US$5 billion saved in energy sector – Government touts prudent decisions

Finance Ministry has said prudent steps taken by the government in the energy sector has saved the sector over US$5 billion.

In a statement dated December 3, 2020, the Finance Ministry said it made the savings by relocating the Karpowership and securing agreements with CENIT Power Limited.

“In 2020 alone, this government has paid in excess of US$1 billion to Independent Power Producers. This is on top of GH¢2.7 billion paid by Electricity Company of Ghana Limited,” the Finance Ministry said.

The statement said the government was committed to undertaking the Energy Sector Recovery Programme (ESRP) in good faith and in partnership with its stakeholders.

“Government welcomes the collaboration and commitment shown by Independent Power Producers (IPPs) so far and calls for their support in bringing the negotiations to a swift close,” the statement said.

The IPPs had earlier threatened to withdraw their services over government and ECG indebtedness to them.

But according to the statement from the Finance Ministry, the energy sector in Ghana is faced with several challenges and many of them were inherited by the current government from the previous administration.

“While attempting to provide emergency power to address a spate of persistent load-shedding (dumsor) which crippled business and adversely affected GDP growth as a result of signed contracts with IPPs in an uncoordinated and non-competitive manner.

“Consequently, today, Ghana pays over $500 million a year in excess capacity payments, i.e., payment for power that it simply does not use or need. Despite the challenges, this Government has prioritised making payments to the IPPs to reduce the debts,” the statement said.

A spokesperson for the ESRP is quoted in the statement as saying: “This Government has successfully kept the lights on over the past four years and intends to continue doing so for the years to come. The electricity produced by IPPs drives the engine of our economy and contributes to sustainable development. The onerous take-or-pay contracts painfully obligate Government to pay over US$500 million a year for power we do not use.

“This year alone, Government has made payments of $1 billion to independent power producers, all while keeping the power on and prices low.

“Government will continue to manage the situation by negotiating more balanced contracts, reducing the debt, instituting careful forward planning and proper data-driven analysis, as well as transparent, competitive, energy procurement processes to build a resilient, sustainable energy sector for the good people of Ghana.”

Government said it remains committed to building an energy sector based on long-term energy security, sustainable investment, and partnerships to bring affordable accessible energy to Ghanaians in line with the vision of a Ghana Beyond Aid.

“To achieve this vision, Government has taken pragmatic and decisive action to manage the energy sector. In collaboration with the World Bank, Government established the ESRP, identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023),” the statement indicated.

The Government Negotiating Team, established under the Energy Sector Recovery Task Force (ESRTF), which is helmed by the Senior Minister, is working bilaterally with IPPs and Gas Suppliers under the ESRP Consultation Process, to secure more favourable and sustainable agreements for both parties, the statement added.