Ramu 2 Hydroelectricity Project

2C18KH7 Landscape of Ramu river and valley, Madang Papua New Gunea. Image shot 10/2017. Exact date unknown.

Ramu 2 Hydroelectricity Project

This research reflects information available up until June 2021, it may not reflect developments after the date of assessment.

The project is a proposed 180MW hydropower station on the Ramu River. The development is aimed at optimizing the utilization of water resources within the Yonki reservoir to meet increasing load demands and displace high-cost diesel generation. Ramu 2 is expected to increase Papua New Guinea’s electricity capacity by 36 percent.

The Ramu regional distribution grid, which includes the Yonki complex, services an area with approximately 4 million inhabitants, including the load centres of Lae and Madang in the Momase region; and Kainantu, Goroka, Kundiawa, Hagen, Tari, Mendi, and Wabag in the Highlands region. Electricity demand presently exceeds available generation capacity, resulting in frequent power outages in some centres.

Ramu 2 is located downstream of the existing Yonki hydroelectric complex in the Eastern Highlands Province of Papua New Guinea. The Yonki complex currently consists of two hydro facilities fed from the Yonki dam and reservoir: the 75MW Ramu 1 power station and the 18MW Yonki Toe of Dam hydropower station. The Ramu 2 project will develop the final 570 m head of water in the Ramu gorge between Ramu 1 tailrace Tunnel and the Ramu valley. The project is planned to meet the future power demands of local mines and associated processing plants, as well as household, commercial, and industrial demand between Lae and through the Highlands provinces, by way of the Ramu grid.

The project meets goals identified in the National Strategy for Responsible Sustainable Development for Papua New Guinea (STaRS), which prioritizes green energy, economic diversification, and sustainable economic and livelihood activities. Ramu 2 also aligns with the move toward hydro under the National Energy Policy 2016-2020. PNG needs significant improvements in energy capacity to reach this level of demand while implementing broad access to electricity, and the proposed Ramu 2 hydropower project could play a key role in meeting these goals.

While Chinese and PNG officials do not appear to have directly linked Ramu 2 to the BRI, the hydropower project clearly falls within the initiative’s focus on energy projects, which accounted for 44 percent of BRI construction in 2019. Shenzhen Energy, the major contractor for the project, describes itself as “[actively] responding to the Belt and Road Initiative,” including through the Ramu 2 project. The PNG government officially joined the BRI in June 2018 and announced that Shenzhen and Sinohydro had won the project bid in September 2018.

On the Chinese side, the Agency for International Economic Cooperation under the Ministry of Commerce chose IPPR International Engineering Co. Ltd and IPPA International Engineering Co. Ltd as the joint project managers of the “Aid Project on Western Pacific University of Papua New Guinea” through its own open tender process. In January 2020, the PRC gave DHERST a list of six Chinese companies and requested to begin the bidding process for the contract. In February 2021, Seladi-85 invited the six Chinese companies to bid, and in July 2020, IPPR and the Project Steering Committee evaluated the bids. Then, in August, Seladi-85 released its Tender Evaluation Report, and IPPR announced the selection of China Jiangsu International Economic and Technical Cooperation Group Ltd (CJI) as the private contractor for project infrastructure development. In response to DHERST’s request, the Solicitor’s Office granted legal clearance to CJI as the contractor in September 2020.

Lack of transparency

There was no project concept paper submitted for Budget Approval and NEC Approval, and there was no public involvement or opinion in the project, although the project will have significant economic and environmental effects. Furthermore, it appears that project officials did not consult the Provincial Governments during the planning process.
There is also a severe lack of publicly available information and documents regarding the Ramu 2 project. Unavailable or missing documents include the Submission to the NEC on Project Identification and Project Site, the pre-feasibility and feasibility studies, environmental impact assessments, RFP, financial and project agreements, PPA, and lease agreements.


Environmental Impacts

According to the IPBC quarterly review of 2015, an environmental impact assessment (EIA) was conducted as part of the feasibility study in 2013. The EIA, like the feasibility study report, is not readily available. INA tried several times to arrange an interview with the Conservation, Environment Protection Authority (CEPA) to confirm these reports and determine the extent of the ESIA studies conducted for the project and whether due process was followed. CEPA did not respond.


