MiDA to make ECG credible off-taker – CEO

Any company that succeeds in securing the concession to operate the Electricity Company of Ghana (ECG) from January 2017 will be expected to invest not less than $200 million every year.

It is on record that the power sector requires about $200 million investment every year for a number of years --- a responsibility the government alone could not shoulder, hence the need for the concessionaire.

The money will be used to replace obsolete equipment in order to maintain service quality.

In addition, between $8 billion and $12 billion would be required by the country for new power generating plants in the next 10 years to ensure reliable power.

International Finance Corporation (IFC), the transaction advisor, will before the end of this week present to government and the Millennium Development Authority (MiDA) the document that defines the details of how the concession should be structured, MIDA Chief Executive Officer (CEO) Ing. Owura Sarfo has said.

He said once government approves this document, MiDA will then go ahead to send out tender documents in March 2016.

He announced that 26 companies have already expressed interest in the ECG concession.

According to him, 14 of the companies are purely foreign, 10 are indigenous Ghanaian companies while two are joint ventures between local and international companies.

He disclosed that the expression of interest would be brought to an end by the close of this year.

The compact was signed in August 2014, and Ing. Owura Sarfo gave the timelines as CIF Disbursement - May 2015; Entry into force (EIF) - March 2016; Tranche 1 disbursement - April 2015; Tranche 2 Disbursement - April 2018; and the compact closure will take place in March 2021.

He explained that MiDA fixing the challenges of ECG was critical because Independent Power Producers (IPP) are looking for a credible off-taker in order to invest in power generation.

According to him, the fear of no credible off-taker was hampering IPP investments in the power sector as fears of failure to recover investment in current off-taker distribution arrangements abound.

MiDA CEO explained that if ECG is able to reduce its cumulative losses, which stand at 35%, by half, it would be making $150 million every year.

He added that the work of MiDA would transform ECG in terms of technology and efficiency in power distribution to become a stronger company able to meet the current and future needs of Ghanaians.

The major project under the Ghana Power Compact is the Electricity Company of Ghana (ECG) Financial and Operational Turnaround Project, which is designed to transform ECG into an efficient and financially strong institution through private sector participation (PSP).

About $300 million of the MCC grant is being invested in ECG, and the Government of Ghana is committing at least $37.4 million of its own money.

The project seeks to bring about PSP in investments into, as well as the management and operation of the ECG through a concession arrangement.