The government will save more than $ 200 million in the power purchase agreement amended by CENIT

Business news for Saturday, September 26, 2020

Source: GNA

2020-09-26

The government and CENIT have agreed to a modified power purchase agreement under which the company has decided to move to a toll structure and transfer all resulting cost savings to the Electricity Company of Ghana (ECG).

CENIT, an independent power producer (IPP) from Ghana that started commercial operations in 2012, also agreed to reduce its capital recovery fee by 38.9%.

The deal is expected to save the country more than $ 200 million.
A statement issued by the Finance Ministry’s Public Relations Unit said the commitment made by CEL was 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 will ultimately reduce the cost of electricity for the people of Ghana,” the statement said.

Currently, Ghana pays over US $ 500 million a year for unused electricity due to power purchase agreements entered into under the previous administration in an attempt to end power outages.

The agreed rates were not competitive and have contributed significantly to the accumulation of debt in the sector and the excess supply of energy.

The statement said that the government, in collaboration with the World Bank, created the Energy Sector Recovery Program (ESRP), identifying the policies and actions necessary for financial recovery in the energy sector in a five-year horizon (2019-2023). ).

As part of the reforms, the Government is taking steps to institute competitive bids for future additional capacity to ensure that future rates are fair and in line with expected price benchmarks.

The statement said that the Government had demonstrated its commitment to the PEIS through the active development of sector-wide initiatives and reforms, including; implementing the Cash Cascade Mechanism (CWM) in April 2020, which enables Electricity Company of Ghana’s income to be distributed in a more transparent manner, and manages arrears payments despite the difficult fiscal situation, which is has been aggravated by the COVID-19 pandemic.

The ESRP Steering Committee, established by the Energy Sector Recovery Working Group under the direction of the Chief Minister, is working closely with IPPs and gas suppliers under the ESRP Consultation Process to negotiate more agreements. favorable for both parties and achieve a balanced energy sector capable of offering fair solutions in the long term.

The government has entered into discussions in good faith and urges all IPPs to continue to work closely with the ESRP Steering Committee to conclude negotiations as soon as possible.

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.”