Lack of Feasibility Study

The assessment on the economic and financial benefits of Ramu 2, which was conducted in 2015 according to a joint JICA-PPL Master Plan for Ramu System Power Development, is not publicly available.


Project Delays

The Project has continued for more than 10 years since the NEC gave its approval for the project in 2011, more than 5 years after the launching of the project in 2015, and more than 4 years after Shenzhen Energy planned to begin construction in 2017. Over this time, costs have increased beyond the reported budget of US$902 million (K3.5 billion) to $939 million.

  • Not Transparent
  • Transparent
Project & Contract Phase Project Information Score Response Link to Information
Project Identification 5.7 Project owner Department for State Enterprises: Kumul Consolidated Holdings (KCH – a State-owned Enterprise, which is the State’s holding corporation for its eqity in the non-extractive sector buisnesses, including the utility companies) https://www.kch.com.pg/publications/kch-2019-annual-review/ (see page 13 of the Annual Report for 2019)
Sector, subsector

Sector: Energy and Electricity Infrastucture including renewable energy.

Sub-sectors: Generation, Transmisssion, Distribution Supply, Ancilliary facilities including dam for hydropower, Gas transmission, Public Gas distriburtion, Gas and gas works

Project name Ramu 2 Hydro Power Project https://www.kch.com.pg/ramu-2-hydropower-project-to-boost-power-generation-duma/
Project Location The Project on the Ramu River located downstream of the existing Yonki hydroelectric complex in the Eastern Highlands Province of Papua New Guinea. https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf (see #2.2)

It is expected to lift Yonki’s electricity capacity from the current 93MW (once all major refurbishment and upgrade works are completed) to 273MW, an expansion of 194% in scheme’s generation capacity.

More significantly, Ramu 2 is expected to increase total electricity generation capacity in Papua New Guinea by 36% from a (purportedly low cost) renewable source (20% increase according to Flagon Bekker, the Managing Director of PNG Power Ltd until in 2021)

The development of the Ramu 2 project is in line with the PNG Development Strategic Plan 2010-2030 which outlines the following priorities:

increase household access to electricity from current 12% to 70% by 2030;
provide a national grid to increase reliability of electricity supply across the country;
provide a secure, renewable energy base for PNG development pathway;
reduce energy costs through greater hydropower development; and
deliver on the Government’s commitment to support mining and industrial developments within the Highlands and Momase regions.

https://www.kch.com.pg/publications/kch-2020-annual-review/ (see sections on critical project and PNG Power and its precarious financial situation)
Project description Ramu 2 is a major infrastructure project being managed by Kumul Consolidated Holdings (KCH). The project site is located downstream from the existing Yonki Dam and is capable of generating 180 megawatts (MW) of renewable energy. https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Project Preparation 3.1 Project Scope (main output) The scope of the Ramu 2 project includes a new 471,000m3 storage facility; three 61MW turbines; 30kms of new project access roads; 7km underground headrace tunnel; powerstation; 12km of new 132kv transmission lines; and various other temporary works. https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Environmental impact The contents of the approved Environmental Impact Statement have not been made publicly available, althuogh summary information is available on the website of Golder Associates which was commissioned to prepare the Environment Plan, with Tanorama undertaking the Social Impact component https://www.golder.com/project/assessing-the-environmental-and-social-impacts-of-a-hydropower-station-in-papua-new-guinea/
Land and settlement impact Information is not publicly available; reports in the media refer to 6 clans (n Eastern Highlands and Morobe provinces) having signed an agreement to provide 1000 ha. https://www.pngreport.com/energy/news/1411184/land-deal-done-on-ramu-2-hydro
Contact details Kumul Consolidated Holdings (KCH)
3rd Floor, Harbourside West, Stanley Esplanade, PO Box 320, Port Moresby NCD Papua New Guinea

Phone: (675) 321 2977 / (675) 309 6700 | Fax: (675) 321 0192
Email: [email protected]

