A former Minister of Power in the erstwhile Mahama administration in the Republic of Ghana, Dr. Kwabena Donkor has rejected claims by government that the suspension of the concession agreement with Power Distribution Services Ghana Limited was a result of government’s effort at uncovering an alleged fraudulent act perpetrated by the PDS in order to secure the said contract.
Contrary to the claims by government, Dr Donkor is convinced that government officials only managed to ‘discover’ the said fraudulent document upon a tip-off by some individuals and not through its own due diligence as has been reported.
He said, but for the tip off, government would have had no clue as to what was really going on in the power distribution chain in the country.
“We were given a tip-off on July 16 that the document guaranteeing the funding of the project for PDS was fraudulent and that the person who signed it, did not have the power to do so,” he said.
Dr. Donkor, who is also the Member of Parliament for Pru East, expressed worry over how long it took the country to verify the information after it had been provided by a whistle blower. He says instead of two weeks, government should have, within three days, ascertained the truth or otherwise of the claim by the informant.
He questioned why the Finance and Energy Ministries, the Millennium Development Authority (MiDA) and the Attorney General supervised the handing-over of the country’s property to a private company without doing the necessary checks and due diligence.
“Are we saying we handed over our property to PDS without due diligence? We were either being irresponsible or unpatriotic,” he said.
The former Power Minister is laying the blame squarely at the doorstep of the Finance Minister for supervising a sham.
He said the Ministry refused to hand over the necessary documents to parliament despite persistent requests.
“We asked for it but however, there is a weakness in Parliament. Too often the majority side and the executive want to push things through so when you ask, they will say we will provide it and often than not, documents are not provided and this is one of the examples,” he noted.
Ghana’s electricity regulator, Energy Commission, has appointed the Electricity Company of Ghana (ECG) as the interim operator of the electricity retail sale functions in the southern distribution zone under the license number EC/ESL/ 02-19-001.
According to the Commission, its decision is based on the validity of the said license becoming impaired due to the suspension of the operation of Power Distribution Services (Ghana) Limited over some breaches in the concession agreement signed with Government of Ghana.
A statement issued by the Board of Energy Commission to that effect urged the PDS to facilitate and provide ECG with the needed access to all billing systems, metering operations, payment accounts among others, required for the effective operations of the retail sales license
Government of Ghana, through the Information Minister, Kojo Oppong-Nkrumah, announced the suspension of PDS over some breaches in the concession agreement signed with government.
“The decision follows the detection of fundamental and materials breaches of PDS obligations in the provision of Payment Securities (Demand Guarantees) for the transaction, which have been discovered upon further due diligence.
“The Demand Guarantee were key prerequisite for the lease of assets on the 1st March, 2019, to secure the assets that were transferred to the concessionaire,” the statement indicated.
Eskom’s financial, operational and environmental performance will continue to be challenging for some time before significant improvements are realized, South Africa’s power utility group has declared in a statement.
The group recorded a net loss after tax of R20.7 billion for the year (March 2018: R2.3 billion), and EBITDA of R31.5 billion (March 2018: R45.4 billion).
According to the power utility, the EBITDA (earnings before interest, tax, depreciation and amortization) margin declined to 17.5% (March 2018: 25.6%, restated), mainly due to increased primary energy and employee benefit expenditure, combined with largely-stagnant revenue growth during the year.
Eskom further stated that there was a substantial increase in depreciation and net finance cost resulting in a growth in net loss.
The company said: “Primary energy costs (including coal, liquid fuels and Independent Power Producers) increased to R99.5 billion (March 2018: R85.2 billion).
“Usage of OCGTs, Eskom and IPPs, increased substantially driven by poor plant performance and supply constraints at a cost of R6.5 billion (March 2018: R0.3 billion).
“Expenditure on renewable IPPs increased to R22.2 billion for the year (March 2018: R19.0 billion) primarily due to the commissioning of new renewable IPPs during the year.
Audit modification
On the positive side, the company reported that progress was made in cleaning up the prior year audit modification relating to the completeness of irregular, fruitless and wasteful expenditure and losses due to criminal conduct.
“Despite our efforts, the auditors issued a modified opinion relating to the accuracy and reasonableness of the PFMA reporting,” Eskom revealed.
Irregular expenditure for the current year totaled R6.6 billion, of which R1.5 billion relates to new transgressions.
The remaining R5.1 billion is attributable to issues which had been detected previously and are continuing until the related contract is condoned, or to prior year transgressions identified during the year as part of the clean-up process.
“It is to be expected that new instances of irregularities will be detected as we continue our governance clean-up exercise. We have also made progress in clearing the reportable irregularities previously reported by the external auditors, Jabu Mabuza newly appointed chairman said.
“However, some irregularities will remain open until finalization of court cases or conclusion of investigations by external parties,” Mabuza added.
Decreased investor confidence in Eskom
Eskom noted that its access to funding in both the domestic and foreign markets has been restricted due to decreased investor confidence, as a result of reputational damage owing to the audit modifications in the 2016/17 and 2017/18 financial statements related to the completeness of irregular expenditure, previously reported governance issues, ongoing operational challenges, as well as uncertainty regarding our proposed restructuring.
Jabu Mabuza, Chairman of ESKOM
As a result of the extensive challenges confronting the organisation, Eskom has embarked on a comprehensive strategic review to develop a turnaround plan that would put the organisation on a path towards achieving structural, financial and operational sustainability.
The turnaround plan supported by the nine-point generation recovery plan; is enabled by four pillars, namely cost containment and sales growth, cost-reflective tariffs, balance sheet optimization, and business separation.
