The Government of Ghana has made a total savings of US$200 million following a successful renegotiation and amendment of the terms of the CENIT Energy Limited power deal.
This was revealed in a statement issued by the country’s Finance Ministry.
CENIT Energy Limited is a Ghanaian independent power producer (IPP) that began commercial operations in 2012.
According to the Ministry of Finance (MoF), the power company has “agreed to convert their power plant into a tolling structure and transfer all resulting cost savings to ECG.”
In addition, CEL has “agreed to a further reduction in the capital recovery tariff of 38.9%, resulting in total savings to government and all Ghanaians in excess of US$200 million over the remaining life of the PPA,” the Ministry said.
The Ministry described the commitment made by CEL as crucial in reinforcing the government’s efforts towards building a balanced and sustainable energy sector.
“The terms agreed to between the government and CEL will produce a more favourable situation for both parties and ultimately reduce the cost of electricity for the people of Ghana,” the Ministry added.
At present, Ghana pays over US$500 million annually for unused electricity, said MoF.
“Most of the PPAs are legacy agreements entered into under the previous administration in an uncoordinated and hasty attempt to end the power crisis (dumsor),” explained the statement, adding: “The tariffs agreed were not competitive and have contributed significantly to the build-up of debt in the sector and oversupply of energy.”
The present government, in collaboration with the World Bank, created the Energy Sector Recovery Programme (ESRP), identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023).
The statement said: “As part of the reforms, the government is taking steps to institute competitive bidding for future additional capacity, so as to ensure that future tariffs are fair and in line with expected pricing benchmarks.”
The government, the statement mentioned, has “demonstrated its commitment to the ESRP by actively developing whole-of-sector initiatives and reforms, including implementing the Cash Waterfall Mechanism (CWM) in April 2020, which allows Electricity Company of Ghana’s revenues to be distributed in a more transparent manner, and managing payments of arrears despite the challenging fiscal situation which has been exacerbated by the COVID-19 pandemic.”
The ESRP Steering Committee established by the Energy Sector Recovery Task Force under the Senior Minister, Yaw Osafo-Maafo, “is working closely with IPPs and gas suppliers under the ESRP Consultation Process to negotiate more favourable agreements for both parties and to achieve a balanced energy sector capable of delivering fair, long-term solutions. Government has undertaken these discussions in good faith and urges all IPPs to continue working closely with the ESRP Steering Committee to conclude negotiations as soon as possible,” the Ministry said.
“We welcome CENIT Energy’s commitment to Ghana and its role in regenerating the energy sector.
“CENIT is an important partner and a significant energy producer in Ghana,” the Country’s Finance Minister Ken Ofori-Atta, was quoted as saying.
“We encourage other IPPs to join CENIT in collaborating to help reduce onerous debts and to provide a stable energy supply for the people of Ghana.
“We are committed to building a competitive and dynamic energy sector where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.”
https://mofep.gov.gh/sites/default/files/news/PR_20200925_GoG_Amended_Terms_with_CENIT_Energy.pdf
Source: www.energynewsafrica.com
