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Why Gov’t can’t cancel 8 Power Deals

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GOVERNMENT is unable to cancel eight Power Purchase Agreements (PPAs) deemed excess capacity because the financial implications range between $400million and $500million.

The earliest any of the eight projects would come on stream is 2019 by which time it would not be needed since it would be excess capacity.

Consequently, the only option left for the government is to defer the completion dates of these projects and some will be deferred as far as 2030.

With all the power projects signed by government, total capacity is estimated to be 10,800 megawatts even though the country needs 5,000 megawatts.

However, government has cancelled 20 power agreements totaling close to 3,000 megawatts which have reached financial closure and will not cost the country any money.

A Deputy Minister for Energy, Dr Mohammed Amin Adam, explained that if all agreements signed by the previous government are executed, the country would be saddled with 5,800 megawatts of excess capacity which “we will not be using over the next five years but which we have to pay for.”

“The contracts are take or pay contracts, meaning whether you use it or not you have to pay,” he stated.
“We have estimated that we would be paying about $680 million every year for power that is not used”.
“There are other agreements that we would not need beyond 2030, yet we signed onto them and so some of them may have to be cancelled,” he added.

“We have too many other agreements which were signed but which we don’t need,” he told The Finder.
The Minister of Energy, Mr Boakye Agyarko, described the attitude of the previous government as what amounted to “indecent haste that ended in the procurement of emergency power left, right and centre”.

He said the proper shopping methodology that ought to have been followed was not done, adding that the challenges bedevilling the Electricity Company of Ghana (ECG) may lead to its collapse if they are not remedied urgently.

ECG operating with GH₵2billion capital deficit

Mr Agyarko revealed that the country’s power distributor is currently operating with a capital deficit of GH₵2 billion, a situation that threatens its survival.
The Minister said any turn around solution for ECG will require its balance sheet to be fixed.
20 agreements cancelled to save $300m

Government had earlier on said over $300million was saved through the cancellation of about 20 agreements and the review of four others.

40 power purchase agreements

About 40 power purchase agreements were signed by the previous government in a bid to find a solution to the protracted power crisis that hit the country some three years ago.

The agreements, the new government maintains, were signed without due diligence and value for money and so upon assumption of office commissioned an audit of all the agreements.

High tariffs endanger power exports – World Bank

World Bank Country Director for Ghana, Liberia and Sierra Leone, Henry Kerali, has warned that the country’s attempt to export power to its neighbouring countries would suffer a major setback if tariff differentials between Independent Power Producers (IPPs) signed in Ghana and those in the export destinations in the sub-region are not addressed.

Despite an anticipated excess supply of about one-and-a-half gigawatts of electricity in the next four years, Mr Kerali said the high cost of kilowatt per hour in the country, relative to those in the sub-region, meant that power deficit countries in West Africa would struggle to patronise power from Ghana.

The result can end the country’s export dreams, which has been touted for years.
The neighbouring countries will not opt to buy electricity from Ghana if the tariff level is higher than what they can buy from other countries, he said.

According to him, the high tariff regime was the consequence of too many power purchase agreements (PPAs) signed within the past eight years.

Ghana to subsidise power export

On options available to Ghana given the tariff differentials, Mr Kerali said the excess power could be exported at tariff levels that pertained on the regional market.

“Another option is to subsidise any export and bring them down to the level of the regional market or find ways to reduce the tariffs,” he said.

In Cote d’Ivoire, where Ghana exported power to before, tariffs are averaging nine cents and 11 cents compared to Ghana, where they are significantly higher.

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