Business News of 2014-02-03

More power soon as Compact II takes off mid-year

There may be some relief in sight for power consumers as the country is in the final lap of negotiations for Ghana Compact ll under the Millennium Challenge Account (MCA) that focuses on the energy sector.

Mr Jonathan O. Bloom, Deputy Vice-President of the Millennium Challenge Corporation (MCC) for Africa, has given an assurance that the Compact ll was due to take off by the middle of the year.

In an interview on the second compact in Accra last Friday, Mr Bloom explained that the processes leading to its take-off had unusually gone on for a long time because its focus was on energy, which is a complicated sector.

The compact, which is expected to last for about five-and-a-half years, is designed to deal with energy challenges in the country.

The decision to focus on energy, Mr Bloom stated, was born out of a study conducted by the MCC and the government on what was drawing back economic development “and power turned out to be one of the major actors”.

“We’ve been going on for three years now, which is an unusually long time, but because we are tackling one of the biggest problems in the country – we are seeking access to reliable power, it is a difficult problem to solve,” he said.

Cause of delay

Speaking to the concern from various quarters on the delayed take-off of Compact II, he said “there has been a team that has come several times, because the critical process for the MCC is to prepare in great detail to know what is going to be done by who, when, with what result to expect, through what mechanisms, for what amounts of money, and so we design all that with a team from (Millennium Development Authority) MiDA.”

While admitting that the components of Compact II were still being defined, he said they were likely to be three modules – demand side management (helping to ensure efficient use of electricity); investments in ECG to improve distribution, reach, access for poor consumers and for businesses, and building an enabling environment (investments in capacity of the rest of the systems – generation and fuel supply).

He said when the processes were through, they would have to be approved by the MCC Board, followed by several months of preparation “and it’s only at the end of that, that the big money starts to flow”.

Mr Bloom said it was his hope that the processes would be approved by the board, which would pave way for the signing ceremony for work to start on the second compact, which he estimated to be worth hundreds of millions of dollars.

He, however, stated that the greater part of the work, which he described as “the large drawings”, would be done in 2015.

Critical areas

Mr Bloom said some of the critical areas identified were finishing up the reforms of the Electricity Company of Ghana Ltd (ECG), which was central to the whole process; completion of the gas sector; ensuring adequate fuel supply for generating electricity, and assisting investors to build their electricity generation capacity.

He commended the government of Ghana and other stakeholders for identifying a problem and knowing the solutions, but said the hard part was doing it, because people naturally were not susceptible to change.

Tariffs and investments

He also lauded the government for initiating some reforms in the energy sector towards getting the compact started, saying the efforts made on tariffs were very significant and that “it’s been good progress on structuring the supply of gas,” while there had been some studies on ECG that had already begun to improve the sector.

“The decision that the Public Utilities Regulatory Commission (PURC) made in October, 2013 to raise tariffs substantially was a politically courageous decision. It was necessary, but it requires courage. In many countries they cannot advance because their leadership doesn’t make those hard decisions. So I congratulate the government on making those hard decisions, but it takes time,” he stated.

According to the MCA Deputy Vice-President for Africa, no matter the contributions made by the MCA, “the real money would come from private investors, both Ghanaian and international, who are willing to build the generating facility in exchange of the electricity distributed”.

He said the initial US$8 million grant agreement signed between the Government of Ghana and the MCC in July 2013 was not part of the actual compact II amount, but was to facilitate feasibility studies in engineering and consultancies, and had greatly contributed to the progress made so far towards the compact’s take-off.

“That US$8 million has substantially been spent and it is essentially what has enabled us to make a lot of progress,” he said.

On whether the power situation would improve with the implementation of Compact II, he replied with an emphatic yes, but cautioned that the real impact would not be felt until some decades; because it would take time to build plants, ensure power generation and do all other associated works.

Source: graphic.com
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