Funding sources Consortium led by Shenzhen Energy Group, with China Hydro:
For development and construction of the project as a PPP, with an interim Power Purchase Agreement with PNG Power Ltd, the State provider of powerto businesses and private consumers
Kumul Consolidated Holdings :
All the studies carried out prior to and during the procurement phase
Project Budget There is no Budget allocation as the project is modelled under the PPP arrangement, as specified in the EOI. Shenzhen Energy group will secure the finance and construct the project under a BOOT arrangement, with the ownership of the assets transferred to the State after 25 years. https://postcourier.com.pg/ramu-2-set-flood-country-energy/
Project budget approval date The project does not appear in the Budget Documents and there was no budget approval. The Expression of Interest from KCH invited companies to bid to become the project operators, which would finance and run the project, with a PPA to sell the power to PNG Power, under an agreement with an Asset Entity, which will own the project and in turn by owned by the State, provincial governments and customary landowning clans. The arrangements between the operating company and assets entity also seem to have been adjusted during negotiation of the agreement. https://www.thenational.com.pg/morobe-shares-in-ramu-2-blessings/#:~:text=The%20Ramu%202%20hydro-electricity%20project%20will%20benefit%20both,wants%20to%20start%20construction%20by%20March%20next%20year
Project Completion 3.2 Project status (current) Selection of the consortium to develop the project was done in 2016. 65 proponents responded to the invite to bid on 29 February 2016, before the deadline of 2nd March 2016, with 7 submissions made. The 3 shorlisted bids, in order, were 1) a Daewoo/Hyundai consortium, 2) Sinohydro Corporation, and 3) Shenzhen Energy. The latter two proponents subsequently combined their proposals and were somehow selected. It is still awaiting the start of construction. A conditional PPA was signed with PPL in Februrary 2021, with expected initial Kina 200 million of funding expected for initial work. Latest update was in March, 2021, when the (former) PNG Power’s Managing Director said: “”We should be looking at financial close in the next three-to-four months. Then, construction will be starting fairly early on the ground. We will make a head start on it. We are looking, in around six or seven years, that the plant will be commissioned. It also depends on our resource investors … we need off-takers.”” (the most up-to-date information on a Government website seemsto be on the KCH website, with the 2020 Annual Review, briefly mentioning measures already taken and actions still pending. https://www.kch.com.pg/publications/kch-2020-annual-review/ (see sections on critical project and PNG Power and its precarious financial situation)
https://www.businessadvantagepng.com/ramu-2-will-be-a-nation-building-project-says-png-power-md/ https://www.pngbusinessnews.com/articles/2021/2/government-and-chinese-firm-sign-hydropower-project
Completion cost (projected) US$ 939 million (around PNG Kina 3.0 Billion); this K3 billion figure is provided by the Minister, and repeated, but there’s no documentation available detailing or verifying it. (US$ 902 mill – K3.2 billion, was specified in March 2021 in ‘Business Advantage’) https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf (the EOI specified the expected financing arrangements for the PPP, and requirements to provide details of capacity to secure funds)
Completion date (projected) Projected for completion in 2022 in 2016 but delayed to 2024 in 2019.
Current status is not known.
Scope at completion Projected scope of project.
The project includes a new 471,000m3 storage facility; three (3) 61MW turbines: 30 kms of new project access roads; 7 km underground headrace tunnel; power station; 12 km of new 132kv transmission lines and various other temporary works. An indicative scope of the scope of the project is shown in Diagram 1.
Key elements of the indicative scope include but are not limited to:

Infrastructure requirements: weir and head works infrastructure, Weir structure, Intake structure, Temporary coffer dams (as required), Waterways infrastructure, Low pressure headrace tunnel, Access adits (as required), Pressure shaft, Surge shaft, High pressure headrace tunnel, Powerhouse inlet manifold and Tailrace.

Power Station Infrastructure: Concrete substructure including, transformer fire walls and plinths and station sump; Steelwork superstructure, including crane rails; Building services and fit-outs for control/electrical areas, administration, ablutions and workshops; Turbine inlet isolation valves; 3 x pelton style turbines; 3 x vertical shaft arrangement Generators; Black start Generator; Tail race stop logs and 415V. auxiliiary power system: Single overhead travelling crane; Drainage and dewatering including an integrated sump in the powerhouse foundations; Cooling water system; Station compressed air supply.

