Full Text of Minority Response to World Bank Director, NPP
PRESS CONFERENCE BY THE NDC MINORITY ON THE STATE OF GHANA’S ENERGY SECTOR
The attention of the Minority in Parliament has been drawn to a video recording of the World Bank country director Mr Laporte which has been given extensive twists by NPP pro-government media houses seeking to blame President Mahama for the current economic mess that the country finds itself.
On the issue of the take-or-pay agreements, Mr. Laporte may provide us with evidence of peer countries where would-be investors are willing to invest $300 million and above in Gas-to-power projects at that time of emergency without demanding some form of supply and payment guarantees.
We wish to state unequivocally that the claim by the Vice-President and others that Ghana’s electricity tariffs are the highest in the sub-region is completely deceptive. Available records will attest to the fact that despite having a lower hydro ratio power mix, Ghana’s electricity tariffs are within the lower bracket in the subregion. A comprehensive study published by the Africa Development Bank (AFDB) titled: Comparative Analysis of Electricity Tariffs in ECOWAS Member Countries (See Appendix-1) will confirm that Ghana’s tariffs (both Generation and end-user tariffs) are indeed lower than most countries including Cote D’Ivoire.
On the issue of capacity charges, we wish to state that there are standardised and regulated industry tools used by electricity utilities to recover infrastructure expansion costs triggered by new development. The PURC tariff setting guidelines defines “Capacity Charges” as the amount spent by electricity distributor utility to acquire or enhance fixed assets, such as land, building, and major equipment which is recovered over their useful life. The decision to factor in capital recovery pre-dates the Mahama administration, e.g., power plants such as CENIT, Cenpower, TICO, Asogli -1, and TT2PP which were negotiated before the Mahama administration all had capacity charges to ensure capital recovery. Agreeing to capacity charges did not start with the Mahama administration neither has it stopped under the Akufo-Addo-led government.
It is imperative to reiterate that almost all the Power Purchase Agreements (PPA), including Early Power, Amandi, AKSA, Ameri etc, were submitted to parliament for consideration and approval. It is equally instructive to note that all these agreements were approved on consensus by both sides of the house without objection from the NPP minority in Parliament. It will therefore be hypocritical for the very people who participated in scrutinising and approving the agreements to turn around and criticise the very agreements they approved.
Ladies and Gentlemen of the press, it may shock you to note that despite the consistent claim by the NPP government that Ghana has too much electricity capacity and does not need most of the Independent Power Plants (IPPs), as soon as the 5-year 370MW AKSA PPA signed under the Mahama led government elapsed, the Akufo-Addo/Bawumia led government quietly and surreptitiously signed a new 15-years PPA with AKSA for the same plant, and more surprisingly the contract contains take-or-pay clauses. Can the AKUFO Addo government explain the justification for the extension in years of the KarPower Barge – what were the changes made in that very contract extension? Again, the critical question to ask is, since when did the so-called excess capacity vanish into thin air?
As if that is not enough, the current Government has gone ahead to sign a completely new 207MW PPA with AKSA for a 20-year period, and guess what? this very agreement also contains take-or-pay clauses.
Ladies and gentlemen, we would at this juncture like to use this opportunity to shed light and provide details on these energy sector payments, which unfortunately have been described by government spokespersons as excess capacity payments.
A critical look at documents submitted by the Finance Minister, Mr Ken Ofori-Atta and other energy SOEs to parliament will reveal that these payments are actually meant to cover the following;
- Cover payments for fuel consumption which otherwise should have been recovered through the tariff structure.
- Increased technical and commercial losses, which has increased to over 30% under this government.
- Parment for forex losses, which hit a record high of GHS4.8 billion in 2022 alone due to the mismanagement of the Ghanaian economy, with the cedi depreciating over 50% and attaining the unenviable of being rated as the worst currency in the world.
- Payments for required reserve margins which have not been factored into the PURC tariff rate setting methodology.
- Settlement of outstanding electricity bills accrued by Ministries, Departments and Agencies.
- Payments for non-power sector-related fuel consumption by essential service providers such as the Military, Police, Health etc.
We have attached the Excel spreadsheet of these payments for your own perusal. How anyone is able to come up with such warped logic that President Mahama can be held responsible for these energy sector payments is most disingenuous and outrageous.
From the information provided, we wish to reiterate our opposition that the recent claim by Vice-President Dr Bawumiah, that his government has made some 17 billion Ghana cedis payments arising from excess capacity payments is bogus and deceptive at best.
