Government cancels 11 power agreements

Energy Minister, Boakye Agyarko, has told Parliament that government has cancelled 11 Power Purchase Agreements (PPAs) at a cost of US$402million, given their precarious nature and the total cost of US$7.6billion that would have accrued in capacity charges over a 13-year period.

Mr. Agyarko told Parliament last week that: “The Ministry of energy tasked a committee led by the Energy Commission to review all Power Purchase Agreements (PPAs) signed by the ECG for conventional power projects. The Committee reviewed 26 out of the 30 PPAs the ECG had initiated.

Four others were not reviewed because they were already underway. The combined generation capacity of the 28 PPAs is 7,298MW of power.

The review recommended that four PPAs with a combined capacity of 1810MW, be deferred to 2018 for 2018-2025. Three PPAs with a combined capacity of 1150MW be deferred to beyond 2025.”

He added that: “The Committee recommended that 11 PPAs with a combined capacity of 2,808MW be terminated. The estimated cost for termination is $402.39m compared with the average annual cost of US$ 586million or a cumulative of US$7.6billion from 2018 -2030. This yields an estimated saving of $7.21billion over a 13-year period.”

Prior to his appearance before the 275-member Legislature, he told Accra-based Oman FM that: “With some of the PPAs, you could clearly see that it was just signed with no merit. We grouped the PPAs into various categories. There were three (3) PPAs that you could see that there was nothing that could be done about it because they have met all their conditions precedent, they have come to financial close and have begun building the plant; you can simply not cancel such PPAs. Those three, we can absorb.

There was a fourth one called Marinos, which is a 50MW plant. We flare a residual gas, Isopentane — a flammable liquid gas – from the Jubilee filed. No turbine in Ghana is able to use it but Marinos said they can generate power using that gas. So their PPA was added to the three and we have asked them to move towards financial close.Isopentane, C5H12 — also called methylbutane or 2-methylbutane, is a branched-chain alkane with five carbon atoms.

It is an extremely volatile and extremely flammable liquid at room temperature and pressure. The normal boiling point is just a few degrees above room temperature, and Isopentane will readily boil and evaporate away on a warm day. Isopentane is commonly used in conjunction with liquid nitrogen to achieve a liquid bath temperature of 160 °C. It is 1% or less of natural gas.

The Energy Minister indicated that other PPAs were cancelled outright because there was a long stop. Meaning the companies waited without acting for so long that the contracts have expired, indicating that there is no financial obligation to the state in those cases.