Dumsor: The Untold Story

The Volta River Authority (VRA) needs at least $30 million a month to buy Light Crude Oil (LCO) to fuel thermal power plants in Tema and Takoradi to generate some 520 megawatts of power to ameliorate the worsening dumsor in the country.

In the Aboadze power enclave, VRA will require $15 million every month to buy LCO for the Takoradi Thermal Power Plant Company (TAPCO) to generate 300MW from a combined cycle and another $15 million every month to buy LCO for Tema Thermal Power Plant (TT1), with a capacity of 110MW, and the 110MW-Cenit Power Plant to generate 200MW per day in the Tema power enclave.

This is a tall order because VRA’s indebtedness as a result of monies spent on fuel is heading towards $2 billion.

The breakdown of VRA’s indebtedness is as follows: Banks - $1.3billion; Ghana National Gas Company, close to $200 million; and N-Gas of Nigeria - close to $200 million.

2016 budget and VRA

Reading the 2016 budget, The Finder is yet to come across any provision to bail out VRA, let alone make provision for fuel to run thermal power plants.

AMERI brings fuel crisis

The tie-in of African Middle East Investment (AMERI) power plant into thermal plants in Takoradi has been completed.

Power sector stakeholders told The Finder that VRA is under contractual agreement to supply fuel to the AMERI power plant.

Consequently, VRA will supply 50 million standard cubic feet of lean gas out of the up to 110 million standard cubic feet of lean gas per day supplied by Ghana National Gas Company to the AMERI power plant to generate 250MW.

The remaining 60 million standard cubic feet of lean gas per day from the Atuabo Gas Processing Plant will be supplied to Takoradi International Company (TICO) power plant, which has a combined cycle to generate 300MW.

Takoradi Thermal Power Plant Company (TAPCO), which also has a combined cycle that generates 300MW, will be left without fuel.

 To run TAPCO on crude, it will require 10,000 barrels of Light Crude Oil (LCO) a day to generate 200MW in addition to 100MW from the heat generated by the machines.

Pegging crude oil price at $50 per barrel, including transportation, insurance and other costs, VRA will need $15 million every month to operate TAPCO.

VRA is compelled to supply fuel to Independent Power Producers (IPPs). As a result, VRA is forced to give lean gas from Nigeria and Atuabo to IPPs and look for money to buy LCO to powers its own thermal plants.

Sources stated that TAPCO, which generates 300MW, will remain shut until such a time that VRA is able to buy LCO to operate it.

TAPCO and TICO, both with combined cycles, generate 600MW from the up to 110 standard cubic feet of lean gas per day from Atuabo.

However, running AMERI and TICO on the same 110 standard cubic feet of lean gas per day from Atuabo will generate 550MW because AMERI produces 250MW.

This means the power supply from Aboadze will drop by 50MW.

Instead of the 900MW trumpeted by politicians, Aboadze will contribute 550MW until such a time that VRA is able to buy crude to power TAPCO, which has 300MW.

VRA will require $15 million to buy crude oil every month to generate 300MW from TAPCO plant, which is a combined facility of 200MW from LCO and 100MW from the heat the plant generates.

Tema Thermal Power Enclave

Currently, N-gas of Nigeria supplies an average of 35 million standard cubic feet of lean gas per day and it is used by Sunon Asogli Power Plant to generate 200MW per day.

The Tema Thermal Power Plant (TT1), with capacity of 110 megawatts, the 50-megawatt Tema Thermal Power Plant (TT2), 110-megawatt Cenit Power Plant and Mines Reserve Plant with the capacity to generate 80 megawatts are all shut because VRA has no money to buy LCO to operate them.

Apart from the 50MW-TT2 and 200MW-Sunon Asogli power plants, which use only gas, all the others use gas, diesel or LCO.

In the absence of lean gas, the Mines Reserve Plant can use diesel while the Tema Thermal Power Plant (TT1), with capacity of 110 megawatts, and the 110-megawatt Cenit Power Plant can run on LCO.

If N-Gas of Nigeria supplies 120 million standard cubic feet of lean gas per day, it will be enough to run all the plants in the Tema Thermal Power enclave.

However, with the current situation of 35 million standard cubic feet of lean gas per day from N-Gas, VRA needs at least $15 million to buy LCO every month to power the Tema Thermal Power Plant (TT1) with capacity of 110MW and 110MW-Cenit Power Plant to generate 200MW per day.

Cheap lean gas

Despite the low crude oil prices, it is still cheaper to generate power from gas compared to using crude oil.

According to energy experts, a 100MW plant will consume 5,000 barrels of crude oil per day.

At $50 per barrel of LCO, including transportation, insurance and other costs, a 100MW plant will consume $285,000 worth of LCO a day while lean gas will cost $250,000.

