Akufo-Addo saves Ghana $ 200 million in renegotiated power purchase agreement with CENIT Energy

Business news for Sunday, September 27, 2020

Source: FM class

27-09-2020

The government of Ghana has said it has successfully secured the modified terms with independent power producer CENIT Energy Limited, which will save the country some US $ 200 million, and has asked all other independent service providers to accelerate the conclusion of their renegotiations.

A statement issued by the public relations unit of the Ministry of Finance on Friday, September 25, 2020 read: “On Wednesday, the government and CENIT Energy Limited (CEL) successfully secured the terms of a power purchase agreement (PPA) modified”.

CEL is an Independent Power Producer (IPP) from Ghana that began commercial operations in 2012 ”and has“ agreed to convert its power plant into a toll structure and transfer all resulting cost savings to ECG, ”the statement said.

Additionally, CEL has “agreed to a further reduction in the capital recovery fee of 38.9%, resulting in total savings for the government and all Ghanaians of more than $ 200.0 million over the remaining life of the PPA. ”Said the Ministry.

The commitment assumed by the CEL, according to the statement, “is crucial to reinforce the government’s efforts to build a balanced and sustainable energy sector.”

“The terms agreed between the government and CEL will produce a more favorable situation for both parties and ultimately reduce the cost of electricity for the people of Ghana,” added the Ministry.

Today, Ghana pays more than $ 500 million a year for unused electricity, the Finance Ministry said.

“Most of the PPAs are legacy agreements, entered into under the previous administration in an uncoordinated and hasty attempt to end the dumsor,” the statement explains, adding: “The agreed rates were not competitive and have contributed significantly to the accumulation of debt in the sector and energy oversupply ”.

5. This Government, in collaboration with the World Bank, created the Energy Sector Recovery Program (ESRP), identifying the policies and actions necessary for the financial recovery of the energy sector in a five-year horizon (2019-2023).

He said: “As part of the reforms, the government is taking steps to institute competitive tenders for future additional capacity, to ensure that future rates are fair and in line with expected price benchmarks.”

The government, the statement mentions, has “demonstrated its commitment to the ESRP through the active development of sector-wide initiatives and reforms, including the implementation of the Cash Cascade Mechanism (CWM) in April 2020, which allows revenue distribution Electricity Company of Ghana more transparently and managing arrears payments despite the challenging fiscal situation that has been exacerbated by the COVID-19 pandemic. “

The ESRP Steering Committee, established by the Energy Sector Recovery Working Group under the direction of Chief Minister Yaw Osafo-Maafo, “is working closely with IPPs and gas suppliers within the framework of the Consultation Process of the ESRP to negotiate more favorable agreements for both parties and achieve a balanced Energy Sector capable of offering fair solutions in the long term. The government has conducted these discussions in good faith and urges all IPPs to continue to work closely with the ESRP Steering Committee to conclude the negotiations as soon as possible, ”the statement said.

The statement quoted Finance Minister Ken Ofori-Atta as saying: “We welcome CENIT Energy’s commitment to Ghana and its role in the regeneration of the energy sector.”

“CENIT is an important partner and a major energy producer in Ghana.

“We encourage other IPPs to join CENIT to collaborate to help reduce burdensome debt and provide a stable power supply for the people of Ghana.”

“We are committed to building a dynamic and competitive energy sector where private investment can flourish and the interests of Ghanaian people and businesses continue to flourish.”