The Minister for Parliamentary Affairs, Osei Kyei-Mensah-Bonsu is expected to deliver the 2021 Budget State and Economic Policy on Friday, March 12, 2021.
This presentation will cover all critical aspects of the country’s economy including Energy which has prominently featured in all of the country’s previous budgets, not only because of the influence it has over other aspects of the economy but because of the many controversies surrounding it.
The sector in Ghana’s recent history has records of the severe power crisis in 2015, and the botched PDS deal which has brought it into public focus.
When the 2020 budget statement was delivered on the Floor of Parliament in November 2019, Ken Ofori-Atta, the then Minister for Finance, indicated that the government was still renegotiating some power agreements entered into with independent power producers.
“This Government had to also address serious contractual commitments. The exorbitant energy bill from expensive, difficult-to-explain ‘take or pay’ of Power Purchase Agreements; a pile-up of unpaid arrears and outstanding commitments, mostly accrued from contracts awarded without the slightest care for the public purse,” the summary of the budget read.
Per the budget, extensive consultations were being embarked upon to “rationalize commercial agreements” in the energy sector including reassessing all take-or-pay contracts and imposing a moratorium on the signing of new agreements in the sector”.
Again, the government announced through the budget that it was committed to getting private sector participation in the Electricity of Ghana (ECG) after the botched PDS deal.
“Government is fully committed to private sector participation in ECG and is focused on moving forward with urgency to find a suitable replacement for the PDS arrangements. Moreover, we are prepared to review the transaction structure and indeed, recognize the need to improve significantly the management of ECG, by bringing in world-class private sector expertise and attracting adequate private capital,” a part of the budget read.
President Akufo-Addo in his 2021 State of the Nation Address on Tuesday, March 9, 2021, said the country expects to complete talks with the independent power producers by the end of the year.
Interestingly the address coincided with extensive power outages across the country in what the Electricity Company of Ghana (ECG) said was linked to problems with the power transmitters of the Ghana Grid Company.
The Independent Power Producers (IPPs) have asked the government to immediately address issues resulting in the recent power outages.
The IPPs themselves were a centre of a national conversation in the last quarter of 2020 when they heightened their demand for payment for work done.
They said they were owed over one billion dollars.
A statement issued by the Chamber, Chief Executive Officer of the Chamber of Independent Power Producers, Distributors and Bulk Consumers (CIPDiB), Elikplim Kwabla Apetorgbor, explained that the energy sector is currently on life support and the growing debt is crippling the Ghanaian economy hence its pressure on government to clear the debt.
“On average, IPPs, since 2017, are paid just barely 40% of power invoices on a monthly basis which is not enough to sustain operations, especially when these low payments have persisted for so long. Members have had to resort to loans in order to keep their operations going but at the cost of crippling debt service obligations which have become unsustainable hence the demand for the prompt payment of overdue invoices to the tune of $1.44billion as at 30th September 2020.”
“The unpaid invoices owed IPPs is crippling the businesses of our members. It would interest the public to know that the Energy Sector debt to IPPs which was $124 million at the end of 2016 has ballooned ten-fold to $1,180 million as of 31st July 2020. Clearly, this is unsustainable and poses serious economic and financial risks to our members which is why we are being compelled to serve notice to Ghanaians about the possibility of a forced shutdown due to lack of funds to maintain our operations,” the statement added.
A former energy minister, John Peter Amewu during his vetting indicated that the government had successfully cleared all arrears owed the IPPs.
Besides this development, Ghana is positioning itself to become a petroleum hub with Sub-Saharan Africa’s first liquefied natural gas (LNG) import terminal at Tema.
The project, built at a cost of $350m, can be a “driver of growth” for Ghana and the region, says Edmund Agyeman-Duah, the Director. He said it will provide year-round guaranteed supply and promote investment in industries that have relied on more expensive oils with erratic availability.
Another critical development within the sector was the moving of power plants from Tema to Takoradi which is the source of fuel.
John Peter Amewu said in a previous media interaction that, transporting gas from Takoradi to Tema to feed power plants cost the country millions of dollars every month hence the decision to relocate the plants.
“Because when the gas travels from Takoradi to Tema, it is also not free, it costs about $2.7 million. … For one month, the travelling cost of gas costs this country in a rage of about $15 million; that is just the tariff for the volume of gas that you’ll ship from Takoradi to Tema. The first thing, therefore, is that let us move the plant from Tema to Takoradi, which is a very good management idea…” Mr Amewu said.
Meanwhile, the Institute of Energy Securities (IES) has called on the government to hasten the processes for the selection of a new private partner for the Electricity Company of Ghana.
It said in a Citi News interview that it would be best for the government to do this before the end of 2021.
Indeed, some of these issues came up during the vetting of Energy Minister, Matthew Opoku Prempeh earlier this month.
Among the assurances he gave at the Appointments Committee was that the government was still going to pursue private-sector participating in energy sector as way of addressing the current debt challenges and also ensure efficiency.