ADB had no objection to the design change of using a combination of concrete “Chinese” pods, blocks, and hollow blocks.
18. The main port facility component was substantially completed on 31 December 2014 as per the scope of the project at the time of appraisal. The completion of the slope protection works and the diversion of Mai Creek at the north end of the basin were postponed in view of PNGPCL’s intention to start further expansion of the tidal basin (locally known as Phase 2), by extending the new wharf by another 180 m, deepening the basin by 1 more meter, and extending the basin to the north. The main purpose of extending the tidal basin to the north under Phase 2 was to expand the reclaimed area for the proposed industrial estate. The installation of navigational aids was also postponed to be included in Phase 2 works when siltation at the basin entrance was observed.12
11 The donor agency for this program is the Government of Sweden through the Swedish International Development Cooperation Agency (Sida). 12 As of the writing of this report, no progress has been made toward the implementation of Phase 2. 5
19. Upon completion of the project, IPBC commissioned an external audit to identify defects prior to closure of the defect-liability period on 31 December 2016. This audit detected defects in the stability of the slope-protection works, and higher levels of siltation than expected:
(i) The design change specifications for slope protection required random placement of the “Chinese” pods. However, these pods were placed in a symmetrical fashion above sea level for aesthetic reasons, affecting the stability of the slope protection along the meeting line between the regular and the random placements. This deviation was undertaken without IPBC’s approval but was corrected by the contractor at its own expense. (ii) The feasibility study indicated the potential danger of siltation. IPBC engaged a firm to study the siltation issue and concluded that siltation to the level of 11 m below chart datum from the dredged 14 m below chart datum occurred at the western entrance to the basin. However, this siltation had not increased for over 1 year and seemed to have stabilized.
20. Labu small-craft landing site. The original plan to acquire and develop land in front of the South Pacific Brewery for the Labu small-craft landing site was not implemented because of unresolved land issues. 13 Alternative options identified during project implementation were either unavailable or unacceptable to the Labu people. As an interim measure, the existing small-craft landing area was upgraded and improved with a new basin at the current site to make it more convenient and safer for the Labu people to land and to access the market, schools, and shopping facilities in Lae. It is currently being used to serve the Labu people and other surrounding coastal communities.
21. Because the current landing site is located within the existing Lae Port premises, an action plan for a new Labu small-craft landing project was prepared by PNGPCL in consultation with the MPG and the Labu people. The action plan was endorsed by IPBC on 23 November 2016 for a 12-month implementation from January to December 2017. It includes detailed consultations with the Labu people, review of the current memorandum of understanding by the MPG and relevant stakeholders, and the construction of a new jetty at a suitable site with breakwaters, as well as fish market, transit terminal, and fuel voucher outlet.
22. Resettlement. The supplementary resettlement plan, which superseded the original resettlement plan, included a CAP as well as training for livelihood awareness and financial planning. An audit revision during the preparation of the supplementary resettlement plan indicated that resettlement impacts had increased, from 482 households or 2,912 persons to 544 households or more than 3,200 persons. Each of the 544 households received K31,116 in two installments, after signing a deed of release and indemnity and vacating the premises. In total, K16.9 million was paid between 18 December 2009 and 18 March 2010. Households wanting to stay in Lae district were assisted with a fixed amount of K1,000 per household toward transport costs. Households relocating to their home provinces outside Lae were provided with transport assistance for their belongings. Of those relocating, 61% (1,785 persons) settled within Morobe Province and the remainder relocated to their preferred provinces, usually
13 This was the main provision of the memorandum of understanding initially agreed between the Labu people and the MPG, which outlined specific entitlements of the Labu people from the need to relocate their small-craft landing site and fish market.
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their place of birth. Of those settling in Morobe Province, 96% stayed within the Lae district.14 The established grievance redress procedures were applied successfully, and all 315 recorded cases were resolved.
23. Livelihood. This component aimed to improve the living standards of both the physically displaced households and the Labu people residing near the project area. It was implemented by IPBC and the MPG through various nongovernment organizations and training institutes. Affected persons were offered personal viability training, “start your own business” training, and sessions on vocational skills, basic literacy, health, nutrition for women, and good governance. Affected persons also benefited from the improvement of selected schools and health centers in the areas where they relocated. In total, 23 schools and health facilities were improved to assist the host communities in coping with the new residents.
24. The Labu people also received livelihood assistance for cocoa production, inland fish farming, mud crab production, and an offshore fish-aggregating device, all of which were intended to provide alternative sources of income.15 The microfinance component was not fully implemented because of insufficient funds to cover administration costs and the seed money required to reach all affected persons. However, a similar microfinance program was implemented under a separate ADB-funded microfinance program, which helped individuals find loans.16
25. HIV/AIDS component. The Lae Chamber of Commerce implemented this component by familiarizing local businesses with precautionary measures against HIV/AIDS and disseminating information through seminars, flyers, and brochures. Initially, only port-related industries were involved but outreach was later expanded to other business and public areas. Only 2 out of 5 target clinics were built because the Lae Chamber of Commerce lacked the capacity to manage procurement and civil works.
26. Port operations. A port operations plan for the project was proposed by PNGPCL and submitted to ADB on 19 February 2015.17 The plan highlighted that coastal shipping services would initially use and operate the facilities. A long-term arrangement was envisioned for PNGPCL to engage in a public–private partnership (PPP) to operate the terminal for container ships under a concessional agreement. The process of engaging a PPP partner is ongoing. In the meantime, the port has been operated by a coastal shipping company on a 3-year lease. PNGPCL has highlighted shortcomings in the port’s layout which, in their view, could have been avoided if they had been more involved in the project’s design and implementation as the prospective end-user. As noted in para. 37, IPBC was selected to be the project executing
14 Social Monitoring Report, January 2010–December 2013. 15 This information was drawn from the JFPR 9113 completion report (June 2015). The support for cocoa production was provided to the Labu Pile and Labu Puseka villages, where 73 households or 300 people participated. The two villages were also selected for inland fish farming, and training was provided. Puseka farmers built ponds ranging from 200 to 600 square meters, with the capacity to hold 1,000–3,000 fish, depending on their size. About 70,000 tilapia fingerlings were distributed, including to the resettled communities in a 14-mile radius from the project area. The Labu Butu village was the main beneficiary of the mud crab production program. The target was to train village farmers and establish 40 mud crab pens, but only 20 pens were built for lack of interest on the part of farmers and because of difficulties in adopting the crab farming methods. Fish-aggregating devices were deployed in all three coastal villages. Most of the catch is shared by the village members, the rest is sold in the market 16 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Papua New Guinea for the Microfinance Expansion Project. Manila. (Loan 2686 PNG).The Project has operations in Lae. 17 Lae Tidal Basin International Container Terminal – Operation Plan, by Pacific Marine Management Ltd on behalf of PNG Ports Corporation Ltd. 7
agency rather than PNGPCL, which compromised PNGPCL’s involvement and cooperation in design and implementation activities.
27. Assessment. The outputs related to the port facilities were delivered as planned at appraisal. The site was made available for port operations, despite cost increases and substantial delays in project implementation. The supplementary resettlement plan, as an alternative resettlement option, was executed in a timely manner despite the challenges associated with mobilizing funds and the intensive community consultations required. The improved small-craft landing site is currently being used by the Labu people, and an action plan for an alternative landing site is under implementation (para. 21). The livelihood component was successfully implemented for the affected persons who relocated within Morobe. The microcredit component was not fully implemented but replaced by training on financial literacy under the ADB-funded microfinance program (para. 24).
28. Environmental safeguards were monitored systematically, and the project management unit (PMU), the supervision consulting firm, and the civil works contractor's team produced regular reports. The contractor performed regular data collection, sampling, and laboratory analysis as part of its environmental management plan, and included the analysis in its monthly progress reports. The supervision consulting firm's international safeguard specialist reviewed these environmental reports regularly, especially the quarterly safeguard reports submitted to ADB and posted on the ADB website. The delay in the implementation of the original resettlement plan contributed to the lack of regular social safeguard monitoring reports in the beginning of project implementation. Consultations with affected households after their relocation should have been more frequent.
C. Project Costs
29. The cost estimates of the project components at appraisal and the actual project costs are presented in Table 1. At appraisal, the total project cost was estimated at $154 million. The newly envisaged role for Lae Port as a regional transshipment hub required design changes that were not reflected in the feasibility study estimates at appraisal. Additional geotechnical investigations by the feasibility study consultant were carried out, resulting in an estimated additional cost of $137.4 million. A cost audit carried out by Deloitte,18 commissioned by IPBC, and reappraised in connection with the loans for additional financing confirmed the project’s sustained financial and economic viability. To meet these cost increases, ADB approved two loans for additional financing on 10 November 2011: loan 2803 from its ordinary capital resources and loan 2804 from the Asian Development Fund, totaling $89.12 million.19
30. The report and recommendation of the President (RRP) for the additional financing stated that 20% of the additional cost was attributable to the design changes; the remainder was attributed to cost increases as a result of the 2-year resettlement delay (footnote 19). From 2007 to 2011, PNG’s economy experienced a real average annual growth rate of more than 7%. This growth caused supply constraints, resulting in cumulative inflation of consumer prices of more than 25% and substantially higher construction costs. The US dollar depreciated 22% against the kina during the same period, correspondingly increasing the local cost component in dollars.
18 Deloitte, Touche Tohmatsu, PNG. 2010. Preliminary Update to the Cost Benefit Analysis of Lae Port Tidal Basin Project. Port Moresby. 19 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loans to Papua New Guinea for Additional Financing: Lae Port Development. Manila (paras. 7–12).
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31. At project completion, the total project cost had increased by 102% over the original cost estimates, but by only 7% over the estimated cost at reappraisal for the additional financing. This was largely attributed to the civil works component, which increased by an additional 6%. The CAP related to compensation and relocation (Table 1, item C) resulted in a more than fivefold increase from the appraisal estimates, including the original resettlement housing allocation of $1.5 million that was reallocated to item C. The government has fully financed this resettlement exercise.20
Table 1: Project Cost – Planned vs. Actual ($ million) Components Appraisal Additional Total Actual Increase (%) (1) Financing(2) (3) (4) (4)/(1) (4)/(3) A. Civil works 109.42 124.44 233.86 286.22 162% 22% B. Land acquisition 1.49 1.49 C. Compensation and relocation 0.31 0.31 11.13 3490% 3490% D. Livelihood and social support 1.50 1.50 1.16 (23%) (23%) E. HIV/AIDS 0.75 0.75 0.65 (13%) (13%) F. Consulting services 9.57 9.57 11.21 17% 17% G Training 0.03 0.03 H.. Contingencies 25.75 9.33 35.08 I. Financing charges 5.18 3.63 8.81 Total 154.00 137.40 291.40 310.37 102% 7% Note: In calculating the percentage increases, (i) item H was attributed to item A, (ii) item C was allocated to item C, and (iii) item D was reduced to $1.2 million.
D. Disbursements
32. After the loan became effective on 30 October 2008, the first disbursements were made on 27 January 2009 for the HIV/AIDS component and, more than 3 years later, on 25 June 2012, for the civil works contract. This delay in the civil works disbursement arose primarily from the redesign and prolonged implementation of the resettlement program, since civil works could only begin after the CAP was completed in January 2010. Actual disbursements closely followed the estimates made at the reappraisal for additional financing.
33. For the grants dealing with safeguards, consulting services, and livelihood improvement, the imprest account procedures were in accordance with the respective guidelines, although the implementing agencies—Lae Chamber of Commerce and MPG found it difficult to obtain timely replenishment because of their inexperience with ADB procedures. Civil works and consultant supervision were procured using national competitive bidding.
E. Project Schedule
34. The chronology of the main implementation events is in Appendix 2. At appraisal, it was estimated that the project would be implemented over 4 years and completed on 31 December
20 After the Fukushima nuclear disaster in March 2011, the Japan Fund for Poverty Reduction (JFPR) reduced its allocation for the livelihood and social support component from $1.5 million to $1.2 million. Small residual balances of $40,000 for the livelihood and social support component and $100,000 for the HIV/AIDS component remained unused at loan closing and were canceled. 9
2011. Preconstruction activities such as the detailed engineering design, and prequalification, tendering, and awarding of contracts began in January 2007 but had to be suspended due to resettlement implementation delays. Civil works, planned to begin in early 2009, were not started until April 2012 and not substantially completed until December 2014. The defect-liability period ended on 31 December 2016, during which identified defects (para. 19) were corrected. The delays in resettlement also affected the HIV/AIDS and the livelihood and social support programs.
F. Implementation Arrangements
35. The implementation arrangements at appraisal designated IPBC 21 as the executing agency. A PMU was established to implement the project, including its resettlement and environmental aspects, in association with the MPG which was the implementing agency for the livelihood program. The Lae Chamber of Commerce was tasked with implementing the HIV/AIDS awareness program given its outreach and earlier involvement with the Morobe Provincial AIDS Council. The PMU supported the financial management of the livelihood improvement and HIV/AIDS awareness programs. The PMU’s organizational structure was set up as envisaged at appraisal, except for the finance section, which was directly supervised by the project director and adequately monitored by IPBC (only two major contracts to administer). The project’s organizational structure is outlined in Appendix 6.
36. Three months after loan approval, a project steering committee (PSC), chaired by the IPBC managing director and comprising high-level representatives of PNGPCL as well as national and provincial government ministries and departments, was established to oversee the project’s implementation and provide policy guidance in quarterly meetings.
37. As the entity responsible for the development, management, and maintenance of all of PNG’s declared ports, PNGPCL expected that it would be the project’s executing agency. However, the government decided that IPBC was better equipped to serve as a PMU. Furthermore, the facilities were envisioned to be operated under a PPP arrangement with a private operator. Unfortunately, PNGPCL’s commitment during project implementation was limited. PNGPCL did not significantly contribute to, or participate in, PSC meetings to highlight any of the concerns that they subsequently raised when the new facilities were handed over to them.
38. ADB was aware of these institutional issues and advocated for PNGPCL’s more direct involvement during implementation. Although this was consistently brought to the attention of IPBC—and to the government’s central agencies, including the Department of Treasury (the borrower) and the Department of National Planning and Monitoring—close cooperation between IPBC and PNGPCL did not materialize.
G. Conditions and Covenants
39. Appendix 7 provides an overview of the status of the most relevant covenants of the loan and project agreements. Among the instances of noncompliance were:
21 IPBC (established in 2002) is the trustee of state assets and state-owned enterprises, including PNGPCL. Its strategic objectives include mobilizing resources to implement government policies and achieve its objectives, and catalyzing economic and social development. It reports to the Minister for Information and State Enterprises and the National Executive Council.
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(i) Within 3 months of loan effectivity, the borrower should have set up the PSC, which was to meet at least quarterly (project agreement schedule 5, para. 2). The PSC first met on 25 May 2010 and officially convened only four times during project implementation. (ii) On 2 April 2015, with the government’s approval but without ADB’s consent, IPBC handed the operation of the new project facilities over to PNGPCL. Although ADB formally raised this matter with IPBC and the government in a letter to IPBC dated 20 April 2015 and a letter to the Department of Treasury dated 16 February 2016, in addition to numerous e-mails and verbal follow-ups, no response came forward. (iii) While the borrower submitted a port operational plan (para. 26), it did not submit an action plan to develop a strategic PPP model for the operation of the new facilities. Currently, a coastal shipping company operates the facilities on a 3- year lease. (iv) IPBC did not establish the project performance monitoring system, which was captured as a noncompliance issue in aide-mémoires and a memorandum of understanding as part of ADB’s review missions. This noncompliance was mainly a result of capacity constraints.
40. The arrangements for a new small-craft landing site for the Labu people are presented in the recent action plan (para. 21). The Labu people are currently occupying and using the improved landing site within the port area, and the action plan seeks to identify an alternative landing site.
41. Noncompliance issues were mainly observed when the audited project financial statements and safeguard reports were submitted, and led ADB to suspend disbursement. This affected the project in as far as payments were delayed, but did not materially affect the progress of the civil works.
42. Although the facilities were handed over to PNGPCL without ADB’s consent, it is not clear whether PNGPCL will be responsible for servicing the debt. The subsidiary loans are still in the name of IPBC.
H. Consultant Recruitment and Procurement
43. Consultant recruitment and procurement was in compliance with ADB guidelines. The only major consultant contract under the project was for construction supervision; recruitment under the quality- and cost-based selection procedure began on 8 January 2010, and ADB confirmed that it had no objection on 18 October 2010. Since the tender process for the civil works contract had to be delayed until the resettlement issue was resolved, the construction supervision contract with Korean Engineering Consultants Corporation (KECC) was not signed until 29 December 2011. The civil works for construction of the terminal were appropriately grouped into one contract package to attract international bidders and reduce the administrative pressure on the executing agency. Although one-stage, one-envelope international competitive bidding with prequalification was envisaged, this was changed to postqualification during the appraisal for additional financing because of the resettlement delay. Invitations to bid were issued on 19 January 2011, and ADB approved IPBC’s recommendation to award the civil works contract to China Harbor Engineering Company, the lowest evaluated responsive bidder, on 15 September 2011. The signing of the contract was delayed by more than 6 months because the National Executive Council had not initially agreed with IPBC’s evaluation. This issue was resolved with ADB’s facilitation, and the contract was awarded to the lowest 11
evaluated responsive bidder on 26 March 2012. Consultancies and procurement under the component funded by the Japan Fund for Poverty Reduction (JFPR 9113) and the HIV/AIDS component were carried out using local competitive bidding, shopping, and single-source selection.
44. The performance of KECC, the consultant for construction supervision, is rated partly satisfactory because KECC did not intervene against, and did not follow the required approval process for the change in scope regarding slope protection (para. 19). The slope protection defects were rectified during the defect-liability period.
45. The performance of the contractor, China Harbor Engineering Company, is rated satisfactory. It delivered the outputs fully in line with the planned implementation schedule, in a difficult environment, at good quality, and largely within the cost estimates. The contractor also offered adequate design changes where necessary. The personnel were motivated, dedicated, results-oriented, and understood the requirements of the task. The major repair work on the slope protection was carried out under the defect-liability provision at the cost of the contractor.
