Government assures IPPs of “fair outcome” in take-or-pay negotiations Featured

By News Desk October 29, 2019 1134 0

Government has given the assurance that its newly inaugurated Energy Sector Recovery Programme Steering Committee will ensure that there is broader consultation processes between it and each independent power producer (IPP) and gas supplier (GS), in the effort to address the energy issues confronting the country.

According to Government, the committee’s work will lead to a “fair outcome” after engagements with all relevant stakeholders.

“The purpose of the Steering Committee is to take responsibility for the consultation process with the IPPs and GSs over the coming months, with the objective of ensuring a sustainable energy partnership with each IPP and GS,” the Finance Minister said yesterday when he inaugurated the committee.

The inauguration follows a decision by the Energy Sector Recovery Task Force, as mandated by Cabinet, to ensure and oversee the implementation of the Energy Sector Recovery Programme (ESRP).

The committee is expected to help implement the ESRP, which identifies key issues in the energy sector and proposes solutions.

Key among the issues is the problem of excess capacity. The country has an installed power generation capacity of 5,083 MW, a dependable capacity of 4, 593 MW and a peak demand of around 2,700 MW.

Sustainable energy

During the presentation of his mid-year Budget review, Mr Ofori-Atta announced Government’s intention to rationalise the commercial agreements in Ghana’s energy sector, including reassessing all take-or-pay contracts, and imposing a moratorium on the signing of new power purchase agreements in the energy sector.

“The Steering Committee is of key importance for the future of Ghana’s energy sector and Ghana’s long-term sustainable development,” the Finance Minister said yesterday.

He added: “Government has been working hard to establish a long-term sustainable strategy for a competitive and dynamic energy sector, where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.”

PDS saga

In a related development, while addressing members of the diplomatic corps yesterday, Mr Ofori-Atta indicated that Government will ensure that the pitfalls that characterised the concession agreement between the Electricity Company of Ghana (ECG) and the Power Distribution Services (PDS) is not repeated.

He assured that Government will institute broad Ghanaian institutional participation, as well as the democratisation of share ownership, with an eventual listing on the Ghana Stock Exchange.

“In this regard, Government intends to present an action plan, by November 15 2019, for the restoration of private sector participation in ECG,” the Finance Minister said.

The meeting was to provide an update to Government’s international stakeholders on recent developments in Ghana’s energy sector, which the Finance Minister said is “a core focus of our valued partnerships.”

Private sector commitment

The Finance Minister also reiterated that Government remains committed to private sector participation (PSP) in ECG, and is keenly focused on strengthening Ghana’s energy sector by attracting world-class private sector expertise and capital.

With many concerned about the outcome of the relationship between Ghana and the US, following the termination of the PDS agreement, Mr Ofori-Atta said the two countries still continue to enjoy healthy relationship.

“The Republic of Ghana and the United States of America are truly long-term partners, with a shared vision of a ‘Ghana Beyond Aid’ and the USA’s principle of a ‘Journey Towards Self-Reliance’, anchored by the emergence of Ghana as a pillar of stability in West Africa and, indeed, on the continent,” he said.

He also said Ghana’s relationship with the Millennium Challenge Corporation (MCC), under the US$498 million Ghana Power Compact (Compact II), dated August 5 2014, will continue to thrive with the support and stewardship of the Millennium Development Authority (MiDA).

“It is worth noting that, despite the de-obligation by the MCC of the USD190 million tranche 2 funds under Compact II, the USD308 million tranche 1 funding is committed and intact; and the primacy of Ghana’s energy sector reforms, as envisioned under both the MCC Compact and the Energy Sector Recovery Programme (ESRP), jointly developed by the World Bank and the Government of Ghana, remain foundational,” he said.

Termination

Throwing more light on the stance of Government with regards to the termination of the PDS concession, the Finance Minister said the state suspended the concession after it detected some breaches.

“As you may all already know, on July 30 2019, in the overriding interest of good governance and protecting a critical national asset, Government suspended the PDS concession agreement following Government’s detection of fundamental and material breaches of PDS’s obligations in the provision of payment securities for the transaction and related matters.
“After further investigations and extensive consultations with relevant stakeholders, Government, on October 19 2019, officially communicated to the MCC its decision to terminate the PDS concession,” he said.

He explained further that Government’s decision to terminate the PDS concession was not at variance with the MCC’s own position on the matter.

“Principally, the United States relied on the report of FTI Consulting, an independent auditing firm, which suggested that the concession contract was valid, as of March 31, 2019.
“This is in contrast to the report submitted by the Government’s investigation team, which insisted that the payment guarantee, which was in issue, was not in fact valid,” he said.

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