I can tell you one secret. Our Minister of Power does not like the word “dumsor” in his boardroom or attached to his persona. He flipped his lid completely and nearly chucked us out for daring to introduce such local language parlance in his presence.
In an unprovoked outburst during our meeting, at his invitation last Thursday, the Minister of Power instructed that we do not blend the now common household word to load shedding. His angry tirade triggered our reply for him to call the meeting to an abrupt end and we would be more than happy to oblige, but we eventually resolved it.
What puzzled me more though, was that his whole entourage, about twelve or thirteen persons from the Ministry, supported him fully; even his deputy minister and technical advisors, waded in to play their ethnicity that there is no word such as “dumsor” in their language and therefore it had no place in their boardroom.
We had more than a one-hour meeting, after which we trundled our separate ways, clearly with different views of the AMERI deal.
In clearly selective disclosure mode, the Ministry refused to share information with Occupy Ghana, even when such material was in the public domain.
Our probing questions on the mechanism of a civil works contract to Engineers and Planners (E&P), the President’s brother, was a sore point, buttered with an accusation that I personally had come with a hidden agenda.
The fact that neither the Minister nor any of his team could remember whether E&P had been shortlisted with others and whether the contract had been sole-sourced to E&P, was of concern to Occupy, seeing as the level of disclosure we expect from the Ministry in a major contract such as this, must be elevated to “more than regular”.
In the aftermath, we discovered that the civil works contract has maybe been paid twice, once from the Petroleum Revenue funds and again from this contract through VRA. Refer to page 34 of the Petroleum Fund report to Parliament 2015, page 34.
But this week I am borrowing material again, because so many knowledgeable persons are coming forward and showing me that they are just as smart if not smarter, and I appreciate this posturing to explain the intricacies of our Government’s corruption bent.
I am not even going to bother with the bus branding that ended up costing GH¢3.6million through the Ministry of Transport when it should have been about a tenth of that. Minister Attivor is still not out with any explanation and now the Chief of Staff from the President’s office has “ordered” the Attorney General to investigate the matter. Something that should really not have happened in the first place was it not for the plenty “chop-chop mentality” of our politicos.
So here is what Mr. Atsu Amegashie thought of what he listened to from our meeting with Dr. Kwabena Donkor, Minister of Power, who has only eleven days from today to either fix the “dumsor” as he promised us all, or leave office. The way things are, he should be writing his handover notes. But maybe not, because after our meeting, I came away not too sure he has a full handle on what needs to be done.
“On December 17, 2015, minister for power, Dr. Kwabena Donkor met members of OccupyGhana:
According to Kwabena Donkor, under a rental/lease option, cost was $785,000 per month per unit of equipment (no ownership after 5 years). This option was not chosen because it did not include the right to own. Makes sense to me.
Under “Build, Own, Operate, and Transfer” (BOOT) option, cost is: $850,000 per month per unit of equipment (includes ownership to Ghana after 5 years). This option was chosen.
Note that Ghana ordered 10 units. Therefore, the total cost over 5 years in respect of the cost $850,000 per month per unit is $850,000 times 12 times 5 times 10 = $510 million.
According to Kwabena Donkor, the right to own (under BOOT) after 5 years is reflected in the following tariff structure in the contract (begin at 6:00 mark of audio clip at above weblink): Year 1 to 5 tariff includes capital recovery charge and year 6 to 20 does not include capital recovery charge (capital recovery charge is zero). That is why the tariff in the first five years is US Cents 14.5918/kWh and the tariff from year 6 to year 20 is US Cents 10.4149/kWh. I note that the difference in the two tariffs is US cents 4.1769 per kilowatt hour (kWh).
The capital recovery charge is to recoup the cost of capital expenditure (capex). At the time of signing the contract, Ameri must have been certain that it can indeed produce the required output for it to have agreed to link capital recovery to output (e.g., there must be a guarantee that Ghana will meet its contractual obligation of providing fuel or paying for the cost of fuel).
In the contract, there is a variable charge per year of US$0.005/kWh, which is US$16.6 million per year. Therefore, US cents 4.1769/kWh = $0.041769/kWh will be equivalent to $138.673 million per year (.04179/.005)x$16.6million. So the capital recovery charge (which gives us the right to own the equipment and any auxiliary works) is $138.675 times 5 = $693.365 million.
Therefore, the total cost of equipment (10 turbines) plus all auxiliary works plus interest payments is $693.365 million plus $510 million = $1.203 billion for 250 MW. This figure is too high. Any thoughts? I thought the tariffs were only for operating variable costs related to output (kWh). Dr. Kwabena Donkor’s disclosure that they also include a capital recovery charge raises a serious question about the economic efficiency of this deal. Further clarification is required.
Given the tariffs above, what is the justification for the variable charge per year of US$0.005/kWh, which is US$16.6 million per year (i.e., $83 million over 5 years)?
According to Kwabena Donkor, under direct purchase, the equipment plus balance of plant would have cost about $247 million. “Balance of plant refers to supporting and/or auxiliary components based on the power source or site-specific requirements and integrated into a comprehensive power system package.”
Kwabena Donkor claimed that at a bond yield (just think of this as the interest rate) of 9.5% (the yield on Ghana’s Eurobond at that the time), it would have cost $411 million over five years to borrow $247 million. However, I am unable to reconcile his figures. That is, a 9.5% interest rate on $247 million for five years will require a total payment of significantly less than $411 million to pay off the loan.
Sydney Casely-Hayford asked why a Eurobond (Dumsor bond) was not issued to raise $247 million for direct purchase (begin at 33:00 mark of audio clip at weblink above).
In response, Kwabena Donkor said sovereign guarantees for issuing Eurobonds were no longer available to ministries and agencies of the state. This is very puzzling. Don’t ministries act on behalf of Ghana? Ghana has the right to borrow by issuing domestic bonds and Eurobonds whenever she pleases.
This distinction between Ghana and agencies of Ghana (the ministries) does not make sense to me. It also did not make sense to Sydney Casely-Hayford. Issuing a Eurobond would have been cheaper. We could have raised more than the $1 billion we raised (at 8.125%) in September 2014, six months before the Ameri deal.
Note that although we intended to raise $1 billion in 2014 (and indeed raised $1 billion), our September 2014 Eurobond issue bond was oversubscribed with orders of up to $3 billion
So if we were looking ahead, we could have raised a little bit more at the same interest rate or at a slightly higher rate.
Dr. Kwabena Donkor must be commended for meeting OccupyGhana and for doing so in a very timely fashion. However, further clarification is necessary”.
So let me say this. Dumsor is not a word. It is a reflection of incompetence and an outcome of a total failure of Governments in Africa and in our case a description of a Ghanaian phenomenon that says, we are not capable of keeping the lights on and we will continue to lie and care-freely load-shed energy even as we bankrupt the country from poorly thought through policies.
Dumsor is not a word, it is a description of failure. This deal stinks and Parliament is letting us down. The arithmetic does not stack up, we have been seriously short changed. But it is not over, we have a lot more to say on this.
Ghana, Aha a yε din papa. Alius atrox week advenio. Another terrible week to come!
Source: Sydney Casely-Hayford, [email protected]
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