Power Purchase Agreements Former Power minister slams World Bank over PPA comments

Former power Minister, Dr. Kwabena Donkor has accused the World Bank of compromising objectivity in its dealings with governments over procurement of power agreements.

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play Former Power Minister, Dr Kwabena Donkor
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Former power Minister, Dr. Kwabena Donkor says the World Bank has not been objectivity with its comments on the country's power agreements.

The Bank has blamed the past NDC administration of signing more power purchase agreements than required for the country.

They also intimated that the tariffs signed for in the agreements were higher than what pertains in neighbouring countries.

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However, Dr Donkor said the World Bank was being insincere and politically selective. He explained that there are reasons for the high tariffs in Ghana than in neighbouring Ivory Coast and Nigeria.

Below is a full write-up he released on Monday:

The reported World Bank position is tenuous. Legally and technically, Ghana had not signed the number of agreements being bundled around. ECG had initialed some PPAs but until Cabinet and Parliament approves, it is not a signed agreement because of the requirement for a government consent and support agreement or the put/call option agreement as well as the constitutional requirement for parliamentary approval because of the guarantees involved.

As at today, only one such agreement has been approved by Cabinet and Parliament that is not under construction – Jacobsen project.

The small 107MW subsidiary of Ghana Power Generation Company Ltd has its turbine already in Ghana while Amandi, Bridge Power and Cenpower are at various stages of construction.

It is also important to state that limiting the comments to the last eight years is unfair and very politically skewed. The SSNIT owned plant Cenit was not constructed over the last eight years and had the highest tariff of all thermal plants other than Trans Tema which was brought in as Emergency Power in 2007. Sunon Asogli Phase One was promoted outside the last eight years and yet its tariff falls within the average. The Government during the last administration renegotiated the Cenit tariff down.

It is a fact that tariffs in Ghana are generally higher than Nigeria and Côte d’Ivoire, our main competitors in the power market in the subregion. 

But a major cause is the price of fuel. Both Nigeria and Côte d’Ivoire have significantly lower fuel cost. Our construction cost is also affected by the security provision of dual and tri fuel plants that turn to cost more because of the historic unreliability of the West Africa Gas Pipeline fuel flows. Dual and Tri fuel plants impose extra cost on both equipment design and fuel storage infrastructure.

Again our historic thermal plants were simple cycle plants. Government however in 2015 issued instructions to power regulators not to license any single cycle plant again and only to license combine cycle plants.

Fortunately there is the opportunity to renegotiate the ENI gas price down and we should be doing that. I must state that the power sector has been very unhappy with the $9.5 per million British Thermal Units projection for ENI gas as contained in the 2017 Budget Statement.

Fortunately for Ghana the actual development cost of the ENI project is significantly lower than earlier projected because of the downturn in global oil field service prices thus bringing development cost down. Under the Petroleum Agreement, provision has been made for such a situation and Ghana should take advantage of this.

I also urge the Finance Ministry not to see domestic gas production as another revenue stream but a critical component of power supply. The Ghanaian State already earns a lot of revenue from power end users in the form of taxes and levies on electricity and should strip ENI gas and other domestic sources of further taxes and levies to make the Ghana power sector competitive.

To the World Bank and its Country Office, Ghana would benefit most from their Assistance if they eschew the tendency of praising every Government only to demonize the same Government when the Government is out of power. We have a local terminology to describe such behavior!

Kwabena Donkor Ph.D
Yeji
15/05/17