I. Performance of the Borrower and the Executing Agency
46. Overall, the performance of the borrower, IPBC, and its PMU is rated partly satisfactory. Despite inexperience with ADB procedures, IPBC was able to implement the project, while the PMU’s performance during preparation and construction was supportive. A functional project management system was established to ensure the effective use of funds. Local funds were mobilized on time, withdrawal applications were submitted largely in a timely manner, and the contractor was paid on time after initial problems in determining the percentages financed by loan funds, which incurred late payment charges of K4.9 million payable to the contractor. Despite the initial resettlement delay, the PMU successfully identified and implemented an alternative and acceptable resettlement plan. The PMU also used the delay period effectively to update the design data. The transfer of assets without ADB’s consent, contrary to requirements under the loan and project agreements, and the late submission of audited reports for the project accounts contributed to the partly satisfactory rating.
J. Performance of the Asian Development Bank
47. ADB’s overall performance is rated partly satisfactory. It was known at appraisal that the project’s needs and expectations would require the 1982 design to be updated. More detailed investigations before loan approval might have yielded better estimates and avoided additional financing. ADB was responsive in resolving implementation and financing issues and avoiding further project delays by processing the additional financing loans in a timely fashion. Delegation of the project to the PNG Resident Mission helped expedite response time and provided for direct advice on procurement, disbursement, and other loan administration issues. Missions from headquarters assisted with the implementation of the resettlement program, environmental safeguards, and the livelihood and HIV/AIDS components.
IV. EVALUATION OF PERFORMANCE
A. Relevance
48. At both appraisal and completion, the project was relevant to the development policies and strategies of the Government of PNG and ADB. The government’s National Transport Development Plan, 2008–2010 lists the Lae Port Project as a core national project. Together
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with the Highlands Highway, Lae Port is a key driver of growth, development, and poverty reduction. The project is consistent with the government’s and ADB’s development strategies. ADB’s development strategy for PNG focuses on transport sector improvement, private sector development, and HIV/AIDS reduction, with poverty reduction and inclusive growth as overarching goals.
B. Effectiveness in Achieving Outcome
49. The project is rated less than effective in achieving its outcomes. It did relieve port capacity constraints, and it will eventually catalyze industrial and commercial development in the port area and hinterland. At appraisal, it was envisioned that the new facilities would be operated under a PPP approach, but this has not yet materialized. The government remains committed to PPPs in its national transport planning strategy. The effectiveness of the resettlement plan and livelihood component cannot be assessed given the lack of any recent surveys. However, earlier assessments revealed that the outcome of the supplementary resettlment plan was very much dependent on how the affected persons utilized the funds.22 The most significant gain to the affected persons resulted from land they acquired with the CAP. Other gains noted in the monitoring reports include better access to water and electricity, particularly for those who relocated within Lae. The supplementary resettlement plan was completed without serious grievances from the affected persons.
50. The provision of livelihood training and other health awareness programs delivered most of the intended benefits, except for those who relocated outside Morobe and who were unable to avail of livelihood support. Indirect assistance through improvement of the existing school and health facilities in several host communities within Morobe was provided through Grant 9113 (JFPR).
C. Efficiency in Achieving Outcome and Outputs
51. Overall, the project is rated less than efficient in achieving its main outcome—trade- constraining port bottleneck is relieved—and the three outputs: (i) new port facilities are operational; (ii) the livelihoods of directly and indirectly affected people are improved; and (iii) HIV/AIDS incidence in Lae is reduced. At reappraisal, traffic at Lae Port had increased significantly because of the impacts of the PNG liquefied natural gas project led by ExxonMobil, but port traffic has since decreased again. PNG’s economic prospects now appear less buoyant than at the time of reappraisal, with growth rates estimated at 4.3% for 2016 and 2.4% for 2017.
52. The project’s economic internal rate of return (EIRR) was reevaluated by applying the same basic approach used in the appraisals for the 2007 and 2012 RRPs.23 The base EIRR was reevaluated to be 13% (12% if all dredging costs are included and 11% if traffic growth is reduced to 4%). This represents a decline from the base EIRRs of 15.8% in the 2007 RRP and from 18.7% in the 2012 RRP, mainly as a result of lower traffic levels. The 2012 RRP assumed that traffic would grow at an annual rate of 6% from 2011, or 18% in total by 2015. But by 2015, actual traffic had grown by only 3%. The details of the evaluation methodology are in Appendix 9 and the EIRR results are in Appendix 10.
22 Social Monitoring Report, January 2010–December 2012 and Social Monitoring Report, January–June 2014. 23 EIRRs were calculated by (i) comparing with-project and without-project scenarios by identifying savings from faster ship turnarounds, and (ii) assessing the economic value of traffic resulting from the port’s increased capacity. 13
53. The resettlement, livelihood, and HIV/AIDS components are rated less than efficient given the significant delays of almost 2 years in completing the project’s resettlement activities and the shortcomings in delivering and monitoring support for livelihood and HIV/AIDS. The progress of the HIV/AIDS component, which targeted a 20% decrease in the prevalence of HIV/AIDS in the Lae and Huon districts, could not be measured for lack of data and monitoring.
D. Preliminary Assessment of Sustainability
54. The sustainability of the project is rated as less than likely sustainable given the delays in full operationalization of the port. The financial internal rate of return (FIRR) was reassessed based on the actual financial investment cost adjusted to 2016 prices and a reduction of dredging costs by 50%, but reflecting incremental operations, maintenance, and insurance costs. The revenue (wharfage, pilotage, storage, and lease of the newly reclaimed land) was based only on incremental traffic made possible by the expansion, and was adjusted by a 30% corporate tax for years with positive revenues. Based on these assumptions, the FIRR was estimated at 1.39% before taxes and at 0.25% after taxes (Appendix 10). The FIRR is lower than the weighted average cost of capital (WACC) of 3.19% (Appendix 11). The WACC assessment assumed that PNGPCL would be required to service the project loan debts. A tariff increase of about 20% for overseas cargo24 at Lae, an annual concession fee of K28 million, or a combination thereof, would bring the FIRR to the level of the WACC.
55. ADB was unable to obtain any financial data (e.g., balance sheets and profit, loss, and cash-flow statements) from PNGPCL other than those published online until 2013. Despite interventions by the PNG Resident Mission, PNGPCL in Port Moresby was only available for one short meeting, at which the mission’s purpose and data requirements were explained but no data was obtained. To assess PNGPCL’s financial position, the mission reviewed assumptions made during appraisals and in Deloitte’s 2010 cost audit, and assess whether these findings had materially changed. Deloitte’s analysis stated that PNGPCL should be able to repay the interest and capital portion of the loan to the government. The current port tariffs are considered regionally competitive but can be increased.
E. Impact
56. Overall, at this point in its cycle, the project’s potential impact is rated satisfactory. The project relieved port congestion and the port is being operated by a coastal shipping company, and is expected to reach full operation when it caters to overseas container traffic, eventually becoming an international hub. The one-berth facility is expected to function at full capacity, since the amount of overseas container cargo at Lae Port currently exceeds what can optimally be accommodated (berth occupancy ratio: 30%).25 The final monitoring report on environment, health, and safety compliance stated no major lasting negative environmental impact. All environmental, health, and safety requirements were fulfilled during implementation. The self- relocation approach adopted by the project revealed variable outcomes because some affected persons relocated outside Morobe Province. Initial interviews revealed that follow-up support from existing MPG programs will help sustain the gains from the livelihood support.
24 A tariff increase for total overseas cargo (including the cargo handled at the old port facilities) is justified, since such cargo benefits equally from reduced waiting time. 25 The berth occupancy ratio relates to an optimal waiting-time/service-time ratio of 0.30 for the one-berth tidal basin wharf.
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V. OVERALL ASSESSMENT AND RECOMMENDATIONS
A. Overall Assessment
57. Overall, the project is rated less than successful based on a review of its relevance, effectiveness, efficiency, and sustainability (Appendix 13). The outputs were implemented as intended at appraisal, despite substantial cost increases requiring additional financing because the original appraisal had been based on a preliminary design. Implementation was delayed by 2.5 years, mainly because the original resettlement plan was difficult to implement and had to be revised which, in turn, delayed award of the civil works contract. While the physical infrastructure has been completed and the new facilities have relieved port congestion, the full potential of Lae Port becoming a regional hub remains to be achieved.
B. Lessons
58. Three important lessons can be drawn from this project: (i) Approval of financing for a project of this size and importance should not be based on preliminary designs, particularly since the feasibility study explicitly indicated the lack of geotechnical data and possible siltation issues. (ii) A resettlement plan, especially in the context of PNG, should include a comprehensive assessment of the resettlement impacts on both the affected persons and host communities to anticipate potential issues during implementation. Self-relocation schemes should ensure that those affected will use the cash assistance for its intended purpose. (iii) The selection of the executing agency should be carefully assessed during project processing. PNGPCL should have been more involved in the implementation, since they are responsible for port operations.
C. Recommendations
1. Project Related
59. Future monitoring. ADB needs to obtain clarifications on the terms and conditions for the handover of the facilities from IPBC to PNGPCL to ensure the financial viability of PNGPCL in operating port facilities and servicing the debt. From the financial evaluation, further tariff increases will be needed and their magnitude will depend on the concession fees charged to the operator of the new facilities. For a meaningful post-evaluation assessment, ADB should ensure that the monitoring and evaluation system is designed appropriately and implemented effectively.
60. The government’s major stakeholders, IPBC and PNGPCL, in consultation with the MPG and the Labu people, are implementing the action plan for the small-craft landing site. The plan began in January 2017 and ends in December 2017 (para. 21). ADB, through the resident mission’s safeguard officer, is monitoring implementation of the action plan according to the memorandum of understanding.
61. Covenants. Actions to comply with covenants for the facilities handover, financial sustainability, and tariff increases usually extend beyond the implementation period of the project. It is recommended that such covenants be extended for 5 years, and include specific port-operational data from the post-evaluation assessment. The disbursement covenant related to civil works payments needs to account for the time required for internal government and ADB 15
processing. Other covenants, such as legislative changes and private sector participation also have timeframes that extend beyond the implementation period of the project.
62. Additional assistance. Additional assistance to set up and implement the monitoring and evaluation system may be necessary for the post-evaluation assessment. It is also recommended that ADB remain involved in the proposed Phase 2 expansion of the port.
63. Public private partnership. In September 2013, IPBC requested ADB to identify public- private partnership (PPP) options for port operations, with the vision to develop Lae Port into a regional transshipment hub. ADB’s options study, based on demand forecasts and feedback from leading global operators, indicated that the Lae Port is well suited to be developed under a PPP. Global operators also expressed interest in investing and managing the port. ADB also supported development of PPP Act which was approved by Parliament in September 2014.
64. In March 2015, IPBC reaffirmed its interest to develop the port as a PPP and ADB prepared a proposal to provide transaction advisory services to structure, tender, and reach concession signing for Lae Port under a PPP modality. With the transfer of the facilities from IPBC to PNGPCL at that time, IPBC decided not to accept the proposed transaction advisory services. However, in March 2017 with a new Minister and new Managing Director for IPBC (now Kumul Consolidated Holdings), the government is committed to pursue ADB’s proposal for the provision of transaction advisory services.
65. Timing of the project performance evaluation report. It is recommended that the project performance evaluation report be undertaken at the end of 2019.
2. General
66. It is important to conduct detailed institutional assessments during project preparation to identify institutional capacities, constraints, risks, and mitigation measures. Of particular importance is a thorough assessment of the financial and project management capacities of the proposed executing agency.
67. More direct involvement of central government agencies, such as Treasury and Planning in PNG, is recommended in the design, processing, and implementation stages of projects that have impacts beyond the construction of physical infrastructure.
68. An effective performance monitoring and evaluation system, including the collection of detailed information on project performance indicators, should be established and implemented for future projects of this nature, since this allows for more effective project monitoring and reporting.
69. ADB review missions should update the project performance monitoring system to monitor and facilitate the executing agency’s compliance in measuring project performance, and identify actions and measures to ensure that targets and results are achieved effectively and efficiently. Regular monitoring and reporting will also ensure that necessary information is available for the project completion report and the project performance evaluation report.
16 Appendix 1
PROJECT FRAMEWORK
Design Summary Original Performance Actual Achievement Indicators/Targets
Impact 15–20 new industrial and 500 No monitoring system is in place for commercial enterprises established Morobe Province or Lae City, but An enabling environment for by 2020 four industries have made inquiries industrial and commercial to rent part of the newly reclaimed development created land.
1,000 jobs generated by 2020 No monitoring system is in place to monitor job creation. Outcome Lae Port’s cargo-handling capacity The new wharf increased the port’s increased by about 1.4 million rt per capacity by about 2 million rt per Port bottleneck constraining trade is year after completion year. relieved
Lae Port’s cargo handling rate increased from 140 rt/hr to 210 rt/hr Based on PNGPCL statistics, the by 2015 handling rate since 2011 has been fluctuating between 88 rt/hr and 110 rt/hr for container and break- bulk cargo. Ship calls increased from 600 to 900 by 2017 The new facilities provide capacity for an additional 160 ship calls. Outputs 1. New port facilities A basin, multipurpose berth, and The basin and multipurpose berth terminal constructed by 2011, and were constructed, but the houses 2. Improved livelihood of directly 482 new houses for 2,912 people were not because the resettlement and indirectly affected people built by 2008 plan was changed to include cash compensation for affected persons 3. Reduced HIV/AIDS incidence in that self-relocate. Lae 3 schools in Malahang expanded by 2008 23 existing school facilities were upgraded.
473 children enrolled in the Not achieved as a result of the expanded schools in Malahang by changed resettlement plan. 2008
1 health clinic improved by 2008 Not implemented.
$40,000 in microcredit provided to Microcredit program not 200 households by 2011 implemented.
HIV/AIDS prevalence in Lae and No statistics available. Huon districts decreased by 20%
Income levels of resettled persons 60% of settlers are spread and the Labu people increased by throughout Morobe Province; the 3%–5% by 2011 rest are in the hinterland provinces. Preliminary surveys indicate that the incomes of resettled persons have increased. hr = hour, PNGPCL = Papua New Guinea Ports Corporation Limited, rt = revenue ton.
Appendix 2 17
Chronology of Main Events
Year Date Event/activity 2007 12 March–3 April ADB fact-finding mission EIA and EMP updated and submitted to the Department of July/August Environment and Conservation 20 August SEIA posted on the ADB website 28 August–14 Appraisal mission September 22–23 November Loan negotiations December EIA finalized 4 December OFID approved a $6 million loan for the Lae Port Development Project. 18 December The ADB Board approved the Lae Port Development Project 2008 Lae Port Development Project Agreement (Loans 2398/2399) signed 12 June Lae Port Livelihood and Social Improvement Project (JFPR 9113 [PNG]) signed and effective General meeting of affected persons, IPBC, and ADB held to implement an alternative resettlement plan, as the original plan to resettle the affected persons at the agreed-upon site at Malahang 14 August was not implemented because of landowner and tribal problems. An alternative supplementary plan to relocate the affected persons to areas of their choice, with cash and physical relocation assistance, was agreed upon. 8–18 September Loan inception mission 30 October Loan effectiveness declared by ADB 4 November Loan agreement between PNG and OFID signed 15 December Lae Port: Mobilizing the Private Sector to Respond to Gender and HIV/AIDS Issues (Grant 0102) contract signed with the LCC 18 December The Board approved the Lae Port Development Project Lae Port: Mobilizing the Private Sector to Respond to Gender and HIV/AIDS Issues (Grant 0102) approval, agreement, and effectiveness Lae Port: Livelihood and Social Improvement Project (JFPR 9113 [PNG]) grant approval 2009 7 January OFID loan declared effective May The DEC approved the EIA and EMP, in principle ADB review mission for the JFPR component and procurement 9–10 November issues related to the construction supervision consultant contract 14–17 December ADB safeguard review mission Implementation of the summary relocation plan The IPBC project management unit, together with the central December 2009– government's stakeholders (MPG, RPNGC), successfully repatriated March 2010 and relocated approximately 3,200 affected persons back to their home provinces and within Lae City. 2010 8 January–8 Recruitment of Supervision consultant. Request for expressions of March interest February–July The executing agency commissioned Royal Haskoning to finalize detailed engineering designs. Preliminary results indicated that the estimated costs for the port facilities project component would increase substantially (up to 100%), and the project would require supplementary financing.
18 Appendix 2
24 March Supervision Consultant: EOI evaluation submitted to ADB 28 April SC: No objection by ADB 10 May CWC: Submission of tender evaluation to ADB 15–30 May SC: Request for proposals 18 July–12 ADB fact-finding mission for the additional financing loan August 29 July Final evaluation report with ADB comments finalized 30 July Report circulated to ADB's procurement committee 3 August SC: The executing agency’s technical evaluation report submitted to ADB 16 August SC: No objection by ADB 3–5 November Review mission: Project-specific consultation to review updated costs 2011 19 January CWC: Invitation to bid using the post-qualification bidding procedure 29 March Lae Port: Livelihood and Social Improvement Project (JFPR 9113 [PNG]) contract signed with Bris Kanda 21 April CWC: Bid closing date 18 July–12 ADB fact-finding mission for the additional financing loan August 26–27 July Review mission: Project-specific consultation to review the HIV/AIDS and gender components of the project 28 July Lae Port: Livelihood and Social Improvement Project (JFPR 9113 [PNG]) 4 civil works contracts to refurbish schools and health facilities signed 17 August ADB approved the extension of the loan closing dates for loans 2398/2399 from 30 June 2012 to 30 June 2014 (24 months). 12 September ADB staff review committee meeting for the ADB financing loan 15 September CWC: ADB approved the executing agency’s recommendation to award the major civil works contract. State team and ADB loan negotiations for the additional financing 6–7 October loans Reports and recommendations of the President circulated to the 20 October Board 10 November Additional financing loans approved by ADB 29 December The supervising consultancy contract was awarded to KECC 2012 Lae Port: Livelihood and Social Improvement Project (JFPR 9113 10 January [PNG]) closing date extended to 11 June 2013 26 March Major civil works contract awarded to CHEC 17–19 April Review mission: preconstruction conference Preconstruction meeting with the executing agency, contractors, and 18 April supervision consultants Lae Port groundbreaking ceremony Loan and project agreements signed for the additional financing 30 April loans 2803/2804 (Special Funds) 18 June Lae Port groundbreaking ceremony 21 June Loan effectiveness—additional financing loans 2803/2804 30 June The contractor (CHEC) commenced tidal basin works Review mission: project-specific consultation to review the 13–15 August contractor’s EMP 19 September Dredging activities begun in tidal basin area Review mission: project-specific consultation for the monthly project 27–29 November meeting
Appendix 2 19
2013 15–19 April Midterm project review mission Review mission: project-specific consultation for the project financing 20–21 June plan 4 October The contractor (CHEC) completed dredging works at the tidal basin 2014 5 January Variation No. 17: slope protection, change in material 30 April–2 May Review mission: project implementation review mission February No objection by ADB to the change in material for slope protection 30 June Loan closing date for loans 2398/2399 extended to 31 March 2015 The Treasury Department asked to extend the loan closing date of 14 August loans 2398/2399 from 30 June 2014 to 31 December 2014. The Treasury Department asked to extend the loan closing date of 24 September loans 2803/2804 from 31 December 2014 to 31 March 2015. ADB approved the loan closing date extensions from 30 June 2014 16 October to 31 December 2014 for loans 2398/2399, and from 31 December 2014 to 31 March 2015 for loans 2803/2804. The Prime Minister of PNG, the Honorable Peter O’Neill, officiated at 17 December the commissioning ceremony and launched Phase 2 of the project. 31 December Loan closing date for loans 2803/2804 2015 ADB and IPBC extended KECC’s contract from 31 January 2015 to 31 March 2015, including for the defects liability period, giving time to 10 March implement additional works and help prepare the executing agency’s project completion report. 31 March Loan closing dates for loans 2389/2399 and 2803/2804 IPBC formally handed over the operation of the newly built tidal basin 2 April facility to PNGPCL. IPBC was renamed Kumul Consolidated Holdings through IPBC Act September No. 4, 2015. ADB approved second loan closing date extensions for loans 16 November 2398/2399 (to 31 March 2015) and loans 2803/2804 (to 31 December 2015). The Treasury Department requested a loan closing date extension 24 September for loans 2803/2804 to 31 December 2015. ADB approved loan closing date extensions for loans 2398/2399 and 9 November 2803/2804 to 31 December 2015. 17 December End of the project’s defect-liability period 31 December Final loan closing date for loans 2398/2399 and 2803/2804 ADB = Asian Development Bank, CHEC = China Harbor Engineering Company, CWC = Civil works contractor, DEC = Department of Environment and Conservation, EIA = environmental impact assessment, EMP = environmental management plan, EOI =expression of interest, IPBC = Independent Public Business Corporation, KECC = Korean Engineering Consultants Corporation, LCC = Lae Chamber of Commerce, OFID = Organization of the Petroleum Exporting Countries Fund for International Development, PNG = Papua New Guinea, PNGPCL = Papua New Guinea Ports Corporation Limited, RPNGC=Royal Papua New Guinea Constabulary, SEIA = summary environmental impact assessment, SC =Supervision consultant.
