State-owned utility Volta River Authority (VRA) will be financially burdened if the ‘renegotiated’ agreement between the government of Ghana and the Africa & Middle East Resources Investment Group (AMERI Energy) – currently before the Joint Parliamentary Committees on Finance, and Mines and Energy – is approved by the House, stakeholders have warned.
“This renegotiated contract is a bad deal for us. It will leave us with huge financial obligations. Based on the initial agreement, we supply the gas that AMERI uses in the production of power and we are the off-takers. There is no off-taker contract between AMERI and ECG.
“Any cost Ameri incurs is our cost; they have made profit at the expense of VRA. With just two years to go, we were looking forward to taking over the plant and then start making some money,” a Senior Official of the utility told the B&FT on Monday.
Given the precarious nature of the power producer’s finances and additional cost to be incurred by the state – represented by the VRA, energy-policy think-tanks and other civil society organisations have criticised the renegotiated agreement’s terms and called on Parliament not to approve the deal.
The VRA’s indebtedness to Ghana Gas for gas supplied, according to the Public Interest and Accountability Committee (PIAC), stood at about US$750million as of the end of 2017. The utility is also indebted to various banks in the amount of millions of dollars.
The Institute for Energy Security (IES), in a statement on Monday, condemned the renegotiated contract – describing it as “worthless”.
“In its current form, the deal presented to the Joint Committees of Parliament is fraught with misleading figures and inaccurate claims which may eventually line the pockets of individuals and overburden Ghanaians with a high cost of electricity. The Institute for Energy Security can confidently conclude that ‘the agreement is worthless, immoderate, and rather awful compared to the existing agreement signed in 2015’.”
The AMERI power deal
In February, 2015, the government of Ghana entered into an agreement with AMERI Energy to Build, Own, Operate and Transfer (BOOT) a power-plant by installing 10 new GE TM 2500+ aero derivative Gas Turbines and all related equipment, including the provision of certain services related to operation and maintenance of the Plant for five (5) years to provide a guaranteed output of 230MW.
The cost of each of the 10 units of the Plant was US$850,000 per month, totalling US$102million per year, and US$510million for 5 years. It was agreed that government will own the Power Plants after end of the 5th year.
The government of Ghana has over the past two and half years paid an amount of US$171million to AMERI out of the US$510million. The outstanding balance of US$339million is due to be paid over the next two and a half years.
Under a capacity charge of U.S. cents 5.6253/KWh, the applicable tariff charge for Ghana in the first 5 years of the AMERI deal is U.S. cents 14.5918/KWh, and from the 6th to the 20th year the tariff to apply is U.S. cents 10.4149/KWh. This translates into an average applicable tariff of U.S. cents 11.4591/KWh over the 20-year period.
Selection of a third party to run AMERI
In the renegotiated agreement before Parliament, the Energy Ministry has selected a third party, Mytilineos International Trading Company, to take over the operation of the AMERI power plant at a proposed Capacity charge of 3.8052 US Cents/KWh for a 15-year period with an applicable tariff charge of U.S. cents 11.7125/KWh.
“IES is surprised by the Energy Ministry’s decision to introduce a third party two and a half years into Ghana owning the power plant,” the energy think-thank said.
The proposed tariff under the ‘new’ agreement for the 15-year period is US cents 1.29 higher than the current tariff under the five-year agreement.
If the agreement is approved, consumers may be required to pay more for electricity – given that the cost of power produced by AMERI plants will form part of the cost build-up that VRA relies on for computing its acceptable tariff and submitting same to the Public Utilities Regulatory Commission (PURC).