Energy experts say the best solution is for government to clear the outstanding arrears owed N-Gas for it to increase supply to 120m standard cubic feet of gas per day 

If N-Gas supplies the 120 million standard cubic feet of gas a day, as contained in the contract, it would be enough to power all the plants in the Tema power enclave.

Even though N-Gas claimed it has problems at its production site, power sector sources suspect that may not be the truth.

Sources told The Finder that ever since Ghana reached agreement to pay N-Gas the balance of $171.5 million between November 2015 and February next year, gas supplied from N-Gas averaged 35 million standard cubic feet a day.

They noted that in the agreement with Ghana to pay the outstanding debt, N-Gas demanded that full payment be made for fresh gas to be supplied while the debt is cleared.

However, VRA, which owed banks to the tune of over $1.3 billion, has not been able to make full payment for the fresh gas supplied, and sources believe it is for this reason N-Gas is unwilling to increase supply.

For example, gas supplied for September 2015 amounted to $18 million but VRA was able to pay $12 million, leaving a balance of $6 million.

N-Gas issued VRA a deadline up to ending of February 2016 to clear its outstanding debt of $171.5 million.

In October, VRA paid $9.5 million out of the $181 million debt for gas supplied from August 2014 to August 2015.

This means the balance to be paid is $171.5 million.

The $171.5 million is to be paid in three tranches from this month to ending of February 2016.

The debt covers gas supplied to VRA and the cost of supply and transportation of the gas from Nigeria to Ghana.

Govt should bailout VRA

As of July this year, VRA owed banks to the tune of over $1.3 billion, and it will be very difficult for VRA to secure a loan from any bank in Ghana to pay its debt to N-Gas.

This means the Government of Ghana, which is the 100% owner of VRA, will have to look for money to bailout VRA to ensure that N-Gas does not cut supply to Ghana.

Ghana gets about 25% of power through gas from Nigeria, which flows through the West African Gas Pipeline via Benin and Togo, and the threat by N-Gas to reduce volumes by 70% would have raised the cost of supply.

VRA’s power generation problems are a sign of the budgetary stress facing Ghana, a country that is following an International Monetary Fund programme to restore fiscal balance.

The power crisis stems from a fall in supply from hydro sources, government underpayment to the Electricity Company of Ghana, residents’ illegal consumption and tariffs too low for VRA to recoup its costs.

Causes of VRA’s debts

The indebtedness is the result of the failure of Electricity Company of Ghana (ECG), Independent Power Producers (IPPs) and the Volta Aluminum Company (VALCO) to pay VRA for services rendered, as well as the unrealistically low tariffs sanctioned by the Public Utilities Regulatory Commission.

VRA buys fuel for 30 pesewas to generate one kilowatt of power but consumers pay 14 pesewas for one kilowatt of power sanctioned by PURC.

Reliable sources told The Finder that even though ECG has signed power purchase agreement with IPPs, it has failed to do same with VRA despite persistent pressure from VRA in the last four years.

The sources noted that one of the reasons ECG has persistently failed to sign the power purchase agreement is a clause in the agreement which demands that ECG pays outstanding debts with interest.

ECG argues that consumers of electricity do not pay outstanding debts with interest; therefore it cannot do so to VRA.

For this reason, the sources said ECG usually pays IPPs first before considering paying VRA and Ghana Grid Company (GRIDCo).

According to our sources, consumers pay ECG in cedis but ECG has to pay IPPs the dollar equivalent of power purchased using prevailing exchange rate as stated in the power purchase agreement.

This, the sources said, takes a large chunk of ECG’s money, for which reason ECG is unable to settle its debt to VRA since about 40% of power ECG purchases goes to government institutions, which do not pay bills.

Despite the huge indebtedness, VRA cannot cut supply to ECG because of its strategic nature.

In addition, the sources noted that VRA supplies fuel to the IPPs in the country.

However, the IPPs have failed to pay for the fuel with the explanation that ECG has not paid them in full and since ECG and VRA are state institutions, VRA should collect the fuel money from the money ECG owes them.

Despite this challenge, VRA continues to supply the IPPs fuel because failure to do so would result in huge deficits in power supply.

Consequently, VRA has borrowed money from numerous banks just to keep generating power for the nation.

Now, most of the banks are reluctant to lend to VRA because of the huge indebtedness.

The government in 2013 settled arrears in tariffs owed by the Ministries, Departments and Agencies (MDAs) to ECG and instructed the MDAs to pay their own utility bills thereafter.

The sources said, for this reason, anytime VRA request money from the Ministry of Finance and Economic Planning to purchase crude, the Ministry replies that MDAs have been given money to pay their light bills and therefore ECG should be able to collect the money and pay VRA.

According to the sources, the Ministry of Finance said it was for this reason that ECG was asked to install prepaid meters in all MDAs.