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The Minister of Energy, John Peter Amewu, says that a thorough review of the several power purchase agreements (PPAs) contracted by the previous government has saved Ghana $680 million.

The Minister of Energy, John Peter Amewu, says that a thorough review of the several power purchase agreements (PPAs) contracted by the previous government has saved Ghana $680 million.

This sum was supposed to be paid annually for 13 years in excess capacity charges contracted through controversial deals initiated under the John Mahama government. So, in effect, Ghana will be saving $8.84 billion over the 13-year period.

Speaking at the Meet the Press series of engagements with the media on Tuesday, the Minister said the review had become necessary due to poor management of the energy sector by the previous NDC government, which appeared fixated on signing PPAs.

Mr Amewu said these agreements created potential overcapacity payments, a lack of fuel security for power generation, corrupt and opaque procurement of new power plants, as well as inefficiencies and unsustainable inter-utility debts which threatened the long-term operation of the power sector.

Assessment

Mr Amewu said, having entered office in 2017, the Akufo-Addo government realised that Ghana’s energy sector was in far worse condition than imagined. The government therefore carried out an appraisal of the sector to find a workable solution to its m any challenges.

Together with the leading stakeholders, the Minister recalled, the government quickly put in place strategies to address the declining state of the energy sector and bring hope to power consumers.

“I am glad to announce that we have reviewed several power purchase agreements, saving the country over $680m every year for 13 years if those agreements were allowed to continue,” Mr Amewu said.

Impetus

The government gained impetus in November 2017 after the successful issuing of the Energy Sector Bond, which realised GHC4.78 billion.

It raised a significant proportion of the targeted GHC6bn for the first tranche of funding Ghana needed to support energy sector agencies to improve their operational efficiency and pay off their debts.

This is how the government has managed to reduce the energy sector legacy debt by over 80 per cent and instituted a mechanism to address the debt in its entirety, Mr Amewu said.

“This is to enable sector players to have a strong balance sheet which will become more attractive for future PPAs,” he explained.

Achievements

“We have worked with stakeholders to drastically reduce electricity tariffs, modified the Private Sector Participation agreement to ensure 51 per cent equity participation for Ghanaians, and put measures in place to ensure that Ghana reaches its goal of universal access to electricity by 2020,” Mr Amewu told journalists.

In addition, he said, the government has introduced measures to step up operations of the Volta Aluminium Company (VALCO) to 40 per cent of the VALCO plant’s capacity, at an all-inclusive and globally competitive tariff of 3.5 cents per kilowatt hour (KWh).

Mr Amewu also said a new National Energy Policy has been drafted to provide the framework to guide operations in the energy sector.

This will ensure a fair balance between the government’s aspirations and the interests of industry players, academia, local communities, civil society and other stakeholders.

Local content

The Minister disclosed that $453m worth of contracts had been awarded to Ghanaian companies, and $346m has also been awarded to joint-venture companies in accordance with the local content and local participation law.

In addition, the Ghanaian subsidiary of Norway’s Aker Energy has awarded contracts valued at $40.3m to joint-venture companies, in accordance with its local content obligations.

With this development, over 75 percent of people now working in the upstream petroleum industry are Ghanaians.

Mr Amewu said with the government’s aggressive implementation of the Petroleum Local Content and Local Participation Regulation 2013 (LI 2204), a significant number of Ghanaian companies have registered with the Petroleum Commission to participate in the upstream petroleum industry.

He said rigorous promotion of joint ventures in accordance with Regulation 43 (1) of LI 2204 had also enhanced participation in the industry by indigenous companies.

“As at the end of September 2018, about 600 indigenous Ghanaian companies had registered with the Petroleum Commission to provide goods and services to companies in the oil and gas industry,” he said.

Revival

The Energy Minister expressed his delight that the government has successfully revived the ailing energy sector.

He is satisfied that Ghanaians are now enjoying affordable and reliable power supply because of the government’s relentless efforts to fix the sector.

On the subject of gas, the Minister said there had been a significant reduction in the gas price from US$10.5 per million British thermal units (mmbtu) to $7.89/mmbtu.

The government has also successfully interconnected the gas export pipeline into Ghana's Atuabo-Takoradi (A-T), to make it possible for gas from the Sankofa field to be transported through the Natural Gas Transmission System to various customers across the country.

He touched further on the safety of Ghanaians, saying cabinet had directed a number of actions, including the immediate commencement of the National Liquified Petroleum Gas (LPG) Promotion Policy, based on the cylinder recirculation model.

Mr Amewu said this is to ensure that at least 50 per cent of Ghanaians have access to safe and environmentally friendly LPG for domestic, commercial and industrial use by 2030.