20 Appendix 3
RESETTLEMENT PROGRESS
Table A3.1: Repatriation under the Resettlement Component
No. of Repatriation Date of Affected In-Kind Support for Repatriation Destination Repatriation People 185 Goroka & Mendi 27 Dec 2009 7 buses and 3 trucks 110 Simbu 30 Dec 2009 5 buses and 2 trucks 62 Madang 28 Dec 2009 4 buses and 1 truck 50 Bogia/Madang Jan 2010 4 buses and 1 truck 311 Wewak 27–31 Dec 2009 Hire of the MV Solomon Queen, and buses 250 Wewak 3–5 Jan 2010 and trucks for onward assistance 78 Morobe Province Dinghies and buses 262 Oro & Milne Bay 10–12 Jan 2010 Compensation of regular fares 17 Rabaul & Bougainville 31 Port Moresby & Gulf Hire of the MV Kimbe Queen 150 Vicinity of Lae Dec 2009–Jan Casual labor to load and unload 2010 belongings during relocation 300 Own arrangements MV = motor vessel.
Appendix 3 21
Table A3.2: Grievance Cases
Item Case No. of Cases Remarks Resolved 1. Missing bank 2 The BSP Lae branch manager Yes accounts resolved the issue. 2. Legal cases handled 13 All cases were heard by a Lae Yes by Lae Court district magistrate at court. 3. Statutory declaration 65 The PMU received statutory Yes received declarations from affected persons as evidence of agreement in resolving the issue. 4. Head of the 3 The issues were settled out of Yes household deceased court among household after receipt of the members. CAP 5. Head of the 19 Wives’ names replaced those Yes household name of husbands as heads of change households. 6. Household payment 21 Outsiders claimed ownership Yes disputes by outsiders over houses and/or land and disputed the payment of the CAP to registered affected persons. 7. Spouses divorced or 6 The issues occurred after Yes deserted after receipt resettlement was completed. of the CAP 8. Declared legal 14 During the audit, names were Yes household head changed to those of the rightful homeowners. 9. Household settled on 51 Payments were withheld until Yes state land within Lae the area was vacated. 10. Disputed cases 86 Police were involved in a Yes referred to the police number of disputes after payment of the CAPs. 11. Disputes among 35 The issues were internally Yes family members resolved. Total no. of cases 315
BSP = Bank South Pacific, CAP = cash assistance package, PMU = project management unit.
22 Appendix 4
PROJECT COST
Table A4: Project Cost – Planned vs. Actual ($ million)
Estimate Additiona Increase s l Total Actual Components Appraisal Financing % % (1) (2) (3) (4) (4)/(1) (4)/(3) A. Civil Works 1. Port facilities 106.93 124.44 231.37 286.22 168% 24% 2. Resettlement housinga 1.53 - 1.53 - 3. Canoe landing 0.96 - 0.96 - Subtotal A 109.42 124.44 233.86 286.22 162% 22% B. Land Acquisition 1.49 - 1.49 - 3490 3490 C. Compensation and Relocation 0.31 - 0.31 11.13 % % D. Livelihood and Social Support 1.50 - 1.50 1.16 (23%) (23%) E. HIV/AIDS 0.75 - 0.75 0.65 (13%) (13%) F. Consulting Services 1. Support to the PMU 2.94 - 2.94 5.16 76% 76% 2. Construction supervision 6.00 - 6.00 6.05 1% 1% 3. Housing construction supervision 0.50 - 0.50 - 4. Audit fees 0.13 - 0.13 - Subtotal F 9.57 - 9.57 11.21 17% 17% G. Training 0.03 - 0.03 - H. Contingencies - 1. Physical contingencies for A1 16.47 7.82 24.29 - 2. Price contingencies for A2, C, and F3 0.38 - 0.38 - 3. Price contingencies for A1 8.90 1.51 10.41 - Subtotal H 25.75 9.33 35.08 - I. Financing Charges 5.18 3.63 8.81 - Grand Total 154.00 137.40 291.40 310.37 102% 7% PMU = project management unit. a In calculation, the cost increase in percent for items A2, B, and F3 is allocated to item C. b In calculation, the cost increase in percent for items A2, B, and F3 is allocated to item C. b In calculation, the cost increase in percent for item A1, H1, H3, and I is allocated to Item A1. c Training is included under consultancy. Actual relocation costs of $11.13 were known at the time of the additional loans and should have been listed in d column 2.
Appendix 5 23 D
N
O
S
A
J
J
2016
M
A
M
F
J
D
N
O
S
A
J
J
2015
for defects liabilityfor defects and Phase II
M
A
M
F
J
D
N
O
S
A
J
J
2014
M
A
M
F
J
D
N
O
excl.works for Phase II
S
A
J
excl. for Phaseworks II
J
2013
M
Dredging
A
official monitoring with reporting
M
F
J
D
N
O
Clearing
S
A
J
J
2012
M
A
M
F
J
D
N
O
S
Monitoring
A
J
J
2011
M
A
ActualImplementation
M
F
J
D
N
O
S
A
J
J
2010
M
internal monitoring
A
M
F
J
planned at Additional financing Additional at planned
D
N
O
S
Implementation Schedule (planned Actual) vs.
Implementation
A
J
J
2009
M
A
M
F
J
D
N
O
S
Planned at time of Apprisal First time at Planned
A
J
J
2008
M
A
M
F
J
D
Time savings Time
N
O
2007
S
A
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- actual -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Appraisal at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned -
- planned at Additional Financing Additional at planned - - planned at Additional Financing Additional at planned -
11.2 Wharf -actual Wharf 11.2
Items
4. Lae Port Management Support Management Port Lae 4.
3. PMU (implem. training & eval.)& training PMU (implem. 3.
2. Construction supervision Construction 2.
1. Detailed Engineering 1.
B. Consulting Services Consulting B.
3.2 Monitoring Resettlement & Environment & Resettlement Monitoring 3.2
3. Environmental Management Plan Management Environmental 3.
2.3 Socio-economic monitoring programme monitoring Socio-economic 2.3
2.2 Training programme Training 2.2
HIV/AIDS
JFPR
2. Social Issues Social 2.
1.5 Construction Defects & Liability Period Liability & Defects Construction 1.5
1.4 Terminal works/Container Yard -actual Yard works/Container Terminal 1.4
1.3 Slope protection works -actual works protection Slope 1.3
1.1 Bush clearing, dredging and reclamation and dredging clearing, Bush 1.1
Overall
1. CivilWorks 1.
0.1b Construction Supervision Construction 0.1b
0.1a Civil Works contract Civil 0.1a
0.2 Tender Procedure Tender 0.2
0.1 Resettlement 0.1 0. Preparation 0. 24 Appendix 6
Appendix 7 25
STATUS OF COMPLIANCE WITH LOAN COVENANTS
Reference in Loan Covenant Status of Compliance Agreement
The Borrower shall take all action which shall be LA2399 Section The Government of PNG approved the necessary on its part to enable IPBC to perform its 4.03; LA2398 handover of new facilities by IPBC to obligations under the Project agreement and shall Section 4.04; PNGPCL on 2 April 2015 without ADB’s not take or permit any action which would interfere LA2803 Section concurrence, in violation of loan with the performance of such obligation. 4.06; LA2804 provision sections 4.03 and 4.04 (b). Section 4.03 No rights or obligations under the Subsidiary Loan LA2399 Section Not fully complied with. Agreement shall be assigned, amended, or waived 4.04 (b); LA2398 without the prior concurrence of ADB. Section 4.05 (b); LA2803 Section 4.07 (b); LA2804 Section 4.04 (b) Except as ADB may otherwise agree, IPBC shall PA Section 2.12 The handover of new facilities on 2 not sell, lease or otherwise dispose of any of its April 2015 by IPBC to PNGPCL without assets which shall be required for the efficient ADB’s concurrence violates PA carrying on of its operations or the disposal of provision section 2.12. which may prejudice its ability to perform satisfactorily of its obligation under this Project Agreement. Within three month of the Effective Date, the LA2399 Schedule 5, Not fully complied with, and delays Borrower shall establish the Project Steering paras. 2 and 14; PA were experienced. Committee (PSC) (to oversee Project Schedule, para. 8 implementation and provide policy guidance). The Borrower shall ensure that PSC meets at least on a quarterly basis and provides ADB with the minutes of such meetings. Six months prior to the operation of the port LA2399 Schedule Complied with. Tariff steadily increased facilities, the Borrower, through IPBC, shall 5, para. 4; PA in 2015, 2016, and 2017. undertake the requisite actions to achieve tariff Schedule, para. 1 levels that shall allow for full cost recovery of the facilities. The Borrower shall ensure that the Project is LA2399 Schedule 5, Complied with. carried out in accordance with, and all Project para. 6; LA2804, facilities are designed, constructed, operated, Schedule 3; paras. maintained, and monitored, in compliance with all 3-4 applicable environmental laws and regulations of the Borrower, and ADB's Environment Policy (2002). In case of any discrepancies between the environmental laws, regulations, and/or procedures of the Borrower and ADB's Environment Policy, ADB's Environment Policy shall prevail. The Borrower and IPBC shall implement and comply with the Environmental Management Plan (EMP). The Borrower and IPBC shall submit semi-annual reports to ADB on the implementation of and compliance with EMP. IPBC shall implement and comply with the EMP. PA Schedule, paras. Complied with. The IPBC shall submit semi-annual reports to ADB 3 and 4; LA2399 on the implementation and compliance with the Schedule 5, paras. 6 EMP. IPBC shall ensure that the dumping of and 7 dredged sediments offshore shall only be permitted if appropriate mitigation measures are in place and conducted in compliance with ADB's Environmental Policy and the Borrower's applicable laws and regulations.
26 Appendix 7
Reference in Loan Covenant Status of Compliance Agreement
The Borrower and IPBC shall ensure that the LA 2399 Schedule The modified resettlement plan resettlement activities under the Project are 5, para. 9; PA following the supplementary implemented in accordance with ADB's Involuntary Schedule, para. 5 resettlement plan approved by ADB Resettlement Policy (1995), and the resettlement was complied with. plan agreed upon between ADB and the Borrower. The Borrower and IPBC shall further ensure that: The new boat landing facility and fish market in SP LA2399 Schedule 5, Not fully complied with. An action plan Beach shall have been fully developed and para. 9 for a new Labu small-craft landing site operational, prior to the acquisition of the existing was prepared by PNGPCL in boat landing site and associated fish market in consultation with the MPG and the Sandaun Market for the purpose of the Project. Labu people. The action plan was endorsed by IPBC on 23 November 2016 for a 12-month implementation from January to December 2017. The action plan includes detailed consultations with the Labu people, review of the current MOU by MPG and relevant stakeholders, and the construction of a new jetty at a suitable site with breakwaters, as well as fish market, transit terminal, and fuel voucher outlet. The Borrower shall cause IPBC to prepare, in LA2399 Schedule 5, The public–private partnership policy accordance with its public-private partnership policy paras. 17–18; PA approved by the National Executive a time-bound action plan to develop a strategic Schedule, para. 11; Council in December 2008 was not public-private partnership model to ensure effective LA2804 Schedule 3, complied with in relation to the port and efficient service delivery in the operation of the para.2 facilities. new port facilities constructed under the Project. IPBC shall establish a Project Performance and LA2399 Schedule 5 Not complied with. monitoring system to monitor and evaluate Project para. 19; PA Impacts to ensure that the Project is managed Schedule, para. 9 effectively and the benefits are maximized. ADB and IPBC shall agree upon a system for LA2399 Schedule 5, The reporting requirements were not monitoring and evaluating Project Performance in paras. 14-16; PA fully complied with during relation to its goals and purposes, with an Schedule, para. 10 implementation and after project emphasis to trade, economic activities, job creation, and 12. completion. and livelihood improvement. A consultant shall be recruited under the Project to establish the system and assess the socio-economic impact of the Project. IPBC shall submit to ADB (a) within 3 months at the end of each year, the annual monitoring report, and (b) within 3 months after Project completion, the final monitoring report. The monitoring indicators shall include (a) industrial and commercial activities, (b) job creation, (c) exports and imports, (d) traffic volume (e) port charges, (f) income generation, and (g) social services. Employment impact indicators shall include information about unskilled laborers, poor laborers, and women laborers. The Borrower shall make available to IPBC, LA2398/2803, Complied with promptly as needed and on terms and conditions Section 4.02; PA acceptable to ADB, the funds, facilities, services, Section 2.02 land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project. Appendix 7 27
Reference in Loan Covenant Status of Compliance Agreement
The Borrower shall enable ADB’s representatives LA2399, Section Complied with. to inspect the Project, the Goods and Works 4.02; LA2803, financed out of the proceeds of the Loan, all other Section 4.05; LA plants, sites, properties and equipment of the 2804, Section 4.02 Borrower, and any relevant records and documents. In the carrying out of the Project, the Borrower shall LA2803, Section Complied with. cause competent and qualified consultants and 4.03; PA Sections contractors, acceptable to ADB, to be employed to 2.03 and 2.04 an extent and upon terms and conditions satisfactory to the Borrower and ADB. The Borrower shall repay the principal amount of LA2803/2804 PA Complied with. the Loan withdrawn from the Loan Account in Section 2.05 accordance with the provisions of Schedule 1 to this Loan Agreement LA2398/2399 PA IPBC shall take out and maintain with responsible Section 2.05 insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. ADB and IPBC shall cooperate fully to ensure that LA2398/2399 PA Complied with. the purposes of the Loans will be accomplished. Section 2.07 IPBC shall furnish to ADB all such reports and PA Section 2.08 (a), Complied with. information as ADB shall reasonably request Schedule para 13; concerning (i) the Loans and the expenditure of the LA2399, Schedule proceeds thereof; (ii)the Goods, Works and 5, para 21 consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of IPBC; and (v) any other matters relating to the purposes of the Loans. IPBC shall (i) maintain separate accounts for the PA Section 2.09 (a); Complied with. Project; (ii) have such accounts and related LA2399, Schedule financial statements (balance sheet, statement of 5, para 20 income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the proceeds of the Loans and compliance with the financial covenants of the Loan Agreements as well as on the use of the procedures for imprest account), all in the English language. IPBC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.
