Agyarko touts GHC1.9bn savings in AMERI deal

Boakye Agyarko New Boakye Agyarko, Energy Minister

Wed, 1 Aug 2018 Source: thebftonline.com

Energy Minister Boakye Agyarko in a memo to parliament has begged the House to approve a revised deal of the Ameri Build Own Operate and Transfer (BOOT) agreement signed in 2015, arguing that the country will be making savings of close to GH¢2billion if the deal is approved.

The original deal was expected to come to an end in 2020, but the revised deal has extended the lifetime of the agreement to 15 years – in which the minister, acting on behalf of government, negotiated downward the cost of power charged under the old deal; as well as a number of terms culminating in savings in excess of US$405million over the period.

According to the minister’s memo to Parliament sighted by the B&FT, Mytilineos International Trading Company will pay some US$52.16million owed to Ameri by government – an arrangement that was arrived at during the renegotiation.

Mytilineos, Mr. Agyarko said, will supervise continuance of the plant’s operation and maintenance for 15 years – during which it will be responsible for the provision of operation and maintenance services, as well as all related services.

Under the new agreement, the tariff has been reduced from the existing US cents 14.5918 per kWh to US cents 11.7125 per kWh – a reduction of US cents 2.8793 per kWh.

“The drop in tariff has resulted in a yearly cost-saving of about US$27million. The total cost-savings over the 15-year period is US$405million.

“In addition, Mytilineos is expected to provide a performance guarantee to secure its obligation under the BOOT agreement in the amount of US$10million – which shall be renewed every two years. This provision was not in the BOOT agreement as amended,” the minister’s memo said.

According to the minister, the gains made from renegotiating the BOOT cannot be over-emphasised. He maintains that the waiver of the US$52.7million due AMERI takes a huge financial burden from government.

“Furthermore, adjusting the contract price and establishing a new financial equilibrium – to reflect the term-extension for provision of the services and performance of the obligations under the Original BOOT Agreements – reduce the total generation cost of the plant.

Other gains include a reduction of the standby letter of credit from US$51million to US$37.5million; the cost-savings of US$405.067million over the period of the amendment; as well as provision of the US$10million Bank Guarantee, which was not part of the BOOT Agreement as amended,

“The cumulative benefits to be derived from the renegotiation are immense, and therefore the Novation and Amendment Agreement under reference needs the support of government,” the memo read.

The memo, dated July 25, 2018, has already received executive approval, as the president – in a letter also dated July 25, 2018 – gave his endorsement.

VRA disapproval

Despite the ministry touting claims of savings, some senior staff of the Volta River Authority (VRA) have declared their opposition to the new arrangement.

The Senior Staff Association and Public Services Workers Union at the VRA said the new deal “will bring more hardship to the good people of our dear country – Ghana.

“In less than two and half years the AMERI plant will become a free asset to the nation under the Build Own Operate and Transfer (BOOT) arrangement, and therefore there is no need for another arrangement that will extend ownership to any other third-party interest,” the workers argued in a statement.

“The proposed new agreement before Parliament will be more expensive than the current arrangement and does not make any financial and economic sense to the nation. The nation has surplus generation capacity and does not require any new long-term take or pay arrangement – more so when it is inimical to the nation’s interests,” a statement from the group said.

Source: thebftonline.com
Related Articles: