At the Mid-Year Budget Review - Govt Halts 'Take or Pay' Power Deals ... to Renegotiate All Contracts

By Kingsley Asare, Julius Petetsi And Jonathan Donkor

WITH effect from August 1, 2019, government will only pay for energy and gas that it actually consumes, Finance Minister, Ken Ofori-Atta, has announced.

The John Mahama led National Democratic Congress administration has been blamed for entering into 'take or pay' power deals with Independent Power Producers which according to the current government, has resulted into huge financial cost to the state.

Presenting the mid-year budget review and supplementary estimate of government for the 2019 financial year, Mr Ofori-Atta said the trend would be reversed.

"All take-or-pay contracts will be renegotiated to convert to take-and-pay for both Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs)," he told the House.

For this to become effective, the Finance Minister said with parliamentary ratification where appropriate, the government will suspend indefinitely or terminate all PPAs currently under negotiation and immediately place a complete moratorium on signing new PPAs and Put-Call Option Agreements (PCOAs).

Future PPAs, he said, would be subjected to competitive and transparent procurement procedures and that "Government would therefore no longer entertain any unsolicited proposals."

"An economic merit order dispatch which means that the most efficient power plants will be dispatched first" he said, adding that a programme to improve the performance of the utility distribution companies would be agreed to reduce electricity losses.

The above measures, Ken Ofori-Atta said, would be a continuation of earlier ones undertaken since the NPP assumed power over the last two and half years, some of which include the termination of the Quantum Gas project in 2017.

Others include the termination of one of the Takoradi LNG projects, ADM, with the other one, West Africa Gas Limited, in the process of being terminated.

Government, the Finance Minister said was taking steps to relocate the Karpowership to Takoradi to immediately utilise Sankofa gas, increase power exports by extending the grid to other West African countries and streamlining the management of streetlighting to ensure accountability and transparency in billing and payments.

To spur productivity, Mr Ofori-Atta said, government would Increase the productive use of electricity and natural gas by engaging gas suppliers with a view to reducing the price of natural gas in line with its industrialisation policy.

"Mr Speaker, with the additional measures we are introducing, we are going to clean up and sanitise the energy sector, just as we have been doing in the financial sector.

"These two sectors are fundamental to our agenda to grow the economy, create jobs, and bring prosperity to Ghanaians.

"Our government is strongly supportive of the private sector and believes in fostering a strong legal, regulatory and enabling environment that supports private sector growth.

"However, we are not going to jeopardise our future through unbalanced contracts that benefit a few individuals and companies at the expense of the people of Ghana," he said to loud cheers from the Majority caucus of the House.

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