28 Appendix 7
Reference in Loan Covenant Status of Compliance Agreement
Except as ADB may otherwise agree, IPBC shall PA Section 2.13 Complied with. apply the proceeds of the Loans to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreements and this Project Agreement, and shall ensure that all Goods, Works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project. The Borrower shall cause IPBC to ensure that the LA2399 Schedule 5, Complied with. Project facilities are built in accordance with the para 5; PA design technical specifications and that 2398/2399, construction supervision, quality control, and Schedule para 2 contract management are implemented in accordance with the internationally accepted standards The Borrower shall cause IPBC to ensure that LA2399 Schedule Complied with. Works contractors engaged under the Project shall 5, para 10; PA (a) comply with all applicable labor laws and related 2398/2399, international treaty obligations, and do not employ Schedule para 6 child labor under the Project, (b) provide information to all construction workers during the construction period on the prevention of sexually transmitted infections, including HIV/AIDS, in health and safety programs, (c) provide prompt and equal pay to men and women for work of equivalent value in accordance with the Borrower’s laws and international treaty obligations, (d) provide safe working conditions for both male and female workers, and (e) provide separate and culturally appropriate facilities for men and women workers. The Borrower shall cause IPBC to ensure that specific provisions to this effect shall be included in the bidding documents and contracts for Works. The Borrower shall cause IPBC to monitor compliance and to include the status of the implementation of these activities in the Project progress reports. The Borrower shall comply and cause IPBC to LA2399 Schedule Complied with. comply with ADB’s Anticorruption Policy (1998, as 5, para 12-13; PA amended to date) and the Borrower’s laws and 2398/2399 regulations on anti-corruption. The Borrower Schedule para 7 agrees (a) that ADB reserves the righ to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project, and (b) to cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. In particular, the Borrower shall (a) conduct periodic inspections on the contractors’ activities related to fund withdrawals and settlements, and (b) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of the Project Executing Agency, all Appendix 7 29
Reference in Loan Covenant Status of Compliance Agreement contractors, suppliers, consultants and other service providers as they relate to the Project. The Borrower shall cause IPBC to ensure that (a) the entire PMU staff actively participate in the training on ADB’s Anticorruption Policy, and the Borrower’s laws and regulations on anti-corruption, and (b) within three months of the Effective Date, the Project website shall have been developed and maintained to disclose, among other things, the audited Project financial accounts, the Project progress report and the procurement results. As the Project Executing Agency, IPBC shall be LA2399 Schedule Complied with. responsible for overall Project implementation, and 5, para 1 Morobe Provincial Administration of the Borrower shall be responsible for the day to day implementation of Part 4 of the Project. The Borrower shall cause IPBC to establish the PMU to comprise (a) engineering and contract management division, (b) resettlement and environment division, and (c) finance and administration division. The Borrower shall ensure that IPBC appoint a Project director who has integrity, leadership skills, and familiarity with the administrative system of the Borrower and the local culture. The Project director shall report to the director of IPBC. The Borrower through the IPBC shall cause the PMU to be responsible for the (a) implementation of the resettlement efforts in coordination with the Morobe Provincial Administration, (b) bidding process, (c) management of contracts, (d) monitoring the progress of the Project, (e) preparation of withdrawal applications, (f) preparation of Project progress reports and project completion report, (g) management of Project accounts and financial records for auditing, and (h) monitoring of the socioeconomic impact of the Project. The Borrower shall cause IPBC to ensure that the Project director shall be given adequate financial authority to approve contract variations and Works contract under the Project to an amount to be agreed upon between ADB and the Borrower. The Borrower shall cause IPBC to also ensure that the PMU remain fully staffed and adequately funded throughout Project implementation period. The Borrower shall ensure that throughout the LA2399 Schedule Complied with. implementation of the Project, adequate budgetary 5, para 3 allocations of the required counterpart funds are made, approved, and released in a timely manner in order to ensure proper implementation of the Project
30 Appendix 7
Reference in Loan Covenant Status of Compliance Agreement
The Borrower shall undertake the required LA2399 Schedule Complied with. measures to provide adequate security for the 5, para 11 smooth and uninterrupted implementation of the Project. The Borrower shall also ensure that (a) all Works contracts contain requirements to prepare an action plan for adequate security for the smooth and uninterrupted implementation of the Project, (b) the cost to implement such plan to be included in the budget for such Works, and (c) such plan shall be fully implemented. ADB = Asian Development Bank, IPBC = Independent Public Business Corporation, LA = loan agreement, MGP = Morobe Provincial Government, MOU = memorandum of understanding, PA = project agreement, PNG = Papua New Guinea, PNGPCL = Papua New Guinea Ports Corporation Limited. Appendix 8 31
9
64,605
60,025
41,753
28,389 26,952 rt.
Palmoil
90
79
86 79
107
Series5
no
8
No.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. ships
ships 20
75
348
332
273
109
5,783
3,872
24,454
rt.
11,293
rt. Out
Out
9,284 9,284
49,265 49,265
50,305 50,305
16,861 16,861
16,123 16,123
32,785 32,785
12,091 12,091
14,522 14,522
7
2015
- Bulk Bulk Fuel
Bulk Fuel
In
In
rt.
81,872
51,506
rt.
184,899
250,465
208,050
172,932
207,860
183,262
162,894 142,526
Break-Bulk Coastal
125,772 125,772
167,559 167,559
238,064 238,064
231,586 231,586
202,432 202,432
167,365 167,365
137,364 137,364
144,974 144,974
6
rt.
85,744 51,615
rt.
250,485
208,398
173,007
208,192
183,535
168,677
153,819
Total
Total
175,037 175,037
217,864 217,864
254,925 254,925
240,870 240,870
218,555 218,555
209,353 209,353
200,150 200,150
149,455 149,455
159,496 159,496
92
99
72 150
116
5
no
no
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. ships ships
ContainerCoastal
4%
4%
26%
41%
6.8%
2.7%
-11%
-19%
-23% -21%
-1.0%
46.7%
-14.9%
-18.2%
-15.4%
-38.4%
4
Annual
Annual
Growth Growth 2007 Composition Traffic
-
rt.
75,662
68,892
62,121
80,433
85,158
rt.
Out
Out
108,910
119,605
121,096 139,831
108,667
60,883 60,883
80,377 80,377
89,964 89,964
77,806 77,806
83,810 83,810
134,010 134,010
136,805 136,805
135,838 135,838
3 Break Bulk Break Bulk
Break BulkOverseas
In
In
rt.
rt.
271,799
317,820
403,202
592,976
480,578
465,097
449,615
569,425
375,070
8,427 8,427
75,298 75,298
79,728 79,728
71,823 71,823
73,690 73,690
63,699 63,699
71,362 71,362
79,025 79,025
100,054 100,054
Lae Port Lae Fig. Lae :Fig. Port
2 rt.
rt.
136,181
160,105
161,787
151,496
147,509
180,272
213,035
145,232
235,892
391,404
438,916
543,033
701,643
556,240
533,988
511,736
649,858
460,228
Total Total
160
191
206 168
206
Overseas ContainerOverseas
1
12
12
13
13
13
no
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
0 ships
rt/TEU
CargoOverseas
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000 4,000,000
Cargo Coastal
no
15
15
15
16
16
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. ships rt/TEU
Table A8.1: Traffic at at Traffic A8.1: Table
57,569
59,266
54,219
55,727
55,626
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Nos
Nos
TEU
136,087
129,482
127,887
128,764 106,044
TEU
Bulk oil
490,127 490,127
486,287 486,287
469,685 469,685
477,451 477,451
429,042 429,042
Palmoil &
84%
82%
81%
82%
83%
79%
75%
79%
73%
84%
82%
78%
74%
76%
74%
71% 67%
73%
n.a.
n.a.
n.a.
n.a.
TEUs
Share
Share Share
193,656 193,656
188,748 188,748
182,106 182,106
184,491 184,491
161,670 161,670 Container
Container
212
625
291
1,803
3,542
2,183
1,714
1,244
1,262
Container
Container
rt.
41,383
21,820
41,753
18,415
24,714
34,144
43,574
44,352 50,280
rt.
84%
82%
79%
76%
78%
75%
72%
70%
73%
off/on
off/on Share Share Container
rt
rt.
rt.
Out
Out
583,088
595,533
571,390
579,489
582,441
540,614
498,787
550,323
500,351
246,344
219,229
204,916
238,753
274,253
260,991
247,728 303,282
244,922
527,585 527,585
599,021 599,021
704,820 704,820
853,139 853,139
703,749 703,749
714,260 714,260
724,771 724,771
795,090 795,090
696,120 696,120
Breakbulk
167
rt
In
In
rt.
rt.
109,592
123,925
113,217
131,658
157,086
149,071
141,056
142,856
972,896
945,041
926,725
1,700,735
1,699,677
1,656,334
1,783,762
1,441,797 1,207,347
Container
2,682,945 2,682,945
2,663,726 2,663,726
2,587,822 2,587,822
2,752,702 2,752,702
2,482,474 2,482,474
2,193,880 2,193,880
1,905,285 1,905,285
1,844,427 1,844,427
1,865,425 1,865,425
9.6%
3.0%
-1.6%
-0.9%
-8.7%
-0.4%
13.2%
10.6% rt.
rt.
694,483
723,000
684,819
711,772
741,710
691,399
641,087
551,752
643,498
Total
Total
Annual
Growth
1,988,462
1,940,726
1,903,003
2,040,930
1,740,764
1,502,481
1,264,198 1,292,675 1,221,927
4.3%
2.0%
2.1%
0.0%
-5.9%
-1.9%
-2.9%
-2.7%
-8.6%
22.5%
19.4%
12.8%
14.7%
15.5%
Total Lae Port Overseas and Coastal Cargoes (rt) Cargoes Overseas Port TotalLae Coastal and -20.7%
-10.8%
relev.rt
Growth
Annual
Growth
Annual
Project
3,210,530 3,210,530
3,262,747 3,262,747
3,292,642 3,292,642
3,605,841 3,605,841
3,186,223 3,186,223
2,908,140 2,908,140
2,630,056 2,630,056
2,639,517 2,639,517
2,561,545 2,561,545
Total Coastal
830,664
883,105
846,606
863,268
889,219
871,671
854,122
696,984
879,390
Total Overseas
rt.
rt.
rt.
Total
3,700,657 3,700,657
3,749,034 3,749,034
3,762,327 3,762,327
4,083,292 4,083,292
3,615,265 3,615,265
3,286,169 3,286,169
2,984,025 2,984,025
2,874,716 2,874,716
2,772,656 2,772,656
2,379,866 2,379,866
2,379,642 2,379,642
2,446,036 2,446,036
2,742,573 2,742,573
2,297,004 2,297,004
2,036,469 2,036,469
1,775,934 1,775,934
1,942,533 1,942,533
1,682,155 1,682,155
Total Overseas Total
2015
2014
2013
2012
2011
2010
2009
2008
2007
2015
2014
2013
2012
2011
2010
2009
2008
2007
2015
2014
2013
2012
2011
2010
2009 2008 2007
32 Appendix 8
2015
2014
2013 2012
2011
2010
2009 2008
2007 2006 2005
2004
2003 2002
2001
2015 -
2000
1999
1998 1997
1996
1995
1994 1993
1992
1991
Total Traffic Growth in Lae in Growth TotalTraffic
1990 1989
1988
1987
1986
Traffic and GDP 1698 GDP andGrowth Traffic 1985
- 1984
Growth GDP
1983
1982 1981
1980 1979
1978 Fig : Lae Port Fig Lae :
1977
1976 1975 1974
1973
1972
1971 1970
1969 1968
Traffic and GDP- Lae Growth Port
0
0.1
0.2
0.3
0.4 -0.2
-0.1
0.97 0.97
1.52 1.52
rt.
899,561 899,561
908,799 908,799
848,543 848,543
862,646 862,646
873,998 873,998
841,110 841,110
795,000 795,000
746,000 746,000
733,000 733,000
651,000 651,000
597,000 597,000
546,000 546,000
521,000 521,000
526,000 526,000
577,000 577,000
550,000 550,000
521,000 521,000
491,000 491,000
467,200 467,200
355,300 355,300
430,800 430,800
411,400 411,400
350,000 350,000
337,700 337,700
344,300 344,300
355,600 355,600
251,100 251,100
233,000 233,000
162,000 162,000
3,749,034 3,749,034
3,762,327 3,762,327
4,083,292 4,083,292
3,615,265 3,615,265
3,286,169 3,286,169
2,984,025 2,984,025
2,874,716 2,874,716
2,772,656 2,772,656
1,631,000 1,631,000
1,531,814 1,531,814
1,396,997 1,396,997
1,240,706 1,240,706
1,219,114 1,219,114
1,170,913 1,170,913
1,122,448 1,122,448
1,067,588 1,067,588
1,173,831 1,173,831
1,120,648 1,120,648
1,035,919 1,035,919
Lae
6.4%
3.8%
3.7%
6.5%
9.7%
1.8%
4.1%
4.3%
5.1%
4.7%
8.2%
7.1%
3.9%
5.8%
6.6%
1.8%
9.0%
9.3%
4.8%
4.9%
5.6%
6.1%
5.1%
4.7%
3.6%
7.8%
-0.4%
-7.9%
-9.1%
-1.0%
-1.6%
-1.3%
-1.0%
-8.8%
-1.9%
-3.2%
12.9%
10.0%
10.1%
12.6%
15.2%
12.6%
31.5%
17.5%
41.6%
43.8%
-17.5%
Growth
Total Traffic Growth in in Growth TotalTraffic
2007-2015
1969-2015
4.2%
9.9%
5.0%
8.1%
7.6%
6.1%
8.9%
7.2%
2.6%
3.6%
2.7%
2.9%
7.6%
7.7%
5.9%
9.5%
2.9%
2.8%
4.7%
4.0%
3.2%
0.4%
1.8%
8.5%
0.8%
2.6%
6.5%
5.6%
6.3%
8.3%
4.4%
-1.0%
-0.1%
-0.1%
-2.8%
-4.9%
-3.3%
-3.0%
-1.4%
-0.4%
-0.3%
-2.3%
-3.4%
-0.9%
13.3%
10.7%
18.2%
13.8%
10.8%
GDP
Growth
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968 Traffic/GDP Elasticity Traffic/GDP Appendix 9 33
EVALUATION METHODOLOGY
A. Methodology for Economic Evaluation
1. The evaluation assessed ship lengths and the sizes of the various consignment categories— overseas and coastal containers, and overseas and coastal break-bulk—from Papua New Guinea Ports Corporation Limited (PNGPCL) statistics, but these only provide overall averages. 2. The evaluation considered the existing Lae Port facilities, as shown in Figure A9.1. 3. The evaluation assessed handling rates based on discussions with PNGPCL operational staff during the mission. Total traffic divided by consignment sizes provides the number of ship calls. Consignment sizes and handling rates provide the average berth time for loading and unloading. Berth time multiplied by average ship length provides the berth-meter requirements over the year compared with the berth meters available, which must be adjusted by the maximum optimal berth occupancy ratio (BOR) allowed before the waiting time becomes prohibitive. The following optimal BORs have been assumed: (i) 60% for the two-berth coastal facilities, (ii) 50% for the old three-berth overseas facilities, and (iii) 30% for the one-berth tidal basin wharf. 4. The evaluation assumed that the new facilities would mainly be used for overseas container traffic; however, the new facilities will not be large enough to handle all of this traffic, most of which the old facilities will continue to handle. 5. No improvement in handling rates was assumed because information about the new operator is lacking. Although the new facility provides 240 meters (m) of berthing space and can accommodate ships up to around 180 m long, the one-berth tidal basin wharf can only accommodate one vessel. Therefore, the maximum ship size at that wharf was set at 240 m. 6. Faster turnaround has yielded benefits with regard to ship-time savings and cargo inventories, thanks to shorter waiting times when comparing the with-project and without-project scenarios. 7. The evaluation examined the benefit of potential additional traffic by assessing the value added by additional exports. Imports were not included in this assessment to avoid double counting, since the cost of the value added by additional exports reflects this. 8. The new facilities provide no additional space for coastal cargo. 9. The evaluation assessed the economic cost by clearing the financial investment cost from taxes, and the local components have been shadow-priced (based on figures assessed in the Royal Haskoning feasibility study and brought up to 2016 price levels. The evaluation attributed 50% of dredging costs to the Phase 2 development. 10. This evaluation did not consider the situation at the coastal berths, since these reach capacity only after the overseas berths do so.
B. Methodology for Calculating Financial Internal Rates of Return
1. The financial investment cost reflects all costs, except for the safeguard components and 50% of the dredging costs. 2. Additional traffic made possible by the port expansion is the only source of the financial benefits in the calculation of the financial internal rats of return (FIRRs). The evaluation of the berth facilities reported additional capacity in terms of additional revenue tons. 3. The additional traffic generates incremental income in the form of wharfage, pilotage, and storage fees. Wharfage revenues were derived from the recent regular contract between the
34 Appendix 9
PNGPCL and the Independent Consumer and Competition Commission of 2016, while pilotage and storage revenues were taken as percentages based on the 2010 Deloitte study. 4. Income from leasing the reclaimed area for port-related industries is derived from information provided on existing land leases in the old port (K200 per square meter). Prospective license fees from concessionaires did not provide any information. 5. The blank columns in the FIRR table for tariff increases and licenses are used for sensitivity calculations. It is assumed that tariff increases will apply to all overseas cargo, as this category benefits from reduced waiting time even if handled at the old port. 6. The evaluation considered the existing Lae Port facilities, as shown in Figure A9.1. Table A9.1: Evaluation Parameters Item Amount Unit Handling rate per day Daily handling rates—overseas container at old port 6,144 rt/day Daily handling rates—overseas break-bulk cargo 3,840 rt/day Daily handling rates—coastal container cargo 4,608 rt/day Daily handling rates—coastal break-bulk cargo 2,400 rt/day Daily handling rates—container tidal wharf 7,680 rt/day Consignment size Consignment size—overseas container 7,000 rt/ship Consignment size—overseas break-bulk 3,000 rt/ship Consignment size—coastal container 5,000 rt/ship Consignment size—coastal break-bulk 1,500 rt/ship Consignment size—container tidal wharf 9,000 rt/ship Vessel length Vessel length—overseas container 180 m Vessel length—overseas break-bulk 160 m Vessel length—coastal container 140 m Vessel length—coastal break-bulk 120 m Vessel length—tidal container wharf 240 m Ship cost per day Ship cost per day—overseas container 7,000 $ Ship cost per day—overseas break-bulk 5,000 $ Ship cost per day—coastal container 4,000 $ Ship cost per day—coastal break-bulk 4,000 $ Ship cost per day—tidal container wharf 7,000 $ Port facilities Coastal berths 2 & 3 210 m Overseas berths 4, 5, & 6 451 m Tidal wharf 240 m Total port 901 m m = meter, rt = revenue ton.
Appendix 9 35
Table A9.2: Value Added for Export Cargo through Lae Port Item Unit Percent Amount Year (1) PNG exportsa $ million 8,620 2014 (2) Of which minerals and oila $ million 77% 6,637 2014 (3) PNG importsa $ million 4,900 2014 (4) Import component of PNG exports (excluding minerals and oils) (3)/(2) 74% (5) Value of exports at Lae Port (excluding bulk oil and minerals) 50%*{(1)-(2)} $ million 50% 991 (6) Import component for Lae exports ($ million) (5)*(4) $ million 732 (7) Value added of Lae Port exports (5)–(6) $ million 259 (8) Total overseas trade in Lae Port (excluding bulk oil) rt million 2.40 2014 (9) Share of exportsb 15%*(8) rt million 15% 0.36 2014 (10) Local value added by exports (unit value) (7)/((9) $/rt 721 (11) Value of cargo at Lae Port (excluding minerals and oils) (2)+(3)*50% $ million 50% 5,769 (12) Total cargo at Lae Port (excluding minerals and oils) (11)/(12) rt million 3.3 (13) Unit value $/rt 1,748 PNG = Papua New Guinea, rt = revenue ton. Observatory of Economic Complexity. Country Profile: Papua New Guinea. a http://atlas.media.mit.edu/en/profile/country/png/ b See tables on traffic.
