Ghana: Gov’t To Abolish Take Or Pay Policy In The Energy Sector In August.

Ghana’s Minister for Finance Ken Ofori-Atta has hinted that, government will from August this year do away with take or pay policy in the energy sector which is crippling the sector financially.

The Minister, described the country’s energy sector as being in a ‘state of emergency’ due to some take or pay power contracts the Mahama administration signed with some independent power producers. Therefore, government is set to abolish this policy.

Presenting the mid-year budget statement in Parliament Monday, July 29, 2019 Mr. Ofori-Atta noted that, Ghana is paying so much for unused power and it’s worrying.

“Currently, according to the Energy Commission, our installed capacity of 5,083 MW is almost double our peak demand of around 2,700 MW. Notably, 2,300 MW of the installed capacity has been contracted on a take-or-pay basis. This means that we are contractually obliged to throw away money for this excess capacity which we do not consume. 

This has resulted in us paying over half a billion U.S. dollars or over GHS 2.5 billion annually for power generation capacity that we do not need.

“We shall from August 1st 2019, with the support of Parliament, make Take or-pay contracts a beast of the past,” he stated.

The Finance Minister also added that, for gas, Ghana has contracted for around 750 mmscf per day by2023. This is even after this government terminated two other LNG contracts in 2017.

“Current demand is around 250 mmscf per day, and this is projected to rise to between 450 and 550 mmscf per day by 2023. About 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning we have to pay whether we use it or not. From 2020, if nothing is done, we will be facing annual excess gas capacity charges of between US$550 and US$850 million every year. Thankfully, we have a plan to deal with this,” he said.