Business News of 2014-01-21

VRA in effort to draw more IPPs

The Volta River Authority (VRA) says it plans to acquire land in the Western Region to use as an enclave where Independent Power Producers (IPP) will establish power plants to boost Ghana’s electricity generation.
The initiative, the Authority reckons, will draw more IPPs into the energy sector to help the country meet its goal of installing 5,000 megawatts of electricity by 2016. The current national power-generation capacity is around 2,800 megawatts, of which IPPs -- mainly Sunon Asogli Power Ltd. and CENIT Energy Ltd., owned by SSNIT -- contribute 11 percent.
IPPs sell their power to the Electricity Company of Ghana (ECG) through off-taker agreements with the power distributor. Though a lot of them have expressed interest in investing in the power sector, the lack of incentives and a non-progressive tariff regime are some of the factors which have diluted their interest. But their investment is still critical if the country is to meet its growing energy demand, which requires that 200 megawatts be added to installed capacity each year.
“We want to acquire lands to fasten the process of IPPs coming on stream. That will be our contribution to IPPs,” said Kirk Koffi, acting Chief Executive of the VRA, in an interview in Accra.
“A lot of IPPs have expressed interest and signed public-private agreements with the Electricity Company of Ghana (ECG), but we can’t see them starting anything to bridge the shortfall or the reserve margin we have,” he added.
Improvement in the country’s utility tariffs regime with the expected full implementation of the automatic tariff adjustment formula that kicked off in January is vital to drawing power-sector investors. The adjustment formula’s main objective is to achieve full cost-recovery by the state-owned utility companies -- but that will also increase the tariffs paid to IPPs, which tend to be higher than that received by their public-sector counterparts.
Sunon Asogli Power Ltd., a joint-venture between Ghanaian and Chinese investors, owns the biggest IPP investment in the power sector, the 200-megawatt Sunon Asogli power plant, which is powered by natural gas imported from Nigeria. The plant was built with support from the VRA, whose own combined generating capacity is 2,100 megawatts.
On-going power projects involving IPPs and the VRA include the Takoradi 2 Thermal Power Project (T2) Expansion. The project, jointly owned by VRA and TAQA Energy of Abu Dhabi, seeks to expand the 220-megawatt T2 plant from a single cycle power plant to a combined cycle power plant -- that is, utilising the heat recovered from one engine as the heat source for another in order to enhance system efficiency.
The project will increase the installed capacity of the plant by 110 megawatts and it is expected to be finished by 2015. Another IPP, Cenpower Generation Company Limited, is constructing a 340-megawatt plant at Kpone, near Tema.