36 Appendix 9
Existing Lae Port Layout Port Lae Existing
Figure A9.1: Figure A9.1:
Appendix 9 37
3
2
3.3 3.3
2.6 2.6
0.7 0.7
8.9 8.9
1.2 1.2
394
420
271
271
451
690
177
482
174
309
150
126
126
210
276
137
648
13.4 13.4
10.1 10.1
2.63 2.63
8.88 8.88
1.10 1.10
1.93 1.93
0.69 0.69
1.24 1.24
1.04 1.04
2,206 2,206
11.51 11.51
6,680 6,680
1,724 1,724
1,330 1,330
0.296 0.296
5,775 5,775
1,208 1,208
6,359 6,359
4,000 4,000
0.562 0.562
4,263 4,263
4,453 4,453
2041
2041
60.0%
60.0%
153.0%
5,019,426
131.4%
2,194,131
6,737,373 6,737,373
5,170,797 5,170,797
2,509,713 2,509,713
5,170,797 5,170,797
2,509,713 2,509,713
7,680,510 7,680,510
1,566,576 1,566,576
1,316,479 1,316,479
1,566,576 1,566,576
1,316,479 1,316,479
2,883,055 2,883,055
3
2
7
61
7.5 7.5
2.0 2.0
1.3 1.3
0.7 0.7
5.5 5.5
4.3 4.3
1.2 1.2
829
189
640
271
271
451
332
177
581
482
174
309
126
126
210
133
137
311
5.54 5.54
1.26 1.26
4.27 4.27
1.10 1.10
1.93 1.93
0.69 0.69
1.24 1.24
1.04 1.04
1,312 1,312
6,680 6,680
0.296 0.296
5,775 5,775
6,359 6,359
4,000 4,000
0.562 0.562
4,263 4,263
4,453 4,453
2026
2026
70,320 70,320
70,320 70,320
60.0%
73.6%
60.0%
63.2%
5,019,426
2,194,131
1,255,063 1,255,063
1,184,744 1,184,744
2,509,713 2,509,713
1,184,744 1,184,744
2,509,713 2,509,713
3,694,457 3,694,457
1,316,479 1,316,479
1,316,479 1,316,479
1,386,799 1,386,799
3
2
0
46
7.2 7.2
1.9 1.9
1.2 1.2
0.7 0.7
5.3 5.3
4.1 4.1
1.2
790
180
609
271
271
451
316
177
553
482
174
309
126
126
210
126
137
297
5.27 5.27
1.20 1.20
4.07 4.07
1.10 1.10
1.93 1.93
0.69 0.69
1.24 1.24
1.04 1.04
1,272 1,272
6,680 6,680
0.296 0.296
5,775 5,775
6,359 6,359
4,282 4,282
4,000 4,000
0.562 0.562
4,282 4,282
4,263 4,263
4,453 4,453
2025
2025
60.0%
70.1%
60.0%
60.2%
5,019,426
2,194,131
1,013,099 1,013,099
1,008,817 1,008,817
2,509,713 2,509,713
1,008,817 1,008,817
2,509,713 2,509,713
3,518,530 3,518,530
1,316,479 1,316,479
1,316,479 1,316,479
1,320,761 1,320,761
3
2
30
6.8 6.8
1.8 1.8
1.1 1.1
0.6 0.6
5.1 5.1
3.9 3.9
1.2 1.2
-
-
-
752
172
580
271
271
451
301
177
527
447
152
295
120
126
210
120
137
283
5.02 5.02
1.15 1.15
3.88 3.88
1.10 1.10
1.79 1.79
0.61 0.61
1.18 1.18
1.04 1.04
1,199 1,199
6,680 6,680
0.296 0.296
5,775 5,775
6,359 6,359
4,000 4,000
0.516 0.516
4,263 4,263
4,453 4,453
2024
2024
60.0%
66.8%
57.3%
57.3%
841,268 841,268
841,268 841,268
841,268 841,268
5,019,426
2,194,131
2,509,713 2,509,713
2,509,713 2,509,713
3,350,981 3,350,981
1,257,867 1,257,867
1,316,479 1,316,479
1,257,867 1,257,867
3
2
16
6.4 6.4
1.6 1.6
1.1 1.1
0.5 0.5
4.8 4.8
3.7 3.7
1.1 1.1
-
-
-
716
164
553
271
271
451
287
177
502
400
119
281
115
126
210
115
137
269
4.78 4.78
1.09 1.09
3.69 3.69
1.10 1.10
1.60 1.60
0.48 0.48
1.12 1.12
1.04 1.04
1,116 1,116
6,680 6,680
0.296 0.296
5,775 5,775
6,359 6,359
4,000 4,000
0.423 0.423
4,263 4,263
4,453 4,453
2023
2023
60.0%
63.6%
54.6%
54.6%
681,698 681,698
681,698 681,698
681,698 681,698
5,019,426
2,194,131
2,509,713 2,509,713
2,509,713 2,509,713
3,191,411 3,191,411
1,197,969 1,197,969
1,316,479 1,316,479
1,197,969 1,197,969
3
2
2
97
6.0 6.0
1.4 1.4
1.0 1.0
0.4 0.4
4.6 4.6
3.5 3.5
1.1 1.1
-
-
-
682
156
526
271
271
451
273
177
478
364
268
109
126
210
109
137
256
4.56 4.56
1.04 1.04
3.52 3.52
1.10 1.10
1.46 1.46
0.39 0.39
1.07 1.07
1.04 1.04
1,046 1,046
6,680 6,680
0.296 0.296
5,775 5,775
6,359 6,359
4,000 4,000
0.361 0.361
4,263 4,263
4,453 4,453
2022
2022
60.0%
60.6%
52.0%
52.0%
529,726 529,726
529,726 529,726
529,726 529,726
5,019,426
2,194,131
2,509,713 2,509,713
2,509,713 2,509,713
3,039,439 3,039,439
1,140,923 1,140,923
1,316,479 1,316,479
1,140,923 1,140,923
3
2
70
5.6 5.6
1.2 1.2
0.9 0.9
0.3 0.3
4.4 4.4
3.3 3.3
1.0 1.0
-
-
-
-
962
638
136
501
260
271
451
260
177
455
324
255
104
126
210
104
137
244
4.26 4.26
0.91 0.91
3.35 3.35
1.10 1.10
1.30 1.30
0.28 0.28
1.02 1.02
1.04 1.04
6,680 6,680
0.272 0.272
5,775 5,775
6,359 6,359
4,000 4,000
0.273 0.273
4,263 4,263
4,453 4,453
2021
2021
57.7%
57.7%
49.5%
49.5%
384,990 384,990
384,990 384,990
384,990 384,990
5,019,426
2,194,131
2,509,713 2,509,713
2,509,713 2,509,713
2,894,704 2,894,704
1,086,593 1,086,593
1,316,479 1,316,479
1,086,593 1,086,593
3
2
Project Case Project
63
99
99
5.1 5.1
0.9 0.9
0.7 0.7
0.3 0.3
4.2 4.2
3.2 3.2
1.0 1.0
-
-
-
-
883
578
100
477
248
271
451
248
177
434
305
243
126
210
137
232
-
3.86 3.86
0.67 0.67
3.19 3.19
1.10 1.10
1.22 1.22
0.25 0.25
0.97 0.97
1.04 1.04
6,680 6,680
0.210 0.210
5,775 5,775
6,359 6,359
4,000 4,000
0.258 0.258
4,263 4,263
4,453 4,453
2020
2020
54.9%
54.9%
47.2%
47.2%
247,147 247,147
247,147 247,147
247,147 247,147
5,019,426
2,194,131
2,509,713 2,509,713
2,509,713 2,509,713
2,756,861 2,756,861
1,034,850 1,034,850
1,316,479 1,316,479
1,034,850 1,034,850
3
2
82
56
94
94
4.7 4.7
0.8 0.8
0.5 0.5
0.2 0.2
4.0 4.0
3.0 3.0
0.9 0.9
-
-
-
-
824
536
455
236
271
451
236
177
413
287
231
126
210
137
221
3.58 3.58
0.54 0.54
3.04 3.04
1.10 1.10
1.15 1.15
0.22 0.22
0.92 0.92
1.04 1.04
6,680 6,680
0.179 0.179
5,775 5,775
6,359 6,359
4,000 4,000
0.243 0.243
4,263 4,263
4,453 4,453
2019
2019
52.3%
52.3%
44.9%
44.9%
115,868 115,868
115,868 115,868
115,868 115,868
5,019,426
985,572 985,572
2,194,131
985,572
Without
2,509,713 2,509,713
2,509,713 2,509,713
2,625,581 2,625,581
1,316,479 1,316,479
3
2
—
53
48
90
90
-
4.3 4.3
0.6 0.6
0.4 0.4
0.2 0.2
3.8 3.8
2.9 2.9
0.9 0.9
-
-
-
-
-
-
755
487
433
225
271
451
225
177
393
269
220
126
210
137
211
3.25 3.25
0.36 0.36
2.89 2.89
1.10 1.10
1.07 1.07
0.19 0.19
0.88 0.88
1.04 1.04
6,680 6,680
0.124 0.124
5,775 5,775
6,359 6,359
4,000 4,000
0.220 0.220
4,263 4,263
4,453 4,453
2018
2018
49.8%
49.8%
42.8%
42.8%
5,019,426
938,640 938,640
2,194,131
938,640 938,640
2,500,554 2,500,554
2,509,713 2,509,713
2,500,554 2,500,554
1,316,479 1,316,479
3
2
47
41
86
86
-
4.1 4.1
0.5 0.5
0.3 0.3
0.2 0.2
3.6 3.6
2.8 2.8
0.8 0.8
-
-
-
-
-
-
711
460
412
214
271
451
214
177
374
251
210
126
210
137
201
3.07 3.07
0.32 0.32
2.75 2.75
1.10 1.10
1.00 1.00
0.16 0.16
0.84 0.84
1.04 1.04
6,680 6,680
0.115 0.115
5,775 5,775
6,359 6,359
4,000 4,000
0.196 0.196
4,263 4,263
4,453 4,453
2017
2017
47.4%
47.4%
40.7%
40.7%
5,019,426
893,943 893,943
2,194,131
893,943 893,943
projected
projected
2,381,480 2,381,480
2,509,713 2,509,713
2,381,480 2,381,480
1,316,479 1,316,479
3
2
43
35
81
81
-
3.8 3.8
0.4 0.4
0.3 0.3
0.1 0.1
3.4 3.4
2.6 2.6
0.8 0.8
-
-
-
-
-
-
670
435
393
204
271
451
204
177
357
234
200
126
210
137
191
2.91 2.91
0.28 0.28
2.62 2.62
1.10 1.10
0.94 0.94
0.14 0.14
0.80 0.80
1.04 1.04
6,680 6,680
0.109 0.109
5,775 5,775
6,359 6,359
4,000 4,000
0.173 0.173
4,263 4,263
4,453 4,453
2016
2016
45.2%
45.2%
38.8%
38.8%
5,019,426
851,374 851,374
2,194,131
851,374
2,268,076 2,268,076
2,509,713 2,509,713
2,268,076 2,268,076
1,316,479 1,316,479
3
2
52
32
80
80
-
4.1 4.1
0.5 0.5
0.3 0.3
0.1 0.1
3.6 3.6
2.8 2.8
0.8 0.8
-
-
-
-
-
-
707
480
428
221
271
451
221
176
391
228
196
126
210
137
188
3.18 3.18
0.35 0.35
2.83 2.83
1.09 1.09
0.91 0.91
0.13 0.13
0.78 0.78
1.04 1.04
6,627 6,627
0.122 0.122
5,714 5,714
6,254 6,254
4,000 4,000
0.163 0.163
4,246 4,246
4,426 4,426
2015
2015
49.1%
49.1%
38.0%
38.0%
4,980,735
830,664 830,664
2,187,815
830,664 830,664
2,444,471 2,444,471
2,490,367 2,490,367
2,444,471 2,444,471
1,312,689 1,312,689
3
2
52
41
85
85
-
4.2 4.2
0.5 0.5
0.3 0.3
0.2 0.2
3.7 3.7
2.8 2.8
0.8 0.8
-
-
-
-
-
-
733
482
430
222
271
451
222
176
395
251
210
126
210
136
202
3.18 3.18
0.35 0.35
2.83 2.83
1.09 1.09
1.00 1.00
0.16 0.16
0.84 0.84
1.04 1.04
6,591 6,591
0.122 0.122
5,673 5,673
6,182 6,182
4,000 4,000
0.196 0.196
4,208 4,208
4,365 4,365
2014
2014
49.2%
49.2%
40.6%
40.6%
4,954,213
883,105 883,105
2,173,211
883,105 883,105
2,439,667 2,439,667
2,477,106 2,477,106
2,439,667 2,439,667
1,303,927 1,303,927
3
2
72
36
82
82
Lae Port: Benefits Evaluation Benefits Port: Lae
4.3 4.3
0.6 0.6
0.5 0.5
0.1 0.1
3.7 3.7
2.9 2.9
0.8 0.8
-
-
-
-
755
516
444
229
271
451
229
175
411
238
202
126
210
136
195
3.37 3.37
0.47 0.47
2.90 2.90
1.08 1.08
0.95 0.95
0.14 0.14
0.81 0.81
1.03 1.03
6,530 6,530
0.163 0.163
5,602 5,602
6,060 6,060
4,000 4,000
0.179 0.179
4,186 4,186
4,331 4,331
2013
2013
33,352 33,352
33,352 33,352
33,352 33,352
50.7%
50.7%
39.1%
39.1%
Actual
Actual
4,908,874
846,374 846,374
2,164,887
846,374
2,454,437 2,454,437
2,454,437 2,454,437
2,487,789 2,487,789
1,298,932 1,298,932
-
rt
rt
rt
rt
$
rt
rt
rt
rt
rt
rt
m
m
m
m
m
m
m
m
Nos
Nos
nos.
BOR
BOR
rt/ship
$million
$million BOR BOR %
BOR %
$ $ million
$ $ million
$ $ million
$ $ million
$ $ million
$ $ million
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
shipdays
Shipdays
Shipdays
Shipdays
Shipdays
Shipdays
Shipdays
rt/shipday
$
-
136
4,000 4,000
4,331 4,331
4,331 4,331
Table A9.3: A9.3: Table
50%
60%
rt/day
rt/ship BOR BOR 100%
BOR 100%
'+10m per vessel per '+10m vessel per '+10m
(13)
(6)/(7)
(0)/(1)
(0)-(13)
(6)-(14) (1)/(3)
~(7)/(4)
(20)*(22)
(19)*(22)
(19)*(17)
(14)/(11)
(23)+(24)
(19)+(20)
(18)/(1)*(5) (8)*opt.capacity
(0)>(12) if (0)-(12)
(2)*((4)+10)*(5))/360
((7)*360*(3))/((4)+10))
(6) if (6)<(11) else (11) (6)<(11) if (6)
(23)+(24)
based on E2E2(9)-table on based
(13)
(20)*(22)
(19)*(22)
(19)+(20)
(19)*(17)
(18)/(1)*(5)
(0)-(13)
based on E2E2(9)-table on based
(14)/(11)
(6)-(14)
(6) if (6)<(11) else (11) (6)<(11) if (6)
(0)-(12) if (0)>(12) if (0)-(12)
(8)*opt.capacity
(6)/(7)
~(7)/(4)
((7)*360*(3))/((4)+10))
(2)*((4)+10)*(5))/360 (1)/(3) (0)/(1) Total
Totals Ship turnround times
Cost - Without Project Turnround Total
Total Service Time Cost Time - Without Service Project Total
Without Project Scenario/ Base Case Scenario
Without Project Scenario/ Base Case Scenario
Ship Turnround Cost at Port Ship Turnround
Average Vessel Lenght Average
Overseas CargoOverseas (breakbulk containers& at Berth #4,#5,#6)
Ship Turnround Cost at Port Ship Turnround
Average Vessel Lenght Average
Coastal Coastal Cargo (Breakbulk containers& at3) & Berth Nos.2
Excess Overseas CargoOverseas (cannot beExcess accomodated)
Waiting Time Cost - Overseas BerthsWaiting CostWithout Time - Overseas Project
Waiting Cost Time - Coastal Berths Without Project
Service Time Cost - Overseas Berths Cost- Without Time - Overseas the Service Project
Service Time Cost Time - Coastal Berths Service Without Project
Cost at WharfCost
Total Ship-tunrround Without Project
Excess Cargo (cannot beExcess accomodated)
Ship Ship Waiting Cost Time
Ship Service Time Cost Time Ship Service
Average daily Ship Cost Average
Ship-turnround time in Port Ship-turnround
Waiting for WaitingBerth for
Actual Shipdays Time at Berth/Service
Cargo handled at Berth handled Cargo
WT/ST - Ratio WT/ST
Actual Berth Utilisation (BOR)
Under-capacity of Facility of Under-capacity
Berthmeter Berthmeter used (excl. Excess Cargo)
Excess accomodated) be (cannot Cargo
Optimal Cargo Capacity of Overseas Berths #4, Capacity#5, Overseas #6 Optimal of Cargo
Berthmeter available Project at BOR of Berthmeter available
Berth Ocuppancy (BOR)- Berth without Project Ocuppancy (BOR)-
Berth Berth equivalents
Theoretical Cargo Capacit at 100% Cargo Theoretical
Available Berthlength Available
Berthmeter Berthmeter Requirements
Average time ship at per berth Average
Average Cargo Handling rate Handling Cargo Average
Number of Shipcalls of Number
Average Consignment SizeConsignment Average
Excess Coastal Cargo (cannot Excess be accomodated)
Ship Ship Waiting Cost Time
Ship Service Time Cost Time Ship Service
Average daily Ship Cost Average
Ship-turnround time in Port Ship-turnround
Waiting for WaitingBerth for
Service Time (in days) for Cargo handled at Berth handled Cargo days)(in for Time Service
Cargo accomodated at Berth Cargo
WT/ST - Ratio WT/ST
Actual Berth Utilisation (BOR)
Under-capacity of Facility of Under-capacity
Berthmeter Berthmeter used (excl. Excess Cargo)
Excess accomodated) be (cannot Cargo
Optimal Cargo Capacity Coastal OptimalBerths of Cargo
Berthmeter available at BOR of Berthmeter available
Berth Berth Ocuppancy (BOR)
Berth Berth equivalents
Theoretical Cargo Capacit at 100% Cargo Theoretical
Available Berthlength Available
Berthmeter Berthmeter Requirements
Average time ship at per berth Average
Average Cargo Handling rate Handling Cargo Average Number of Shipcalls of Number
SizeConsignment Average
(9)
(8)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
(0)
(9)
(8)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
(0)
(26)
(25)
(24)
(23)
(22)
(21)
(20)
(19)
(18)
(17)
(15)
(15)
(14)
(13)
(12)
(11)
(10)
(26)
(25)
(24)
(23)
(22)
(21)
(20)
(19)
(18)
(17)
(15)
(15)
(14)
(13)
(12)
(11) (10) 38 Appendix 9
3
438
438
100
338
150
126
126
210
276
137
648
1.75 1.75
0.40 0.40
1.35 1.35
1.75 1.75
0.40 0.40
1.35 1.35
1.04 1.04
4,000 4,000
0.296 0.296
4,263 4,263
4,453 4,453
2041
2,403,096
60.0%
131.4%
1,441,197 1,441,197
1,441,858 1,441,858
1,441,197 1,441,197
1,441,858 1,441,858
2,883,055 2,883,055
1,441,196.9 1,441,196.9
3
7
96
-
-
-
422
422
325
126
126
210
133
137
311
1.69 1.69
0.39 0.39
1.30 1.30
1.69 1.69
0.39 0.39
1.30 1.30
1.04 1.04
4,000 4,000
0.296 0.296
4,263 4,263
4,453 4,453
2026
2,403,096
60.0%
63.2%
1,386,799 1,386,799
1,441,858 1,441,858
1,386,799 1,386,799
… Continued
3
0
92
-
-
-
402
402
310
126
126
210
126
137
297
1.61 1.61
0.37 0.37
1.24 1.24
1.61 1.61
0.37 0.37
1.24 1.24
1.04 1.04
4,000 4,000
0.296 0.296
4,263 4,263
4,453 4,453
2025
2,403,096
60.0%
60.2%
1,320,761 1,320,761
1,441,858 1,441,858
1,320,761 1,320,761
3
79
-
-
-
-
374
374
295
120
126
210
120
137
283
1.50 1.50
0.32 0.32
1.18 1.18
1.50 1.50
0.32 0.32
1.18 1.18
1.04 1.04
4,000 4,000
0.267 0.267
4,263 4,263
4,453
2024
2,403,096
57.3%
57.3%
1,257,867 1,257,867
1,441,858 1,441,858
1,257,867 1,257,867
3
59
-
-
-
-
340
340
281
115
126
210
115
137
269
1.36 1.36
0.24 0.24
1.12 1.12
1.36 1.36
0.24 0.24
1.12 1.12
1.04 1.04
4,000 4,000
0.210 0.210
4,263 4,263
4,453
2023
2,403,096
54.6%
54.6%
1,197,969 1,197,969
1,441,858 1,441,858
1,197,969 1,197,969
3
47
-
-
-
-
314
314
268
109
126
210
109
137
256
1.26 1.26
0.19 0.19
1.07 1.07
1.26 1.26
0.19 0.19
1.07 1.07
1.04 1.04
4,000 4,000
0.174 0.174
4,263 4,263
4,453 4,453
projected
2022
2,403,096
52.0%
52.0%
1,140,923 1,140,923
1,441,858 1,441,858
1,140,923 1,140,923
Project Case Project
3
-
31
-
-
-
-
286
286
255
104
126
210
104
137
244
1.15 1.15
0.13 0.13
1.02 1.02
1.15 1.15
0.13 0.13
1.02 1.02
1.04 1.04
4,000 4,000
0.124 0.124
4,263 4,263
4,453 4,453
2021
2,403,096
49.5%
49.5%
1,086,593 1,086,593
1,441,858 1,441,858
1,086,593 1,086,593
3
Without
28
99
99
-
-
-
-
271
271
243
126
210
137
232
1.08 1.08
0.11 0.11
0.97 0.97
1.08 1.08
0.11 0.11
0.97 0.97
1.04 1.04
4,000 4,000
0.115 0.115
4,263 4,263
4,453 4,453
—
2020 2,403,096
47.2%
47.2%
1,034,850 1,034,850
1,441,858 1,441,858
1,034,850 1,034,850
3
25
94
94
-
-
-
-
256
256
231
126
210
137
221
1.02 1.02
0.10 0.10
0.92 0.92
1.02 1.02
0.10 0.10
0.92 0.92
1.04 1.04
4,000 4,000
0.107 0.107
4,263 4,263
4,453 4,453
2019
985,572 985,572
2,403,096
985,572 985,572
44.9%
44.9%
1,441,858 1,441,858
3
21
90
90
-
-
-
-
241
241
220
126
210
137
211
0.96 0.96
0.08 0.08
0.88 0.88
0.96 0.96
0.08 0.08
0.88 0.88
1.04 1.04
4,000 4,000
0.094 0.094
4,263 4,263
4,453 4,453
2018
938,640 938,640
2,403,096
938,640 938,640
42.8%
42.8%
1,441,858 1,441,858
3
17
86
86
-
-
-
-
227
227
210
126
210
137
201
0.91 0.91
0.07 0.07
0.84 0.84
0.91 0.91
0.07 0.07
0.84 0.84
1.04 1.04
4,000 4,000
0.081 0.081
4,263 4,263
4,453 4,453
2017
893,943 893,943
2,403,096
893,943 893,943
40.7%
40.7% 1,441,858 1,441,858
rt
rt
rt
rt
rt
rt
m
m
m
m
Nos
nos.
