World Bank Country Director Pierre Frank Laporte suggested that the Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs) are a major contributor to the current economic woes the country finds itself facing today.
He indicated that the PPAs are not only expensive but also the contractual terms and arrangements are also bad. Naturally, his statement did not find favour with the opposition NDC political party under whose tenure those arrangements were sealed.
Some have even gone to the extent of claiming Mr. Laporte crossed the line by dabbling in local politics, which his role as a diplomat forbids. Quite interestingly, one would have thought Mr. Laporte was simply analysing the country’s debt situation and attributing where the bulk of the debt emanates from.
Particularly nauseating is the ‘Take or Pay’ clauses – which at the time may not necessarily have been bad, since they were contracted owing to the fact that the 4 years of Dumsor during the last NDC administration compelled it to seek relief and got caught up with expensive PPAs.
These notwithstanding, the previous administration has to be commended for the Ghana Gas plant and procurement of the FPSOs which significantly impacted positively in the gas sector despite the costs.
Putting the argument in perspective, peak demand for electricity at the time was less than 2500MW and the excess capacity of 2,300 MW had to be paid over the next 4-5 years – compounding the country’s debt situation.
This resulted in government paying over GH¢12billion cedis and still counting for the excess capacity and other commitments in the sector. Additionally, as most of these PPAs were dollar-denominated, the cedi-depreciation over the period also compounded Ghana’s obligations to the sector.
Dr. Kwabena Donkor, who served as the Power Minister during the Mahama administration, has refuted Mr. Laporte’s claims – stating that they are inaccurate and lack proper research. Dr. Donkor explained that at the time those agreements were signed, the exchange rate between the cedi and dollar was considered favourable.
However, a former CEO of the Volta River Authority (VRA), Kweku Awotwe, has emphasised the need for Ghana to negotiate better deals in the energy sector in order to save more money. We couldn’t agree more!