In the petroleum sector, despite the criticism levelled against the Mahama led Government, the Akufo-Addo/Bawumia led government has signed a 20-year gas contract with Tema LNG Co. Ltd. with take-or-pay clauses, but more surprisingly, the pricing formula of this contract has been indexed to crude price making it the most expensive gas contract in Ghana. A look at the PURC”s WACOG gas rate setting will reveal that whilst Sankofa gas is pegged at $6.78/MMbtu, Tema LNG is pegged at $8.4/MMbtu.
Is the World Bank country director, Mr. Laporte oblivious to these latest developments we have enumerated? What is his position on these latest contracts?
This NPP government will go down in history as the luckiest ever, having received unpreceded revenues of about GHS24 billion from ESLA and GHS40 billion from oil revenues alone. It will be recalled that despite their failure to scrap the ESLA, this NPP Government went further to introduce a completely new tax known as the Energy Sector Recovery Levy in the 2021 budget, ostensibly aimed at paying for the so-called energy sector capacity payment. What has happened to revenues accruing from this tax?
Even more shocking is the fact that despite securing approval from parliament in the year 2018 to use proceeds ($1 billion) of the Eurobond issuance to refinance some power-related investments, the funds have been grossly misapplied by this government, contributing to the current economic meltdown.
Ladies and Gentlemen, the NDC Minority in parliament completely and
vehemently reject the suggestion that the PPAs executed under the Mahama administration are the cause of the current poor state of the economy, especially in reference to the energy sector. This baseless claim is untrue and cannot stand the test of time.
We are in this current quagmire because of the economic mismanagement of the Akufo-Addo/ Bawumia led government, hugely influenced by unbridled and reckless borrowing with very little investment in critical capital expenditure.
President Mahama’s record in the energy sector remains unmatched and cannot be watered down by such trivialities and distorted narratives clothed with political mischief.
President Mahama can be credited for the Sankofa Gas project, which has been key in providing energy to Ghana since 2018, with the capacity to produce 1,000 megawatts through power plants for around 1.6 million households and many businesses. The 250MW Ameri power plant is now an asset to the Republic of Ghana, with a useful life of about 20 years. President Mahama bequeathed the ESLA to this current government, which has accrued revenues of about 24 billion Cedis. The Mahama led administration before leaving office secured funding from Agence Francaise de Developpement (AFD) and commenced the construction of a 330KV transmission line project from Ghana to Burkina Faso. This project which was supposed to be completed in 2018 was intended to increase Ghana’s exportation of power from 100MW to 200MW to Burkina Faso and beyond. This project suffered undue delays solely due to unnecessary political interference by this government, leading to losses to the state.
Ghanaians are sick and tired of the unnecessary and flimsy blame game strategy adopted by this government and their hirelings. President Akufo-Addo and his head of the economic management team Dr Bawumiah, must accept responsibility and find reasonable solutions to the current economic hardship confronting the ordinary Ghanaian.
Thank you, ladies and gentlemen.
Appendix 2
2016 2017 2018 2019 2020 2021 *2022 2016 – 2022
Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC
A. IPPs/Fuel Suppliers/SOEs 41.01 163.49 56.94 250.53 430.00 2,051.71 684.95 3,585.81 1,156.79 6,534.58 774.54 4,461.95 168.22 1,359.79 3,312.44 18,407.86
1.0 AKSA – – – – 71.00 331.38 137.04 709.16 116.94 660.36 130.00 748.90 17.00 128.50 471.98 2,578.30
o/w Bonds – – – – 20.00 100.00 67.04 350.00 83.57 470.31 10.00 57.61 – – 180.61 977.92
2.0 Karpower (Cash) – – – – 207.00 973.17 162.95 866.63 229.15 1,300.68 175.00 1,008.14 25.00 200.85 799.10 4,349.45
o/w Bonds – – – – 40.00 200.00 37.95 210.00 99.15 558.16 20.00 115.22 – – 197.10 1,083.37
3.0 Sunon Asogli 10.00 44.00 50.00 246.10 137.49 719.17 247.25 1401.60 142.00 818.03 25.00 206.15 611.73 3435.05
o/w Bonds – – – – 20.00 100.00 37.49 200.00 137.25 774.66 15.00 86.41 – – 209.73 1,161.07
4.0 Cenpower – – – – – – – – 139.52 776.94 130 748.9 30.26 245.7 299.78 1,771.54
o/w Bonds – – – – – – – 57.41 325.66 30 172.82 – – 87.41 498.48
5.0 Ameri – – – – 22.00 101.07 105.00 530.85 30.00 172.25 58.19 335.21 5.80 42.82 220.99 1,182.20
o/w Bonds – – – – – – – – – – – – – – – –
6.0 Amandi Energy – – – – – – – 16.56 93.96 – – 23.16 200.3 39.72 294.26
o/w Bonds – – – – – – – – – – – – – – – –
7.0 Cenit – – – – – – – – – – 30.00 172.82 7.00 61.95 37.00 234.77
8.0 GPGC – – – – – – – – – – 34.35 197.88 30.00 221.54 64.35 419.41
9.0 Bui Power Authority – – 9.87 43.42 – – – – – – – – 5.00 52.00 14.87 95.42
10.0 TICO 41.01 163.49 37.07 163.11 – – – – – – – – – – 78.08 326.60
B Fuel Suppliers 19.97 79.6 49.43 217.5 156.7 719.71 729.2 3,777.06 443.16 2,482.79 490.35 2,824.81 403.00 3,271.98 2,291.81 13,373.45
11.0 TMF Trustee Limited (ENI/Vitol) – – – – – – 404.35 2,096.70 269.16 1,503.83 350.7 2,020.31 363.00 2,912.06 1,387.21 8,532.90
12.0 Litasco – – – – 156.70 719.71 153.36 787.58 45.44 257.83 64.65 372.44 40.00 359.92 460.15 2,497.49
13.0 GNPC/GEMCORP – – – – – – 43.29 230.92 128.56 721.13 – – – – 171.85 952.05
14.0 Stratcon Energy – – – – – – 122.23 631.40 – – – – – – 122.23 631.40
15.0 Goil/GO Energy – – 15.68 69.00 – – 5.97 30.46 – – – – – – 21.65 99.46
16.0 WAGL – – – – – – – – – – 75.00 432.06 – – 75.00 432.06
17.0 Sahara Energy – – 23.78 104.65 – – – – – – – – – – 23.78 104.65
18.0 Vitol S.A. – – 9.97 43.85 – – – – – – – – – – 9.97 43.85
19.0 Tema LNG – – – – – – – – – – – – – – – –
20.0 GNGC – – – – – – – – – – – – – – –
21.0 NGAS 19.97 79.6 – – – – – – – – – – – – 19.97 79.6
C. Others 255.12 1,017.02 228.55 1,005.61 13.68 67.02 – – 10.00 58.00 65.00 374.45 – – 572.34 2,522.10
22.0 CIE 25 99.66 39.77 174.99 – – – – – – – – – 64.77 274.65
23.0 VRA Creditor Banks 129.01 514.31 136.1 598.86 – – – – – – – – – – 265.12 1,113.17
24.0 TOR Creditors 46.92 187.05 41.31 181.76 – – – – – – – – – – 88.23 368.81
25.0 BOST – – 11.36 50.00 – – – – – – 15.00 86.41 – – 26.36 136.41
26.0 Balkan Energy – – – – 13.68 67.02 – – – – – – – – 13.68 67.02
27.0 Sinopec – – – – – – – 10.00 58.00 – – – – 10.00 58.00
28.0 China BXC – – – – – – – – – – 50.00 288.04 – – 50.00 288.04
29.0 ECG (MDA Bills) 54.18 216 – – – – – – – – – – – – 54.18 216.00
Total A+B+C (IPPs+Fuel+ others) 316.09 1,260.11 334.92 1,473.63 600.38 2,838.45 1,414.14 7,362.86 1,609.95 9,075.37 1,329.89 7,661.21 571.22 4,631.77 6,176.59 34,303.41 Summary
No. Expenditure Category 2016 2017 2018 2019 2020 2021 *2022 2016-2022
Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC Amount in US$ Amount in GHC
1 IPPS 316.09 1,260.11 334.92 1,473.63 600.38 2,838.45 1,414.14 7,362.86 1,609.95 9,075.37 1,329.89 7,661.21 571.22 4,631.77 6,176.59 34,303.41
Notes
- Report excludes SOEs/IPPs debts settled under ESLA PLC over the period
- Source of funding: Debt Service Reserve Account/Sinking Fund, MoEn Budget, Securitasation with Bonds, and other GoG sources
- 2022 IPPs Data is as at 14th December
About Author