BOR
rt/ship
BOR BOR %
$ $ million
$ $ million
$ $ million
Lae Port: Benefits Evaluation Benefits Port: Lae
$ $ milllion
$ $ milllion
$ $ milllion
shipdays
Shipdays
Shipdays
Shipdays Shipdays rt/shipday $
60% rt/day
rt/ship BOR BOR 100%
vessel per '+10m
A9.4: Table
(13)
(6)/(7)
(0)/(1)
(1)/(3)
(0)-(13)
(6)-(14)
~(7)/(4)
(14)/(11)
(20)*(22)
(19)*(22)
(19)*(17) (23)+(24)
(19)+(20)
(18)/(1)*(5)
(8)*opt.capacity (0)-(12) if (0)>(12) if (0)-(12)
(2)*((4)+10)*(5))/360
((7)*360*(3))/((4)+10)) (6) if (6)<(11) else (11) (6)<(11) if (6) E2E2(9)-table on based
Total
Totals ShipTotals turnround times
With Project Scenario
Ship Turnround Cost at Port - Coastal Cargo Ship Turnround
Average Vessel Length Average
Coastal Coastal Cargo (Breakbulk containers & 3) & at Berth Nos.2
Excess Coastal Cargo (cannot beExcess accomodated)
Cost of CostWaiting at of Wharf Time
Cost of Service Time at Wharf Time CostService of
Cost at WharfCost
Total Ship-tunrround With Project
Excess Cargo (cannot beExcess accomodated)
Waiting Time WaitingCost - Coastal Time Cargo
Service Time Cost - coastalTime Cargo Service
Average daily Ship Cost Average
Ship-turnround time in Port Ship-turnround
Waiting for WaitingBerth for
Service Time (in days) for Cargo at Berth Cargo days) (in for Time Service
Cargo accomodated at Berth Cargo
WT/ST - Ratio WT/ST
Actual Berth Utilisation (BOR)
Under-capacity of Facility of Under-capacity
Berthmeter used (excl.Berthmeter Excess Cargo)
Excess accomodated) be (cannot Cargo
Optimal Cargo CapacityCoastal Berths of Optimal Cargo
Berthmeter available at optimal BOR available Berthmeter
Berth Berth Ocuppancy (BOR)
Berth Berth equivalents
Theoretical Cargo Capacit at 100% Cargo Theoretical
Available Berthlength Available
Berthmeter Requirements Berthmeter
Average time ship at per berth Average
Average Cargo Handling rate Handling Cargo Average
Number of Shipcalls of Number
Average Consignment Size Consignment Average
(9)
(8)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
(0)
(26)
(25)
(24)
(23)
(22)
(21)
(20)
(19)
(18)
(17)
(15)
(15)
(14)
(13)
(12)
(11) (10)
Appendix 9 39
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
560 560
240 240
717 717
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2041
30.0%
233.3%
5,620,543 5,620,543
2,764,800 2,764,800
6,449,983 6,449,983
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
269 269
240 240
345 345
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2026
30.0%
112.2%
ontinued … ontinued
2,273,112 2,273,112
2,764,800 2,764,800
3,102,552 3,102,552
C
…
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
256 256
240 240
328 328
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000
829,440 829,440
829,440 829,440
2025
30.0%
106.9%
2,125,372 2,125,372
2,764,800 2,764,800
2,954,812 2,954,812
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
244 244
240 240
313 313
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000
829,440 829,440
829,440 829,440
2024
30.0%
101.8%
1,984,666 1,984,666
2,764,800 2,764,800
2,814,106 2,814,106
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
233 233
240 240
298 298
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000
829,440 829,440
829,440 829,440
2023
30.0%
96.9%
1,850,661 1,850,661
2,764,800 2,764,800
2,680,101 2,680,101
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
222 222
240 240
284 284
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2022
30.0%
92.3%
1,723,037 1,723,037
2,764,800 2,764,800
2,552,477 2,552,477
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
211 211 240 240
270
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2021
30.0%
87.9%
1,601,491 1,601,491
2,764,800 2,764,800
2,430,931 2,430,931
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
201 201
240 240
257 257
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76 1.00 1.00
1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2020
30.0%
83.7%
1,485,732 1,485,732
2,764,800 2,764,800
2,315,172 2,315,172
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
191 191
240 240
245 245
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000 9,000
829,440 829,440
829,440 829,440
2019
30.0%
79.7%
1,375,486 1,375,486
2,764,800 2,764,800
2,204,926 2,204,926
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
182 182
240 240
233 233
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000
829,440 829,440
829,440 829,440
2018
30.0%
76.0%
1,270,490 1,270,490
2,764,800 2,764,800
2,099,930 2,099,930
39 39
92 92
72 72
92 92
72 72
147 147
147 147
108 108
240 240
174 174
240 240
222 222
1.03 1.03
0.27 0.27
0.76 0.76
0.33 0.33
1.24 1.24
1.03 1.03
0.27 0.27
0.76 0.76
1.00 1.00
1.17 1.17
7,000 7,000
0.360 0.360
7,680 7,680
9,000
829,440 829,440
829,440 829,440
2017
30.0%
72.3%
1,170,493 1,170,493
2,764,800 2,764,800
1,999,933 1,999,933
projected
$
$
$
rt
rt
rt
rt
rt
m
m
m
m
m
nos. nos.
Nos.
rt/ship
rt/ship
BOR BOR %
$ $ milllion
$ $ milllion
shipdays
$ $ milllion
$ $ milllion
$ $ milllion
Shipdays
Shipdays
Shipdays
Shipdays rt/shipday $ milllion
- $/rt
$/rt 30%
BOR 100%
(6)/(7)
(0)/(1)
(1)/(3)
(0)-(13)
(6)-(14)
~(7)/(4)
(14)/(11)
(20)*(22)
(19)*(22)
(19)*(17)
(23)+(24) (19)+(20)
(18)/(1)*(5)
(8)*opt.capacity
(7)*opt.capacity
(0)-(12) if (0)>(12) if (0)-(12)
(2)*((4)+10)*(5))/360
((7)*360*(3))/((4)+10)) (6) if (6)<(11) else (11) (6)<(11) if (6) E2E2(9)-table on based
Total
ShipTotals turnround times
Wharf Basin Tidal
Average Vessel Lenght Average
Cost of CostWaiting at of Wharf Time
Cost of Service Time at Wharf Time CostService of
at Wharf
Total Ship-tunrround cost Total- at TidalShip-tunrround cost Wharf
Waiting Costrt per
Avge.WT&ST Cost at Berth Avge.WT&ST
Ship-Turnround CostWharf at Tidal Ship-Turnround
Waiting Time WaitingCostWharf atTime Tidal
Service Time CostWharf atTime Tidal Service
Overseas Vessels Overseas Costday per
Total Ship-turnround Time Overseas Container Vessel Container Overseas Time Ship-turnround Total
Waiting for BerthWaiting for
Ship Service Time Ship Service
Shipcalls at Tidal Wharf (exl. Diversion to Port)old Shipcalls(exl. Wharf Diversion at Tidal
WT/ST - Ratio WT/ST
Berth Ocuppancy (BOR) excl.cargo diverted to Old Port) Berth excl.cargoOcuppancy (BOR) diverted
Berthmeters Berthmeters used
Cargo at Wharf (excl. Diversion to Port) old at(excl. Wharf Cargo Diversion
Cargo to be diverted to Overseas Berths #5, '4, #6 to Overseas to diverted be Cargo
Shipcall capacityWharf Tidal of
Optimal Cargo Capacity of Tidal Wharf CapacityTidal of Optimal Cargo
Berthmeter available at optimal BOR available Berthmeter
Berth Berth Ocuppancy (BOR)
Berth Berth equivalents
Theoretical Cargo Capacit at 100% Cargo Theoretical
Available Berthlength Available
Berthmeter Requirements Berthmeter
Average Service time ship at per Service berth Average
Average Cargo Handling rate Handling Cargo Average
Number of Shipcalls of Number
Average Consignment Size Consignment Average
Overseas ContainerOverseas Cargo
Continued … Continued
(9)
(8)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
(0)
(28)
(27)
(26)
(25)
(24)
(23)
(22)
(21)
(20)
(19)
(18)
(17)
(15)
(15)
(14)
(13)
(12) (11) (10) 40 Appendix 9
3
29
442
464
435
315
226
315
226
451
619
176
865
5.86 5.86
0.86 0.86
0.27 0.27
0.19 0.19
0.40 0.40
5.00 5.00
0.76 0.76
2.89 2.89
1.35 1.35
3.08 3.08
0.19 0.19
2.89 2.89
3.08 3.08
0.19 0.19
2.89 2.89
1.38 1.38
1,028 1,028
6,641 6,641
0.066 0.066
5,730 5,730
7,922 7,922
4,990,948
2041
50.0%
137.3%
5,796,793 5,796,793
4,355,597 4,355,597
4,355,597 4,355,597
2,495,474 2,495,474
4,355,597 4,355,597
2,495,474 2,495,474
6,851,070 6,851,070
5,620,543 5,620,543
1,230,527 1,230,527
…
3
28
994
426
465
437
319
226
319
226
451
261
176
369
5.78 5.78
0.84 0.84
0.27 0.27
0.19 0.19
0.39 0.39
4.93 4.93
0.76 0.76
2.88 2.88
1.30 1.30
3.06 3.06
0.19 0.19
2.88 2.88
3.06 3.06
0.19 0.19
2.88 2.88
1.37 1.37
6,587 6,587
0.065 0.065
5,668 5,668
7,760
389,453 389,453
389,453 389,453
389,453 389,453
389,453 389,453
4,951,128
591,904 591,904
2026
50.0%
57.9%
2,475,564 2,475,564
2,475,564 2,475,564
2,865,017 2,865,017
2,273,112 2,273,112
ontinued
C
…
3
29
954
406
466
437
319
226
319
226
451
245
176
347
5.70 5.70
0.83 0.83
0.27 0.27
0.19 0.19
0.37 0.37
4.87 4.87
0.76 0.76
2.88 2.88
1.24 1.24
3.06 3.06
0.19 0.19
2.88 2.88
3.06 3.06
0.19 0.19
2.88 2.88
1.37 1.37
6,581 6,581
0.066 0.066
5,661 5,661
7,742
215,772 215,772
215,772 215,772
215,772 215,772
215,772 215,772
4,946,636
563,719 563,719
2025
50.0%
54.4%
2,473,318 2,473,318
2,473,318 2,473,318
2,689,090 2,689,090
2,125,372 2,125,372
3 28
899
378
465
437
320
226
320
226
451
230
176
327
5.58 5.58
0.77 0.77
0.27 0.27
0.19 0.19
0.32 0.32
4.81 4.81
0.76 0.76
2.87 2.87
1.18 1.18
3.06 3.06
0.19 0.19
2.87 2.87
3.06 3.06
0.19 0.19
2.87 2.87
1.37 1.37
6,574 6,574
0.065 0.065
5,653 5,653
7,723 7,723
50,655 50,655
50,655 50,655
50,655 50,655
50,655 50,655
4,941,772
536,875 536,875
2024
50.0%
51.0%
2,470,886 2,470,886
2,470,886 2,470,886
2,521,541 2,521,541
1,984,666 1,984,666
3
25
-
-
-
-
831
344
444
418
307
216
321
226
451
216
176
307
5.30 5.30
0.67 0.67
0.27 0.27
0.17 0.17
0.24 0.24
4.63 4.63
0.76 0.76
2.75 2.75
1.12 1.12
2.91 2.91
0.17 0.17
2.75 2.75
2.91 2.91
0.17 0.17
2.75 2.75
1.36 1.36
6,567 6,567
0.060 0.060
5,645 5,645
7,701 7,701
4,936,494
511,309 511,309
2023
47.8%
47.8%
2,361,971 2,361,971
2,468,247 2,468,247
2,361,971 2,361,971
1,850,661 1,850,661
3
21
-
-
-
-
779
318
413
392
288
202
321
226
451
202
176
288
5.00 5.00
0.60 0.60
0.27 0.27
0.14 0.14
0.19 0.19
4.40 4.40
0.76 0.76
2.57 2.57
1.07 1.07
2.71 2.71
0.14 0.14
2.57 2.57
2.71 2.71
0.14 0.14
2.57 2.57
1.36 1.36
6,559 6,559
0.054 0.054
5,636 5,636
7,678
4,930,754
486,961 486,961
2022
44.8%
44.8%
2,209,999 2,209,999
2,465,377 2,465,377
2,209,999 2,209,999
1,723,037 1,723,037
3
16
-
-
-
-
723
290
383
367
270
189
322
226
451
189
176
270
4.68 4.68
0.50 0.50
0.27 0.27
0.10 0.10
0.13 0.13
4.18 4.18
0.76 0.76
2.40 2.40
1.02 1.02
2.51 2.51
0.10 0.10
2.40 2.40
2.51 2.51
0.10 0.10
2.40 2.40
1.36 1.36
6,551 6,551
0.043 0.043
5,627 5,627
7,653
4,924,496
463,773 463,773
2021
41.9%
41.9%
2,065,264 2,065,264
2,462,248 2,462,248
2,065,264 2,065,264
1,601,491 1,601,491
3
12
-
- -
-
692
274
355
343
253
177
322
226
451
177
175
253
4.43 4.43
0.46 0.46
0.27 0.27
0.08 0.08
0.11 0.11
3.97 3.97
0.76 0.76
2.25 2.25
0.97 0.97
2.32 2.32
0.08 0.08
2.25 2.25
2.32 2.32
0.08 0.08
2.25 2.25
1.36 1.36
6,542 6,542
0.034 0.034
5,616 5,616
7,625 7,625
4,917,657
441,688 441,688
2020
39.2%
39.2%
1,927,421 1,927,421
2,458,828 2,458,828
1,927,421 1,927,421
1,485,732 1,485,732
9
3
-
-
-
-
662
259
329
320
236
165
323
226
451
165
175
236
4.20 4.20
0.43 0.43
0.27 0.27
0.06 0.06
0.10 0.10
3.77 3.77
0.76 0.76
2.09 2.09
0.92 0.92
2.15 2.15
0.06 0.06
2.09 2.09
2.15 2.15
0.06 0.06
2.09 2.09
1.36 1.36
6,532 6,532
0.027 0.027
5,604 5,604
7,595 7,595
4,910,159
420,655 420,655
2019
36.6%
36.6%
1,796,141 1,796,141
2,455,080 2,455,080
1,796,141 1,796,141
1,375,486 1,375,486
4
3
-
-
-
-
632
244
303
299
221
154
324
226
451
154
175
221
3.97 3.97
0.38 0.38
0.27 0.27
0.03 0.03
0.08 0.08
3.59 3.59
0.76 0.76
1.95 1.95
0.88 0.88
1.97 1.97
0.03 0.03
1.95 1.95
1.97 1.97
0.03 0.03
1.95 1.95
1.35 1.35
6,521 6,521
0.013 0.013
5,592 5,592
7,562
4,901,914
400,624 400,624
2018
34.1%
34.1%
1,671,114 1,671,114
2,450,957 2,450,957
1,671,114 1,671,114
1,270,490 1,270,490
4
3
-
-
-
-
603
230
282
278
206
143
325
226
451
143
175
206
3.77 3.77
0.36 0.36
0.27 0.27
0.02 0.02
0.07 0.07
3.41 3.41
0.76 0.76
1.81 1.81
0.84 0.84
1.83 1.83
0.02 0.02
1.81 1.81
1.83 1.83
0.02 0.02
1.81 1.81
1.35 1.35
6,508 6,508
0.013 0.013
5,578 5,578
7,525 7,525
4,892,815 381,547 381,547
2017
31.7%
31.7%
1,552,040 1,552,040
2,446,407 2,446,407
1,552,040 1,552,040
1,170,493 1,170,493
projected
rt
rt
rt
rt
m m
BOR
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
$ $ milllion
shipdays
$ $ milllion
$ $ milllion
$ $ milllion shipdays rt
rt.
rt.
