Government reviewing ‘take or pay’ clauses in energy contracts - Ofori-Atta

The Minister of Finance, Ken Ofori Atta, says the government is reviewing ‘take or pay’ clauses in power purchase agreements signed by the National Democratic Congress (NDC) administration with some of the power producers. A steering committee under the Energy Sector Recovery Task Force has also been set up and tasked to advise on Ghana’s energy sector and its long term sustainable development.

The Minister announced this at a stakeholders’ meeting in Accra on Monday, this week, attended by diplomats on recent developments in Ghana’s energy sector.

In his last Mid-Year Fiscal Policy Review of the 2019 Budget Statement and Economic Policy & Supplementary Estimates for the Government of Ghana for the 2019 Financial Year, presented to Parliament on 29th July 2019, the Finance Minister announced the government’s intention to rationalise the commercial agreements in Ghana’s energy sector, including reassessing all take or pay contracts, and imposing a moratorium on the signing of new power purchase and gas supply agreements in the energy sector.

The Minister told stakeholders in Accra that the government had held discussions with representatives of the Independent Power Producers (IPPs) and Gas Suppliers (GSs) for collaboration to find solutions that result in a fair outcome for all stakeholders.

“The purpose of the Steering Committee is to take responsibility for the consultation process with the IPPs and GSs over the coming months, with the objective of ensuring a well-managed transition towards a more balanced relationship with each IPP and GS towards sustainable energy partnerships,” he added.

He said the government was working hard to establish a long-term sustainable strategy for a competitive and dynamic energy sector, where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.

“We have made significant progress, but there is still a lot to be done. We need to act urgently, but, in doing so, also chart a course which is respectful and fair to our private partners,” said the Minister.

Speaking on the government’s decision to terminate the PDS concession, Ken Ofori-Atta said the action was at variance with the MCC’s own position on the matter.

He explained that “the United States relied on the report of FTI Consulting, an independent auditing firm, which suggested that the concession contract was valid as of March 1, 2019. This contrasted the report submitted by the government’s investigation team, which insisted that the payment guarantee which was in issue was invalid.

Since July, when the government became aware of the invalidity of the payment guarantee, it first took steps to confirm the information regarding the legitimacy of the guarantee. Indeed, the resolution which the government arrived at took some time, because once the government had become fully apprised of the situation, it was keen to engage with the MCC, including a meeting between the President of the Republic and the CEO of the MCC on the sidelines of the UN General Assembly, to find a mutually acceptable common solution.”

The Minister, however, stated that the government remains committed to the essential principles underlying the relationship between the MCC and the Government of Ghana, as well as the overall bilateral relationship between Ghana and the United States.

He said the government was fully committed to private sector participation in ECG, and focused on moving forward with urgency to find a suitable alternative to the PDS.

“We do recognise the need to improve significantly the management of ECG by bringing in private sector expertise and attracting private capital. This will reduce losses and improve service quality, with a view to creating a financially viable power distribution sector that is sufficiently equipped to meet the current and future needs of Ghanaian households and businesses,” he stated.

Ofori Atta announced the government’s intention to present an action plan by November 15, 2019, for the restoration of private sector participation in the ECG.