Ghana’s recently established Energy Sector Recovery Programme is starting to pay dividends, with the announcement that it has so far saved the country’s energy sector $5billion.
The Ghana Ministry of Finance last year stated it would actively seek to renegotiate existing power purchase agreements. It said at the time it would in future enter into contracts from 1 August 2019 which only pay independent power producers for power consumed (on a take and pay basis) not generated (on a take or pay basis).
The country’s energy sector faces a number of challenges, including legacy PPA agreements which sees the country pay billions of US dollars for electricity it cannot use.
In collaboration with the World Bank, Ghana created the Energy Sector Recovery Programme (ESRP) which identifies the policies and actions necessary for the sector to recover its financial footing. The five-year plan runs from 2019 to 2023. A government negotiating team, established under the Energy Sector Recovery Task Force helmed by the Senior Minister, is working with IPPs and gas suppliers under a consultation process to secure more favourable and sustainable agreements for both parties.
In 2020 alone the Ghana government paid in excess of $1 billion to independent power producers, on top of $461,933,253 paid by Electricity Company of Ghana. The $5 billion it has now saved came about by relocating Karpowership Ghana Company and securing agreements with CENIT Power and Cenpower Generation Company.
Ghana government emphasising sustainability and resilience for energy sector
In a press statement released on the Ministry of Finance website, a spokesperson for the Energy Sector Recovery Programme is quoted as follows:
“This Government has successfully kept the light on over the past four years and intends to continue doing so for the years to come. The electricity produced by IPPs drive the engine of our economy and contribute to sustainable development.
“The onerous take-or-pay contracts painfully obligate government to pay over $500million a year for power we do not use.
“This year along government has made payments of $1billion to independent power producers, all while keeping power on and prices low.
“Government will continue to manage the situation by negotiating more balanced contracts, reducing debt, instituting careful forward planning and proper data-driven analysis, as well as transparent, competitive energy procurement processes to build a resilient, sustainable energy sector for the good of Ghana.”