50%
50% rt/day
rt/ship BOR BOR 100%
vessel per '+10m
(14)
(6)/(7)
(0)/(1)
(1)/(3)
(19)*(5)
(15)/(1)
~(7)/(4)
(15)/(12)
(24)*(18)
(20)*(23)
(20)*(18) (24)+(25)
(20)+(21)
(8)*opt.capacity
(7)*opt.capacity
(2)*((4)+10)*(5))/360
((7)*360*(3))/((4)+10))
(6) if (6<(11) else (11) (6<(11) if (6) (6) if (6)<(12) else (12) (6)<(12) if (6)
else (13) (2)<(13) if (2)
based on E2E2(9)-table on based if(0)>(12):(0)-(12) else 0 if(0)>(12):(0)-(12)
Total
Totals Totals Ship turnround times Totals Ship turnround times
Waiting CostTotal Time - With Project
Total Ship Turnround Time - WithTime Project Ship Turnround Total Cost Time - Without Service Project Total
OverseasBerth Port Old
Excess Cargo (cannot beExcess accomodated)
Average Vessel Lenght Average
Total Cargo Demand #4, #5, on#6 Berths Overseas
Container Overflow from Tidal WharfBasin
Overseas CargoOverseas (Breakbulk #4, #5, #6)
Excess Cargo (cannot beExcess accomodated)
Waiting Cost Wharf Time at Tidal
Waiting Time Cost at Wharf - Overseas WaitingBerths Cost #4, Time at#5, - Overseas #6 Wharf
Waiting Cost Time at - Coastal Berths Wharf
Waiting Cost Time -Without Project
Service Time Cost Wharf Time at Tidal Service
Service Time Cost at Wharf - Overseas Berths Cost #4, Time at#5, - Overseas #6 Wharf Service
Service Time Cost Time at - Coastal Berths Wharf Service
Service Time Cost Time - WithService Project
Total - With Ship-tunrround Projectcost
Cost of CostWaiting atof Wharf Time
Cost of Service Time at Wharf Time CostService of
Cost at WharfCost
Total Ship-tunrround Berth Overseas - With Project
Excess Cargo (cannot beExcess accomodated)
Ship-Turnround Cost for Overseas Cargo at old Port Cargo Overseas Cost for Ship-Turnround
Waitng Berths Cost Tim Old atPort Overseas
Service Time Cost at Overseas BerthsCost Time Old atPort Overseas Service
Overseas VesselsOverseas Costday per
Total Ship-turnround Time Overseas Container Vessel Container Overseas Time Ship-turnround Total
Waiting for WaitingBerth for
Ship Service Time Ship Service
Actual Shipcalls Wharf at Tidal
WT/ST - Ratio WT/ST
Actual Berth Utilisation (BOR)
Berthmeters used
Cargo accomodated at Berth Cargo
Excess accomodated) be (cannot Cargo
Shipcall capacity at optimal BOR
Optimal Cargo Capacity of Overseas Berths Port) # (old CapacityOverseas Optimal of Cargo
Berthmeter available at optimal BOR Berthmeter available
Berth Berth Ocuppancy (BOR)
Berth Berth equivalents
Theoretical Cargo Capacit at 100% Cargo Theoretical
Available Berthlength Available
Berthmeter Berthmeter Requirements
Average time ship at per berth Average
Average Cargo Handling rate Handling Cargo Average Number of Shipcalls of Number
SizeConsignment Average
Continued … Continued
(9)
(8)
(7)
(6)
(5)
(4)
(3)
(2)
(1)
(0)
(28)
(26)
(25)
(24)
(23)
(22)
(21)
(20)
(19)
(18)
(17)
(15)
(15)
(14)
(13)
(12)
(11) (10)
Appendix 9 41
0.65 0.65
7.58 7.58
2.46 2.46
5.12 5.12
1,178 1,178
1,178 1,178
2041
940,580 940,580
829,440 829,440
829,440 829,440
940,580 940,580
2041
2,495,474 2,495,474
2,509,713 2,509,713
1,316,479 1,316,479
2,495,474 2,495,474
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,766,771 4,766,771
11,695.88 11,695.88
6,879,930 6,879,930
20,337,215 20,337,215
10,563,565 10,563,565
317
317
0.17 0.17
1.69 1.69
1.12 1.12
0.57 0.57
2026
865,611 865,611
829,440 829,440
829,440 829,440
865,611 865,611
2026
3,149.11 3,149.11
8,486,009 8,486,009
2,475,564 2,475,564
2,509,713 2,509,713
1,316,479 1,316,479
5,081,255 5,081,255
2,475,564 2,475,564
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,746,862 4,746,862
1,852,417 1,852,417
318
318
0.18 0.18
1.51 1.51
1.07 1.07
0.43 0.43
2025
797,326 797,326
829,440 829,440
829,440 829,440
797,326 797,326
2025
3,155.79 3,155.79
8,005,669 8,005,669
2,473,318 2,473,318
2,509,713 2,509,713
1,316,479 1,316,479
4,839,291 4,839,291
2,473,318 2,473,318
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,744,616 4,744,616
1,856,346 1,856,346
300
300
0.17 0.17
1.23 1.23
0.98 0.98
0.25 0.25
2024
790,613 790,613
829,440 829,440
829,440 829,440
790,613 790,613
2024
2,981.59 2,981.59
7,552,518 7,552,518
2,470,886 2,470,886
2,509,713 2,509,713
1,257,867 1,257,867
4,608,848 4,608,848
2,470,886 2,470,886
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,742,183 4,742,183
1,753,875 1,753,875
285
285
0.16 0.16
1.08 1.08
0.89 0.89
0.19 0.19
2023
681,698 681,698
829,440 829,440
829,440 829,440
681,698 681,698
2023
2,828.53 2,828.53
7,125,017 7,125,017
2,361,971 2,361,971
2,509,713 2,509,713
1,197,969 1,197,969
4,389,379 4,389,379
2,468,247 2,468,247
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,739,544 4,739,544
1,663,841 1,663,841
267
267
0.15 0.15
1.02 1.02
0.83 0.83
0.19 0.19
2022
529,726 529,726
829,440 829,440
829,440 829,440
529,726 529,726
2022
2,653.17
6,721,714 6,721,714
2,209,999 2,209,999
2,509,713 2,509,713
1,140,923 1,140,923
4,180,361 4,180,361
2,465,377 2,465,377
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,736,675 4,736,675
1,560,690 1,560,690
239
239
0.13 0.13
0.87 0.87
0.69 0.69
0.19 0.19
2021
384,990 384,990
829,440 829,440
829,440 829,440
384,990 384,990
2021
2,370.22 2,370.22
6,341,240 6,341,240
2,065,264 2,065,264
2,509,713 2,509,713
1,086,593 1,086,593
3,981,297 3,981,297
2,462,248 2,462,248
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,733,546 4,733,546
1,394,249 1,394,249
191
191
0.11 0.11
0.65 0.65
0.46 0.46
0.19 0.19
2020
247,147 247,147
829,440 829,440
829,440 829,440
247,147 247,147
2020
1,900.23 1,900.23
5,982,302 5,982,302
1,927,421 1,927,421
2,509,713 2,509,713
1,034,850 1,034,850
3,791,711 3,791,711
2,458,828 2,458,828
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,730,126 4,730,126
1,117,785 1,117,785
162
162
0.09 0.09
0.53 0.53
0.34 0.34
0.19 0.19
2019
115,868 115,868
829,440 829,440
985,572 985,572
829,440 829,440
115,868 115,868
943,885 943,885
2019
1,604.60 1,604.60
5,643,681 5,643,681
1,796,141 1,796,141
2,509,713 2,509,713
3,611,153 3,611,153
2,455,080 2,455,080
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,726,377 4,726,377
-
-
123
123
0.07 0.07
0.36 0.36
0.17 0.17
0.19 0.19
2018
829,440 829,440
938,640 938,640
829,440 829,440
720,704 720,704
2018
1,225.20 1,225.20
5,324,227 5,324,227
1,671,114 1,671,114
2,500,554 2,500,554
3,439,194 3,439,194
2,450,957 2,450,957
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,722,255 4,722,255
-
-
107
107
0.06 0.06
0.30 0.30
0.12 0.12
0.19 0.19
2017
829,440 829,440
893,943 893,943
829,440 829,440
627,159 627,159
2017
1,066.17 1,066.17
5,022,856 5,022,856
1,552,040 1,552,040
2,381,480 2,381,480
3,275,423 3,275,423
2,446,407 2,446,407
2,509,713 2,509,713
1,316,479 1,316,479
3,826,192 3,826,192
4,717,705 4,717,705
projected
projected
rt
$ $ million
$ $ milllion
shipdays
$ $ milllion $ $ milllion shipdays
1,700 1,700
Total Port Traffic Demand Port Traffic Total Total Traffic at Tidal Wharf at Tidal Traffic Total 2%
Add'l Cargo possible through Project possible through Cargo Add'l Total Traffic assumed at 2012 Aprraisal Traffic Total
Optimal Capacity Total Berths -Coastal
Total Optimal Port Total Capacity - With Project Total MaximumBasin Total CapacityWharf -Tidal
Optimal Port Total Capacity - Without Project
Berths - Withoutat Overseas Project Traffic Total
Total Optimal Capacity -Overseas Berths/With Optimal CapacityTotal -Overseas Project
Total Traffic at Coastal Berths - With Traffic Total & Without Project Total Traffic at Overseas Berths #4, #5, at- With #6 Overseas Project Traffic Total Berths/Without Optimal CapacityTotal -Overseas Project
equivalent Cargo
all cargo Value of Average Totals ShipTotals turnround times -Time in Shipturnround Savings
Addidional Cargothrough Project possible
Inventory Savings
Inventory Cost SavingsInventory Cost
Waiting Time Savings WaitingSavings Time
Service Time Savings Time Service
Savings Shiptime Savings Shiptime
42 Appendix 9
End
Appendix 10 43
Table A10: Economic Internal Rate of Return Calculation—Lae Port Project ($ million, 2016 prices) Cost Benefits Investment Incremental Ship Net Additional Development Net Benefits Total Maintenance Waiting & Benefits Exports Benefits From Including Year Total Phase 2 Inventory Benefits & Operations Total Cost from Port through Additional Development Dredging Service Savings from Port Time Operations Project Exports Benefits Cost Operations Savings 1 1.00% rt million $720.00 2008 - - - - 2009 4.15 4 .15 (4 .15 ) (4 .15 )
2010 10.23 10 .2 3 (10 .2 3 ) (10 .2 3 )
2011 2.27 2 .2 7 (2 .2 7 ) (2 .2 7 ) 2012 55.17 (19.92) 3 5 .2 5 (3 5 .2 5 ) (3 5 .2 5 )
2013 148.26 (16.60) 13 1.6 6 (13 1.6 6 ) (13 1.6 6 )
2014 62.90 6 2 .9 0 (6 2 .9 0 ) (6 2 .9 0 ) 2015 13.83 13 .8 3 (13 .8 3 ) (13 .8 3 )
2016 - 2.97 2 .9 7 0.06 0.01 0.07 (2 .9 0 ) - - (2 .9 0 ) 2017 - 2.97 2 .9 7 0.30 0.06 0.36 (2 .6 0 ) - - (2 .6 0 )
2018 - 2.97 2 .9 7 0.36 0.07 0.43 (2 .5 4 ) - - (2 .5 4 )
2019 - 2.97 2 .9 7 0.53 0.09 0.62 (2 .3 5 ) 0.02 10.85 8 .5 0 2020 - 2.97 2 .9 7 0.65 0.11 0.75 (2 .2 2 ) 0.04 26.69 2 4 .4 8
2021 - 2.97 2 .9 7 0.87 0.13 1.01 (1.9 6 ) 0.06 41.58 3 9 .6 2 2022 - 2.97 2 .9 7 1.02 0.15 1.16 (1.8 0 ) 0.08 57.21 5 5 .4 1
2023 - 2.97 2 .9 7 1.08 0.16 1.24 (1.7 3 ) 0.10 73.62 7 1.8 9
2024 - 2.97 2 .9 7 1.23 0.17 1.39 (1.5 7 ) 0.12 85.39 8 3 .8 1 2025 - 2.97 2 .9 7 1.51 0.18 1.68 (1.2 9 ) 0.12 86.11 8 4 .8 2
2026 - 2.97 2 .9 7 1.69 0.17 1.87 (1.10 ) 0.13 93.49 9 2 .3 8
2027 - 2.97 2 .9 7 1.90 0.18 2.07 (0 .8 9 ) 0.14 99.66 9 8 .7 6 2028 - 2.97 2 .9 7 2.19 0.20 2.39 (0 .5 8 ) 0.14 99.86 9 9 .2 9
2029 - 2.97 2 .9 7 2.49 0.23 2.72 (0 .2 5 ) 0.14 100.06 9 9 .8 1 2030 - 2.97 2 .9 7 2.81 0.26 3.06 0 .0 9 0.14 100.24 10 0 .3 3
2031 - 2.97 2 .9 7 3.14 0.28 3.43 0 .4 6 0.14 100.40 10 0 .8 6
2032 - 2.97 2 .9 7 3.50 0.31 3.81 0 .8 4 0.14 100.56 10 1.4 0 2033 - 2.97 2 .9 7 3.87 0.34 4.21 1.2 4 0.14 100.71 10 1.9 5
2034 - 2.97 2 .9 7 4.25 0.37 4.63 1.6 6 0.14 100.84 10 2 .5 0
2035 - 2.97 2 .9 7 4.66 0.41 5.07 2 .10 0.14 100.97 10 3 .0 7 2036 - 2.97 2 .9 7 5.09 0.44 5.53 2 .5 7 0.14 101.09 10 3 .6 5
2037 - 2.97 2 .9 7 5.54 0.48 6.02 3 .0 5 0.14 101.20 10 4 .2 5 2038 - 2.97 2 .9 7 6.01 0.52 6.53 3 .5 7 0.14 101.30 10 4 .8 7
2039 - 2.97 2 .9 7 6.51 0.56 7.07 4 .10 0.14 101.40 10 5 .5 1
2040 - 2.97 2 .9 7 7.03 0.60 7.64 4 .6 7 0.14 101.50 10 6 .16 2041 - 2.97 2 .9 7 7.58 0.60 8.18 5 .2 2 0.14 101.58 10 6 .8 0
(140.00) 36.52 - (10 3 .4 8 ) - - - 10 3 .4 8 - - 10 3 .4 8
NPV (12%) 149.84 (5.02) 23.43 14 0 .2 8 11.13 1.22 12.35 (13 5 .2 9 ) 18 .5 2
Ba se EIRR: - 5 .4 7 % 12 .9 6 %
EIRR Including Phase 2 Dredging Cost 11.9 8 %
EIRR Traffic Growth 4%: 10 .8 5 % EIRR = economic internal rate of return, NPV = net present value, rt = revenue ton.
