GNPC guarantees first powership

CEO of GNPC Alex Mould has debunked allegations that the power barges expected from Turkey may not come because guarantees have not been provided for them; saying the first one, which is expected in October, has been guaranteed and that a bank is being spoken to on the second one.

“Ecobank is the bank that issued the first guarantee and a bank is being spoken to right now regarding the second. There are discussions between ECG and Karpower on the second barge. When they finish that we will issue the guarantee,” he told the B&FT in an interview.

“My understanding is that the first barge will be completed in the first or second week of September; they will do the final test by third-party inspectors to make sure everything is okay and then it will sail,” he said.

“I think it will take about 30 or 40 days to arrive here; I am not too sure. I understand it will sail in September and arrive in October. So don’t quote me as saying October first, I said sometime in October.”

As part of the agreement the contractors, Karadeniz Power Group of Turkey, demanded that the government of Ghana put up a US$100million bond -- US$50million for each of the two power barges (225 megawatts each) -- as guarantee against failure by the ECG to pay for the power.

The investors, the B&FT understands, are wary of financial paralysis by the power off-taker and are thus unsure they will be paid expeditiously.

As an Independent Power Producer, Karpower is supposed to shoulder all investments toward the delivery of power while the ECG will pay for power delivered as per the agreed tariff.

Some commentators have questioned why government would saddle the GNPC with issuing guarantees for the floating power plants.

Reacting to this concern, Alex Mould said GNPC is issuing the guarantees because it will be the main supplier of fuel to the barges -- which is also because the corporation needs to find uses for the Sankofa gas or the country will pay penalties to ENI, which will produce the gas.

“So we are going to initially start the barges with HFO [Heavy Fuel Oil], and then as soon as our gas comes on-stream we will be supplying gas,” he said.

“One of the conditions of ENI for this project [Sankofa] to go on is that GNPC must ensure that it has capacity to take the gas; so this is why GNPC entered into this. We have to make sure that the capacity is ready to take the gas. If not, then we start paying penalties to ENI for not being able to take the gas. It is a take or pay contract. So far as the gas is available, we are supposed to take it. If there is nowhere for us to dispose of the gas, it becomes a financial loss to the country,” he explained.

Each of the 225megawatt barges will require about 30million standard cubic feet of gas per day, he said.

The World Bank has already warned that if care is not taken there could be a gas glut in the country in the next couple of years as government and its private sector partners pursue both local gas and LNG projects.

The Sankofa project is expected to inject some 170 million cubic feet of gas per day into the system by 2018; at the same time both Quantum Power and General Electric are working to bring in LNG.

If the country does not make ready enough power plants to absorb all the gas, the country could be paying penalties to gas producers like ENI, as Alex Mould fears.

"If you do the demand and supply analysis, you cannot demonstrate there is space in the Ghana power market to absorb the GE LNG and Sankofa at the same time. It is a timing issue. The role for LNG is after 2020,” Sunil Mathrani, a Senior Energy Specialist at the World Bank Ghana Office, told the B&FT in June.