Ranking Member on Parliament's Energy Committee, John Jinapor

Ranking Member on Parliament’s Energy Committee, John Jinapor, has blamed former Energy Minister in Akufo-Addo’s first term for causing a $170 million judgement debt to the state in a failed Power Purchase Agreement.

“Government didn’t take the matter seriously. First of all, I hold the view that it was wrong to have terminated the agreement the way and manner in which this government went about it.

“Clearly, we could have saved more than $150 million if this government had listened to good counsel. But the Minister decided that he would cancel it unilaterally, and today, the state of Ghana is asked to pay about $170 million. That is a whopping amount, and it is a colossal amount,” he said.

The former Deputy Power Minister was speaking in an interview with JoyNews’ Joseph Opoku Gakpo in reaction to an award of $170 million in damages to Ghana Power Generation Company (GPGC) by a Commercial Court in London.

The Court in London instructed the Ghana government to pay $170 million in damages to the claimants for failing to meet set deadlines in contesting alleged unlawful termination of a contract between the two parties.

According to Mr Jinapor, government did not plan effectively to defend its decision to terminate the contract.

In January, a London-seated UNCITRAL tribunal issued its final award, ordering the Ghana government to pay a contractually defined “early termination payment” of more than $134.3 million plus interest and costs.

Government of Ghana, under English Law, had 28 days to bring a challenge to the award, but three days before the expiry of that deadline, the government’s solicitors, Omnia Strategy, applied to the court for a 56-day extension.

They pleaded that bureaucratic processes in preparing the challenge delayed because of national elections in the country and key members of the Attorney General’s office, had contracted Covid-19.

The court agreed to extend the deadline to March 8, but the government, now represented by Volterra Fietta, submitted the challenge to the claims by GPGC, on April 1.

But the Commercial Court declined to admit the challenge to the award since Ghana’s State Attorneys, together with Godfred Yeboah Dame, who took over from former Attorney General, Gloria Afua Akufo, unduly delayed.

Reading the ruling, Mr Justice Butcher said government of Ghana’s grounds for challenging the award were “intrinsically weak” and failed to explain how the Covid-19 pandemic affected “particular people or particular processes” which resulted in the delay.

Mr Jinapor, who is also MP for Yapei-Kusawgu, agreed with the court’s order. He noted that the delay in setting up a new team cannot be a strong basis to request an extension, after an earlier request for extension had been granted.

“The court clearly says they are not tenable. The court insisted Ghana is Ghana and it is a sovereign nation. It is like a company. If a company is running, it must run in perpetuity.

“You cannot say that because you are changing management, it got you not to do that. Bear in mind that if you read the story, we earlier on applied for some extension which was granted. But we failed to act within that extension. What made us ask for that extension and why did we fail? Clearly government didn’t handle the case properly,” he explained.

The Ranking Member on Parliament’s Energy Committee has also suggested a set of guidelines that should be employed when terminating contracts between the state and other institutions.

He advised that Parliament should be consulted before such contracts are terminated.

“We must learn some lessons from it. We can’t just throw the tax payers monies away when we could have used this money for something important.

“There should be proper guidelines and proper ways of terminating contracts. No Minister should get up on his own accord and decide that he wants to terminate contracts. When you are terminating such contracts, you must come back to Parliament and brief it. It is something that I think Parliament should take up seriously and when you want to terminate that contract, it is only proper for the people’s representatives are at least informed prior to the termination of that contract,” he stated.

Background

In February 2015, the GPGC entered into negotiations with the Government of Ghana for the provision of a fast-track power generation solution to see the relocation of the GPGC Equipment from Italy to Ghana and to alleviate the effects of Ghana’s then-ongoing power shortage crisis.

In June 2015, Government and GPGC signed the power agreement. In July, Parliament ratified the agreement. Following a change in government in January 2017, the Volta River Authority informed GPGC that it had decided not to proceed with the leasing of land as Kpone to the company.

In March later that year, GPGC notified the Ministry of Energy that following VRA’s decision not to make the Kpone Site available, GPGC had “identified an alternative site for the project and consider it necessary that we formally inform you that the proposed allocation of the Kpone Site for the project did not materialize.”

A committee set up by the Ministry of Energy at the direction of the Office of the President in April, issued a final draft report.

The committee set forth for consideration the option of termination of the agreement at an estimated cost of US$ 18 million rather than the payment of an excess capacity charge of US$ 24.9 million per annum over the contract period of 4 years.

In its Summary of Proposed Modification to PPAs of Committed Projects, the Committee noted that the GPGC Project was an: “Emergency Plant with a 5-year PPA used plant (not new) and high tariff. Major equipment has arrived at the Tema port awaiting tax exemption to clear.”

In April 2017, news emerged that the new administration was taking steps to review and terminate existing Power Purchasing Agreements entered into by the previous government that were no longer considered necessary to meet Ghana’s ongoing power needs.

Now former Attorney General, Gloria Akuffo, in August, issued an opinion on the agreement in response to a cabinet directive. She noted:

“… It has become necessary to review the implementation of the PPAs, because should all of them be implemented as originally scheduled, it would result in the production of excess energy with its attendant cost which would worsen the financial situation of the power sector. A review would therefore help to cut back on losses that would be incurred.”

Visit the link to access the full story on the judgement debt: Power Purchasing Agreement between Ghana and GPGC explained