Parliament approves US$255m tax waiver for Karpowership
The sixth Parliament of the fourth republic which will bring their work to an end on the midnight of January 6, 2017, has finally approved the US$255m tax waiver for Karpower Ghana Company Limited.
The tax waiver which attracted some resistance from the minority during the debate on the floor of the house is to grant some waivers on project materials and equipment to be procured for the supply of the two 225MW powerships in Tema and Sekondi in relation to the power purchase agreements between Karpower Ghana Company Limited and the Electricity Company of Ghana Limited.
The powership project is expected to provide medium to long term reliable and low-cost supply of electricity over a period of ten years to the Republic of Ghana while new power plants constructed and existing ones rehabilitated.
The tax exemptions being granted under a Project Implementation Agreement were negotiated by Ministry of Finance, GRA and Ministry of Power in October 2016 in line with Provisions of the Power Purchase Agreement (PPA).
As per the PPA, two powerships will generate a total of 450 MW, which will directly supply into Ghana’s electrical grid for 10 years.
While under the PPA, tax exemptions and guarantees were required, the PPA between the ECG and the Karpower Ghana Company Limited have remained outstanding until now.
Chairman of the Finance Committee, James Klutse Avedzi in presenting his committee’s report told members that due to the power crisis that bedevilled the country for about three and half years, there was the need for the policy shift that focuses on increasing the installed capacity of Ghana’s electricity generation from 2000MW to about 5000MW.
This, he noted, is to serve the domestic market, provide appropriate reserve margin, and position the country to export power and develop a non-congested transmission system for the country.
In view of this, he said “there is the need for an accelerated effort to add and reinforce more thermal generation and diversify the country’s portfolio of power plants as well as expand the electric transmission and distribution grid. This is to ensure reliable and secure evacuation of all power that will be generated to meet the ever increasing demands of customers.”
To meet this goal, the government, according to Mr Avedzi, entered into a 10-year power purchase agreement negotiation with Karpowership for the provision of 450MW of electric power into the country’s national grid.
The waivers, he said, falls in line with the government’s investment promotion program to give tax incentives to investors.
The first 225MW powership has since its arrival in the country, consistently and reliably produced 225MW of power to the national grid despite unfulfilled key conditions in the Power Purchasing Agreement (PPA).
One of the biggest advantages of the Karpowership is that it sells power to ECG and not plant availability.
The Turkish powership saves Ghana approximately US$120million per year over other fuel.