About 84% of Palau’s public debt was owed by State-owned Enterprises in 2020, and the Palau Public Utilities Corporation (PPUC) was the largest borrower, with outstanding debt of $23 million, according to the latest Asian Development Bank ( ADB) review of the financial performance of state-owned enterprises (SOEs) in nine Pacific island economies,
The report reviewed the SOEs of Palau, which are the provider of power, water, telecommunications, and banking services.
The report said that PPUC’s profitability has been volatile over the 2015–2020 period due to tariff regulations and offsetting subsidy arrangements. PPUC received a total of $12 million in operating subsidies and grants from 2015 to 2020 and a further $19 million in capital contributions, yet generated a cumulative net loss of $18 million for the period.
It noted that caps on tariffs had constrained PPUC’s ability to recover costs. Most recently, the Republic of Palau Public Law 10–42 restricted PPUC’s ability to increase its electricity tariffs to recover increases in fuel costs during FY2020. COVID-19-induced supply chain disruptions delayed the parts, equipment, and expertise needed to maintain infrastructure and progress renewable energy projects in 2020–2021.
THE SOEs are PPUC, PNCC, NDBP, and Belau Submarine Cable Corporation.
The report added that three of the four SOEs were able to maintain the same level of core revenue in 2020 as in 2019.
“Only PNCC suffered a contraction in revenue, partially because of reduced visitor arrivals,” the report stated.
The National Development Bank of Palau (NDBP) responded to COVID-19-affected customers by restructuring loans or repayment schedules and increased its provisioning for doubtful loans by $2.5 million. NDBP stepped up its Housing Development Loan Program and received $5.7 million in related capital contributions from the government.
SOEs like Palau National Communications Corporation (PNCC) and PPUC, generated a net gain of $10 million and a loss of $18 million, respectively, over the 2015–2020 period. A sharp rise in overall profitability in 2016 is attributable to increases in core revenue for PNCC.