Government is calling on Independent Power Producers (IPP) to expedite conclusion on their power agreements with the country to help reduce onerous debts as well as provide a stable energy supply for the people of Ghana.

This follows successfully secured terms for an amended power purchase agreement (PPA) with CENIT Energy Limited.

CEL is a Ghanaian IPP that began commercial operations in 2012.

It has agreed to convert its power plant into a tolling structure and transfer all resulting cost savings to the Electricity Company of Ghana.

According to a statement from the Ministry of Finance, CEL has agreed to a further reduction in the capital recovery tariff of 38.9%, resulting in total savings to government and all Ghanaians in excess of $200.0 million over the remaining life of the PPA.

It emphasized that the commitment made by CEL is crucial in reinforcing government’s efforts to build a balanced and sustainable energy sector. The terms agreed to between the government and CEL will produce a more favourable situation for both parties and ultimately reduce the cost of electricity for the people of Ghana.

Commenting, Finance Minister, Ken Ofori-Atta said “we welcome CENIT Energy’s commitment to Ghana and its role in regenerating the energy sector. CENIT is an important partner and a significant energy producer in Ghana.

“We encourage other IPPs to join CENIT in collaborating to help reduce onerous debts and to provide a stable energy supply for the people of Ghana.”

He added that “we are committed to building a competitive and dynamic energy sector where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.” 

Cost of unused electricity

Government says it presently pays over $500 million a year for unused electricity.

As such, most of the PPAs are legacy agreements, entered into under the previous administration in an uncoordinated and hasty attempt to end dumsor.

It emphasized that the tariffs agreed were not competitive and have contributed significantly to the build-up of debt in the sector and oversupply of energy.

World Bank/GoG agreement

This Government, in collaboration with the World Bank, created the Energy Sector Recovery Programme (ESRP), identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023).

As part of the reforms, the government said it is taking steps to institute competitive bidding for future additional capacity, so as to ensure that future tariffs are fair and in line with expected pricing benchmarks.

IPPs Threat to shut down plants

The IPPs have threatened to shut down plants by end of September if government fails to settle its outstanding debt of over $1.4 billion to them.

This comes after their bankers are giving them pressure to settle their indebtedness or cut their credit lines.

A notice from the Chamber of the IPPs said “we hereby send you this shut down notice of our plant power generation by the end of September 2020. This shut down is as a result of our difficult cash flow position as we do not receive enough payment to honour our gas bill and financial obligations due.”