‘Dumsor’ PPAs a World Bank conditionality; their silence ‘surprising’ – Mould

Business News of Sunday, 21 February 2021

Source: Class FM

2021-02-21

The Mahama government gave World Bank-backed guarantees to four independent power producers (IPPs) to be built in Ghana during the period of the energy crisis (Dumsor) because the Bretton Woods institution saw the need for them at the time, a former CEO of the Ghana National Petroleum Corporation (GNPC), Mr Alex Mould, has said.

“What people don’t know is that the World Bank supported the government of Ghana to support four IPPs to be built mainly because they needed guarantees for the off-takers of the ENI-Sankofa-Gye Nyame gas”, Mr Mould told Eugene Bawelle on Class91.3FM’s current affairs programme ‘The Watchdog’ on Saturday, 20 February 2021.

He said because the World Bank “had given Ghana $750 million in terms of guarantees to guarantee the ENI-led Sankofa-Gye Nyame gas project, one of the conditions was that we would either build a pipeline or do the convertibility so that the gas can go from the west to the east and we would have off-takers – IPPs that are ready to take the gas”.

“And, as such, they supported Ghana to give what we call a Government Support and Consent Agreement to these IPPs for them to be able to take to their financial institutions to say that: ‘We have a guarantee from the Ghana government which is backed by the World Bank; and, as such, they were able to get the financial decision to build these plants”, he explained.

“That is what we have to understand; that there was a reason for these plants to be built”, he argued, noting: “It wasn’t like these guys came willy-nilly, they had a PPA, they went to their banks, they got financial [support] and now we are saddled with that. No”.

The Daily Guide newspaper recently reported that a source at the Finance Ministry said the government of Ghana has, so far, had to pay GHS12 billion as the cost of excess energy capacity charges inherited since 2017 by the Akufo-Addo government from the Mahama administration due to the ‘Take-or-Pay’ PPAs signed by the Mahama government in dealing with the dumsor.

The government says the country pays over US$500 million a year for unused electricity, since most of the PPAs were an ‘uncoordinated and hasty’ attempt to end dumsor.

In April 2019, Danquah Institute founder Gabby Asare Otchere-Darko, the governing New Patriotic Party (NPP) inherited “financial and legal burdens” in the power sector, “as a result of National Democratic Congress’ strange decision to agree to over 7,000 of excess capacity contracts”.

According to the cousin to President Nana Akufo-Addo, the NPP government “saved Ghana over $7 billion that we otherwise would have paid because John Mahama decides to sign us on for power we had to pay for even though we would never get to use”.

In his write-up, Mr Otchere-Darko said as of the end of 2016, the Electricity Company of Ghana (ECG) “had signed 14 Power Purchase Agreements (PPA), which were operational with a combined capacity of 1104MW”.

He said another 18 PPAs were signed by ECG with a combined capacity of about 6,000MW and 8 PPAs were under discussions with a total capacity of 2116MW.

“This, in addition to existing generation capacity from hydro, the VRA plants at Aboadzi and Tema; and the TICO plant, will result in a total installed capacity of about 11,000MW if the committed capacity were all deployed. This will by far be more than the current peak demand of 2400MW. Even at an annual growth in demand of 10%, our country will not be able to utilise this capacity in two decades”, Mr Otchere-Darko wrote.

In his view, “the over-contracting of capacity imposed serious financial and legal obligations on the government and power consumers”.

To address these, he said the Ministry of Energy tasked a Committee led by the Energy Commission to review all PPAs signed by the Electricity Company of Ghana (ECG) for…