Transmission infrastructure: 3 x Main Transformers at Ramu 2 powerhouse; 132kV connection of the Ramu 2 power house to the Ramu 2 switchyard; Ramu 2 switchyard; 132kV Transmission line to the Sing Sing switchyard -Construction and commissioning only – Asset will transfer to PPL at start of operations phase; Connection to the Sing switchyard; Control and Communication Systems; Modern control system; Communication systems (locally and externally) ;CCTV systems to meet operational requirements.

Roads infrastructure: Northern Access Road (permanent road). Construction and commissioning only – Asset will transfer at start of operations phase; Southern Access Road (permanent road)- Construction and commissioning only-Asset will transfer at start of operations phase; Surge shaft access road (permanent road). Construction and commissioning only – Asset will transfer at start of operations phase; Temporary construction access roads (as required).

Miscellaneous infrastructure/services: Construction of accommodation village, and site offices (as required for construction); Concrete batching plants, material stockpiles, laydown areas (as required for construction); Temporary water and power (as required for construction); Site security and safety infrastructure; Environmental monitoring infrastructure; Sewage Handling and/or treatment plants; Potable Water Supply, storage and reticulation; Fueling Facilities; Transportation and logistics to site and within the site; Waste Management and disposal.

https://www.kch.com.pg/ramu-2-progress-update/ https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Reasons for project changes Delays in contracting and financing, to lead on to construction. Project is now 8 years since the feasibility study, but finalising the PPA with the PPP is not concluded (presumably on the basis of the requirement by the PPP for PNG Power Ltd to purchase all the power generated by Shenzhen, even when the demand has not been established yet, notably with major mining operators), so construction has not started.
Reference to audit and evaluation reports Not known. But some recent Media reports say cost has increased to US$2.6 billion (PNG Kina 6.5 billion)
Contract Phase 3.4 Procuring entity Kumul Consolidated Holdings https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Procuring entity contact details 3rd Floor, Harbour Side West,
Stanley Esplanade, Port Moresby
P.O. Box 320, Port Moresby
Papua New Guinea
Attention: Parkop Kurua
Email: [email protected]
Procurement process KCH Competitive Bidding for all SOE’s in PNG. Follows International Competitive Bidding procedures. https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Contract type Design Build operate and finance.
IPP Model and BOOT Arrangement
Contract status (current) Active https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Number of firms tendering Seven (7) https://postcourier.com.pg/ramu-2-set-flood-country-energy/
Cost estimate US$ 939 million (around PNG Kina 3.0 Billion) https://postcourier.com.pg/ramu-2-set-flood-country-energy/
Contract administration entity Kumul Consolidated Holdings
(same entity)
Contract title Ramu 2 Hydro Electricity project https://www.kch.com.pg/wp-content/uploads/2019/03/Ramu-2-EOI-Document.pdf
Contract firm(s) Shenzhen Energy Group Company Limited, formerly Shenzhen Energy Investment Company limited, in a consortium with SinoHydro https://en.wikipedia.org/wiki/Shenzhen_Energy
Contract price Project has not yet been implemented. Not Available
Contract scope of work Project has not yet been implemented. Not Available
Contract start date and duration Originally from 2017 for completion in 2021. Then delayed to 2018 for completion in 2024. https://www.power-technology.com/marketdata/ramu-2-papua-new-guinea/
Implementation 0.3 Variation to contract price Project has not yet been implemented. Not Available
Escalation of contract price Not known. But recent Media reports say cost has increased to US$2.6 billion (PNG Kina 6.5 billion) The National Newspaper. Port Moresby. 19 February, 2021. “Project depends on low-cost power”
Variation to contract duration Project has not yet been implemented. Not Available
Variation to contract scope Project has not yet been implemented. Not Available
Reasons for price changes Project has not yet been implemented. Not Available
Reasons for scope & duration changes Project has not yet been implemented. Not Available

Ramu 2 Hydroelectricity Project