44 Appendix 11
-
20%
9.92
5.18
0.66
(6.22)
(9.98)
(3.70)
(7.21)
1.93%
2.00%
0.25%
23.40
23.37
23.35
23.32
23.29
23.25
23.22
23.18
23.14
23.04
22.99
22.99
22.94
22.88
22.82
20.94
18.70
18.48
14.91
(12.65)
(41.23)
(17.22)
(35.46)
(14.75)
-258.39
256.21
Net
Tax
(171.57)
(334.90)
after
K 28 mn28 K
Benfits Benfits
Corporate
Deduction
9.99
9.98
9.96
9.95
9.93
9.92
9.88
9.85
9.85
9.83
9.81
9.78
8.98
8.02
7.92
6.39
4.25
2.22
0.28
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
30%
89.29
10.03
10.02
10.01
Net
Tax on
Benefits
-
7.40
0.94
(6.22)
(9.98)
(3.70)
(7.21)
1.39%
33.43
33.39
33.35
33.31
33.26
33.22
33.16
33.11
33.05
32.92
32.85
32.85
32.77
32.69
32.59
29.92
26.72
26.40
21.30
14.18
(12.65)
(41.23)
(17.22)
(35.46)
(14.75)
-169.10
256.21
Net
Tax
(171.57)
(334.90)
before
Benefits Benefits
-
-
-
-
-
-
-
-
-
-
467.94
8.43 8.43
2.00 2.00
1.00 1.00
48.08 48.08
48.04 48.04
48.00 48.00
47.96 47.96
47.91 47.91
47.86 47.86
47.81 47.81
47.75 47.75
47.70 47.70
47.56 47.56
47.49 47.49
47.49 47.49
47.41 47.41
47.33 47.33
47.24 47.24
44.56 44.56
41.36 41.36
41.05 41.05
35.94 35.94
28.82 28.82
22.04 22.04
15.58 15.58
Total
Base Base Case:
62.51
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
4.00 4.00
3.00 3.00
2.00 2.00
1.00 1.00
K200
per m2
Income
Land lease
0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Kina Kina
from
FIRR FIRR incl. Phase II Dredging Cost
Operator
million/year
License Fee Fee License
Lae Port Project Port Lae
Tariff increase required for FIRR=WACC
0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
—
from
Cargo Cargo
Revenue Revenue
increase
Overseas
Wharfage
-
-
2.17
2.17
2.17
2.17
2.16
2.16
2.16
2.16
2.15
2.15
2.14
2.14
2.14
2.14
2.13
2.00
1.84
1.83
1.57
1.22
0.89
0.57
0.27
26.57
al
7%
Revenues
Pilotage
Increment
b/
-
-
9.21
9.13
7.87
6.12
4.45
2.85
1.34
10.86
10.85
10.84
10.83
10.82
10.81
10.80
10.78
10.77
10.74
10.72
10.72
10.70
10.68
10.66
10.00
132.87
35%
Increment
al Storage
b/
(percentage of wharfage) of (percentage
Annual Lincence Fee from Terminal Operator req. For of WACC 3,19%
-
-
8.16
3.82
31.04
31.01
30.98
30.95
30.92
30.89
30.85
30.81
30.77
30.68
30.63
30.63
30.57
30.51
30.45
28.57
26.31
26.09
22.50
17.48
12.70
379.63
Kina/rtb/
Wharfage
33.00 33.00
Incremental
FIRR FIRR after Increase of Tariifs (Wharfage, Pilotage Storage)& Cargofor Overseas 10%:
-
-
rt.
(K million, 2016 prices) 2016 (K million,
940,580 940,580
939,775 939,775
938,919 938,919
938,008 938,008
937,038 937,038
936,004 936,004
934,901 934,901
933,723 933,723
932,464 932,464
929,673 929,673
928,125 928,125
928,125 928,125
926,462 926,462
924,674 924,674
922,748 922,748
865,611 865,611
797,326 797,326
790,613 790,613
681,698 681,698
529,726 529,726
384,990 384,990
247,147 247,147
115,868 115,868
Add'l Add'l Cargo
rt.
3,324,914 3,324,914
3,324,109 3,324,109
3,323,253 3,323,253
3,322,342 3,322,342
3,321,372 3,321,372
3,320,338 3,320,338
3,319,235 3,319,235
3,318,057 3,318,057
3,316,798 3,316,798
3,315,451 3,315,451
3,314,007 3,314,007
3,312,459 3,312,459
3,310,796 3,310,796
3,309,008 3,309,008
3,307,082 3,307,082
3,305,004 3,305,004
3,302,758 3,302,758
3,300,326 3,300,326
3,191,411 3,191,411
3,039,439 3,039,439
2,894,704 2,894,704
2,756,861 2,756,861
2,625,581 2,625,581
2,500,554 2,500,554
2,381,480 2,381,480
at Berths
Total Overseas
Cargo Handeld
Financial Internal Rate of Return Calculation Return of Rate Internal Financial
-
617.35
3.70 3.70
7.21 7.21
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
14.65 14.65
10.98 10.98
41.23 41.23
17.22 17.22
35.46 35.46
14.75 14.75
Total
256.21 256.21
171.57 171.57
334.90 334.90
- -
62.29
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
1.85 1.85
0.5%
Assets
on new
Insurance
Table A11: A11: Table
62.27
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
3.66 3.66
1.83 1.83
0.5%
Staff &
Utilities
117.57
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
7.32 7.32
3.66 3.66
0.02 0.02
Incremental
1.0%
Cost
Increm.
Maint. &
Operations
-4.92
1
(52.24)
(57.68)
50%
Cost
109.92 109.92
Dredging
-
3.19%
350.31
7.21 7.21
41.23 41.23
74.91 74.91
35.46 35.46
14.75 14.75
Investment Cost
366.13 366.13
171.57 171.57
387.14 387.14
prices
in 2016 in 2016
- -
Cost
2041
2040
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009 2008
Year
row (1)a
b/Deloitte AuditReport
a/ Values in row (1) are values for sensitivityvalues are a/calculations (1) Values in row
WACC NPV(WACC=0%) Appendix 12 45
Table A12: Lae Port Project: Weighted Average Cost of Capital Calculation ADB Loans OCRa ADF OFID GoPNGc/ Totalb/ 2398 2803 2399 2804 A. Investment ($ million) 60 85 38.42 4.12 6 115.1 308.64 Original Terms LIBOR + 0.6% LIBOR a + 0.6% 1.0% during GP 1.0% during GP 1.50% Interest Rate 1.5% after 1.5% after Service/Commitment Fee 0.15% 0.15% Maturity 24 24 32 32 20 Grace Period (years) 4 4 8 8 5 Kina/US dollar exchange rate at 2.81 2.21 2.81 2.21 2.81 2.57 drawdown Investment (K million 168.6 187.85 107.96 9.11 16.86 295.69 786.07 B. Weighting (US dollar) 19.44% 27.54% 12.45% 1.33% 1.94% 37.29% 100.00% C. Nominal (onlending) rate 2.14% 2.14% 2.02% 2.02% 4.50% 15.00% D. Tax rate 30.00% 30.00% 30.00% 30.00% 30.00% 0.00% E. Tax-adjusted nominal rate (B*(1-C)) 1.50% 1.50% 1.41% 1.41% 3.15% 15.00% F. Inflation rate 1.50% 1.50% 1.50% 1.50% 1.50% 6.00% G. Real rate ((1+D)/ (1+E)-1) 0.00% 0.00% -0.08% -0.08% 1.63% 8.49% H. Weighted component of WACC 0.00% 0.00% -0.01% 0.00% 0.03% 3.17% 3.19% WACC applied for the NPV in the FIRR assessment: 3.19% ADB = Asian Development Bank, ADF = Asian Development Fund, FIRR = financial internal rate of return, GoPNG= Government of Papua New Guinea, GP = Grace Period, LIBOR = London interbank offered rate, NPV = net present value, OCR = ordinary capital resources, OFID = Organization of the Petroleum Exporting Countries Fund for International Development, WACC = weighted average cost of capital. a Onlending of Loans 2398 and 280 at the same rate as ADB loans; LIBOR (i.e., 10-year swaps: 1,541%; 7 January–13 July 2016). b Excluding the Japan Fund for Poverty Reduction & HIV/AIDS components. c Interest rate on government equity: national outstanding debts/interest payments on national debts (K17.7 billion/ K1.13 billion) = 6.38%; 2016.
46 Appendix 13
Table A13: Project Evaluation Matrix
Rating Weighted Criterion Weight Assessment Value Rating Relevance 25% Relevant 2.2 0.55 Effectiveness 25% Less than effective 1.0 0.25 Efficiency 25% Less than efficient 1.2 0.30 Less than likely Sustainability 25% 1.8 0.45 sustainable Overall rating Partly successful 1.55
Port Facilities
Weight in Terms of Project Cost: 95.8% Rating Weighted Criterion Weight Assessment Value Rating Relevance 25% Relevant 2 0.50 Effectiveness 25% Less effective 1 0.25 Efficiency 25% Efficient 2 0.50 Sustainability 25% Likely sustainable 2 0.50 Overall rating Successful 1.75
Resettlement and Livelihood Components
Weight in Terms of Project Cost: 4.0% Rating Weighted Criterion Weight Assessment Value Rating Relevance 25% Highly relevant 3 0.75 Effectiveness 25% Less than effective 1 0.25 Efficiency 25% Less than efficient 1 0.25 Sustainability 25% Unlikely sustainable 0 0.00 Overall rating Partly successful 1.25
HIV/AIDS Component
Weight in Terms of Project Cost: 0.2% Rating Weighted Criterion Weight Assessment Value Rating Relevance 25% Highly relevant 3 0.75 Effectiveness 25% Less than effective 1 0.25 Efficiency 25% Less than efficient 1 0.25 Less than likely Sustainability 25% 1 0.25 sustainable Overall rating Partly successful 1.50
Notes: Highly successful: Overall weighted average is greater than or equal to 2.7. Successful: Overall weighted average is greater than or equal to 1.6 and less than 2.7. Partly successful: Overall weighted average is greater than or equal to 0.8 and less than 1.6.
Supplementary Appendix A 47
Traffic Forecast and Economic Analysis
A. Traffic Forecast 1. The 2012 report and recommendation of the President (RRP) revised the 2007 RRP’s traffic projection upward because actual traffic in 2011 was 10% higher than projected in the 2007. The economy of Papua New Guinea (PNG) also grew faster than expected, mainly due to the ongoing LNG development. On that basis the 2012 RRP assumed steady average annual traffic growth of 6% over the evaluation period compared to the 2007 RRP’s assumptions of 4% until 2011 and 3% thereafter. The economy slowed in 2011 when the LNG project was completed but the benefits of its revenues had not yet entered the economy. Actual traffic has declined since 2012, and in 2015 (the starting point for the project completion report [PCR] projection) was about 23% less than projected in the 2012 RRP. In the past, periods of very volatile traffic movements occurred independent from gross domestic product growth. The long- term (1969–2015) elasticity of traffic growth vs. gross domestic product growth is around 1.5, whereas the short-term (2009–2015) elasticity is around 0.6. PNG’s economic prospects are now judged to be less buoyant than at re-appraisal, with growth rates now estimated at 4.3% for 2016 and 2.4% for 2017.26 It was therefore considered prudent to reduce the traffic growth projection from 6% in the reappraisal to 5%. This widens the gap in the traffic projections (Figure SA.A.1). Lower traffic also implies that expanding the port was less urgent than originally thought.
Figure SA.A.1: Traffic Projections—Report and Recommendation of the President Versus the Project Completion Report
PCR = project completion report, RRP = report and recommendation of the President, rt = revenue ton.
B. Economic Analysis 2. The economic internal rate of return (EIRR) was reevaluated using the same basic approach applied in the appraisals for the 2007 and 2012 RRPs—namely the with- and without- project comparison—by (I identifying savings from faster ship turnarounds and (ii) assessing the
26 ADB. 2016. Asian Development Outlook. Manila.
48 Supplementary Appendix A economic value of the otherwise suppressed traffic made possible by increasing the port’s capacity through the project. As the steps leading to the figures in both appraisals could not be traced due to a lack of documentation, the evaluation model had to be recreated, making it difficult to compare the input parameters one on one. 3. Lighterage has not been considered a realistic option, since no place along the wharf or coastline near the port can accommodate such operations, even as a short stop-gap measure. To date, no lighterage operation has taken place at Lae. 4. The actual investment cost had been brought to 2016 price levels in US dollars, cleared of taxes and economic adjustments of local cost have been based on parameters provided in the Haskoning feasibility study (SERF = 1.0; SWR for unskilled labor = 0.8). Like in the RRPs, 50% of the dredging cost was deducted, as subsequent phases will benefit equally from this component. 27 However, this requires that these costs be included in the evaluation of subsequent phases.28 5. Providing additional berthing space decreases ship turnaround time due to lower waiting times. Based on projected traffic volumes and observed ship and consignment sizes, the berth- meter requirements are compared with the berth-meters available for the with- and without- project cases. 6. Without the project, the port would reach its full (optimal) capacity by around 2020 (Figure SA.2). 29 Figure SA.A.2: Port Capacity Without Project
Source: Mission estimates.
27 The PNGPCL has started planning for Phase 2 of the project by extending the new wharf by another 180 m, deepening the basin by 1 m, and by extending the basin to the north. 28 A sensitivity calculation including the total dredging cost has also been carried out. 29 The optimal capacity berth occupancy ratio (BOR) is defined as the capacity at which the waiting-time/service-time ratio reaches 30%; this is a standard guiding rule for port planning. The optimal BOR is 60% for the coastal facilities (two berths), 50% for the old overseas facilities (three berths), and 30% for the TBW (one berth). These figures are taken from a standard waiting-time/service-time table published by the United Nations Conference on Trade and Development. Supplementary Appendix A 49
7. It is assumed that the new tidal basin wharf (TBW) will be preferred for overseas container traffic, relieving the old facilities from congestion. From the start, the TBW will operate at its optimal capacity as its modern layout will facilitate better cargo handling, further improving ship turnaround times. With most of the handling-efficient container traffic diverted to the TBW, the old overseas facilities will initially experience a slight reduction in optimal capacity as break- bulk requires longer times at berth, which is again increasing in line with the increasing portion of the containers. After expansion, the entire port (both the old port and TBW) will reach optimal capacity in 2020, about the same time as the coastal facilities (Figure SA.A.3 below).
Figure SA.A.3: Port Capacity with Project
Source: Mission estimates.
8. Shorter turnaround translates into ship-time and inventory savings, which have been established by multiplying the saved ship-days by the daily ship-cost and the average overseas cargo unit value handled at the port. The evaluation parameters for port operational savings used in the evaluation are based on data contained in the feasibility study and own findings of the mission, and are listed in Table SA.A.1.
50 Supplementary Appendix A
Table SA.A.4: Evaluation Parameters
m = meter, rt = revenue ton.
9. The expansion also enables the port to accommodate additional traffic (Figure SA.A.1). As no alternative landing facilities are available to and from where this cargo could be transshipped, this impacts PNG’s economic performance. The RRPs captured the benefits from the additional traffic by listing “productivity gains on exports from coastal areas and on items shipped to coastal areas” and “additional shipping value-added”. The PCR mission was unable to locate any source or documentation as to how these benefits have been determined. As an alternative, the mission replaced those benefits with an assessment of the value added from additional exports made possible by the port expansion, excluding the export revenues from minerals and oils, as these commodities are not handled at Lae Port. The value added per revenue ton of exports through Lae Port has been assessed at $720 (Table SA.A.2).
Supplementary Appendix A 51
Table SA.A.5: Value Added for Export Cargo through Lae Port
PNG = Papua New Guinea, rt = revenue ton.
10. Based on these assumptions, the project’s EIRR is assessed at 13%, which decreases to 12% if all dredging costs are attributed to Phase 1.30 This result is primarily derived from the benefits from the value added from the additional exports made possible by the expansion. This is not unusual, as the main purpose of a port is to facilitate exports and imports. The net present values and EIRRs in the 2007 RRP and PCR are negative if one considers only the port operational benefits yielded by the high initial cost of the new tidal basin with its dredging and reclamation costs. The low proportion of the operational benefits in the PCR resulted from the lower traffic and the fact that the old port was not operating at the congestion levels assumed in the RRPs. The higher EIRR estimated in the 2012 RRP as compared to the 2007 RRP is explained by the lower kina/US dollar exchange rate in 2007. This resulted in a higher investment cost (in kina) for the project in 2007, despite the subsequent cost increase and need for additional financing, as well as higher traffic projections.31
30 The EIRR table is included in the PRC as a separate appendix. 31 The PCR mission was not able to locate the spreadsheets of the EIRR evaluation in the 2012 RRP.
52 Supplementary Appendix A
Table SA.A.6: Net Present Value and Economic Internal Rate of Return Comparison— Reports and Recommendations of the President versus Project Completion Reports
EIRR = economic internal rate of return, NPV = net present value, PCR = project completion report, RRP = report and recommendation of the President. Supplementary Appendix B 53
Financial Evaluation
1. A with- and without-project comparison has been carried out to assess the project’s financial viability. 2. The project cost excludes 50% of the dredging costs, as these cover advance dredging for future expansions and expenditures for the safeguard components, and have been adjusted to 2016 price levels based on the actual disbursement. Additional costs are incremental maintenance and operations and staff, utilities, and insurance costs, which are estimated to account for 2% of the investment costs. A residual value of 50% has been assumed at the end of the 25-year evaluation period. 3. The project facilitates additional traffic at Lae Port in Papua New Guinea, represented by the optimal berth occupancy of the tidal basin wharf (TBW),32 which is the base for additional revenue. This increased from 155,000 revenue tons (rt) to around 920,000 rt, which is the TBW’s optimum cargo capacity (Figure SA.B). The revenue items from this traffic are wharfage (K33/rt, 2016 tariff schedule), storage (35% of wharfage on average), and pilotage (7% of wharfage on average).33 Another expected source of income is the port-related industries that will establish businesses on the area reclaimed under the project and set up for that purpose. About 20 hectares are available from Phase 1I of the project. The evaluation applied a conservative rate of K200/m2, which is currently being charged in other areas of the port.
Figure SA.B.1: Port Capacity Without Project Versus Traffic
32 The optimal berth occupancy ratio has been determined as 30% when the service-time/waiting-time ratio reaches 0.30. This is a generally accepted guiding rule. 33 These percentages are net values and are taken from the available income statements.
54 Supplementary Appendix B
4. From an operational viewpoint, foreign container cargo will be immediately directed to the new, more efficient TBW, which will soon operate at optimal capacity while relieving the old overseas berths from most of the break-bulk cargo. 5. Stevedoring and other cargo-related income will accrue to the concessionaire selected to operate the terminal, for which the Papua New Guinea Ports Corporation will collect a cost- covering concession fee. The selection of the concessionaire is ongoing and the expected concession fee has not been disclosed. 6. To ensure that the financial internal rate of return (FIRR) equals the weighted average cost of capital of 3.2%, the evaluation includes a real wharfage tariff increase of K6.6 (20%) to be charged on all overseas cargo (not only incremental traffic). This is justified, as the overseas cargo handled at the old overseas berth also benefits from lower congestion. This increase will be mitigated when the income from the concession fee is known. Overall, this increase is moderate given the moderate rates for wharfage at Lae Port compared with that of other comparable ports in the region.
Table SA.B.2: Financial Internal Rate of Return Calculation (K, 2016 prices)
FIRR = financial internal rate of return, NPV = net present value, rt = revenue ton, WAC = weighted average cost of capital.
7. For each year, a 30% corporate tax will be charged on positive cash flow. 8. Table SA.B summarizes the assessment based on the assumptions listed above. The after-tax FIRR equals the weighted average cost of capital (the tariff increase has been set to achieve that). The sensitivity analysis showed that, without the tariff increase, the FIRR decreases to 0.2%. As indicated, the tariff increase will be much lower when the concession fees are included.