Group chief financial officer, Calib Cassim said: “In terms of cost savings, we must reduce our overall annual cost base by at least R33 billion in 2022/23, with cumulative cash savings of approximately R77 billion required over the next four years. This pillar also covers growing sales volumes in order to increase revenue.
“When it comes to cost-reflective tariffs, we submitted the MYPD 4 revenue application to NERSA, based on revenue that caters for prudent and efficient costs as well as a reasonable return that matches our debt service commitments.”
Cassim added: “The debt relief pillar saw Eskom approach government for financial assistance to reduce debt and interest to a sustainable level. Government has committed to providing R230 billion over the next 10 years.”
Source: Esi-Africa.com
A consumer advocacy group in the Republic of Ghana, Chamber of Petroleum Consumers (COPEC) has petitioned Ghana’s Parliament to consider by rejecting the proposed increases in petroleum sector levies announced by the Finance Minister in Parliament last Monday.
The chamber urged the legislative body to do so in the interest of consumers in the West African country.
“We humbly indulge your honest house to consider the plight of the ordinary Ghanaian and dismiss the implementation of tax increment on petroleum products, which will only pose huge financial burden on the citizenry of the Republic of Ghana,” a petition signed by executive secretary of COPEC, Duncan Amoah, said.
Presenting a mid-year budget review statement in Parliament on Monday, July 29, this year, Finance Minister Ken Ofori-Atta said, “Government proposes to increase the Energy Sector Levies by GHp20 per litre for petrol and diesel and GHp8 per kg for LPG, so as to increase the inflows to enable government issue additional bonds to pay down our energy sector debt obligations.
“Based on current indicative prices for petrol and diesel, this translates to GHp90 per gallon.”
However, COPEC, in its petition, kicked against the proposed levies.
“As a country committed to curbing the menace of climate change, COPEC is of the opinion that when the LPG price increases, people will be demotivated in attempt to move from non-environmentally friendly fuels to LPG, hence derailing the aim of government’s LPG penetration target.
“COPEC believes that government can source for alternative means of revenue generation including employing prudent measures to check perennial leakages in the energy sector, where the state loses over GH¢1.6 billion yearly to fuel smuggling, as well as revamping and equipping State Owned Enterprises like TOR to be more productive and profitable.”
Halliburton, one of the world’s largest providers of products and services to the energy industry has announced the execution of an integrated services contract with Petrobras for pre-salt development in the Santos Basin.
The two year and six month contract will provide drilling and completion services to drive greater efficiency by applying pre-salt expertise and integrating multiple product offerings and technologies.
“We are pleased to win this work and to collaborate with Petrobras to provide a tailored application of Halliburton technology,” Anouar Fraija, Vice President of Halliburton Brazil said.
“This contract is a testament to our continuous commitment to safety, superior service quality and helping operators maximize their asset value.”
Halliburton has an established track record in Brazil’s pre-salt fields, which have some of the most complex wells ever drilled, and require a broad scope of technologies and capabilities to achieve economical and operational success.
Halliburton also maintains a technology center in Rio de Janeiro, which serves as a global center of expertise for deepwater innovation and training.
The center’s capabilities allow Halliburton to translate offshore knowledge into new technologies that reduce uncertainty and increase efficiency and reliability.
Shell has sold its non-operated interest (22.45%) in the Caesar-Tonga asset, U.S. Gulf of Mexico, to Equinor for $965 million. The transaction is subject to approval of the lease assignments by the regulator.
The transaction represents Shell’s focus on strategically positioning the deepwater business for growth and is consistent with its strategy to pursue competitive projects that deliver value in the 2020s and beyond. The sale contributes to Shell’s ongoing divestment program.
Shell has a leading deepwater portfolio with an exciting development funnel and strong exploration acreage in the U.S. Gulf of Mexico, Brazil, Nigeria and Malaysia heartlands, as well as in emerging offshore basins such as Mexico, Mauritania and the Western Black Sea. Shell currently is the largest leaseholder and one of the leading offshore producers of oil and natural gas in the U.S. Gulf of Mexico.
In April 2019, Shell announced it had signed an agreement to sell its interest to Delek CT Investment. Subsequently, Equinor exercised its right of first refusal under the joint venture operating agreement. The transaction has an effective date of January 1, 2019.
The field is operated by Anadarko Petroleum, holder of 33.75% interest. The remaining interest in the asset following the completion of the divestment is distributed between Equinor (46.0%), and Chevron (20.25%).
U.S. oil and gas company, Hess has reported a net loss of $6 million in the second quarter of 2019, compared to a net loss of $130 million for the same period last year on the back of increased oil production and reduced expenses.
Hess also decided to trim its full year capex guidance.
Hess Corporation on Wednesday reported revenues of $1.7 billion compared to $1.56 billion in the same quarter of 2018.
On an adjusted basis, the company reported a net loss of $28 million in the second quarter of 2019. In last year’s second quarter, Hess reported an adjusted net loss of $56 million.
According to the company, the improved adjusted results reflect increased U.S. crude oil production and reduced exploration expenses, partially offset by the impact of lower realized selling prices and higher depreciation, depletion, and amortization expenses.
The company’s CEO, John Hess, said: “Our production is now expected to come in at the upper end of our full-year guidance range, while our capital and exploratory expenditures are projected to come in below our original full-year guidance.
“In Guyana, we have just increased the estimate of gross discovered recoverable resources for the Stabroek Block to more than 6 bboe and continue to see multibillion barrels of additional exploration potential.”
Hess’ Exploration and Production (E&P) net income was $68 million in the second quarter of 2019, compared to $31 million in the second quarter of 2018.
Higher production driven by Bakken & GoM
The company’s average realized crude oil selling price was $60.45 per barrel in the quarter, versus $62.65 per barrel in the year-ago quarter. The average realized natural gas liquids selling price in the second quarter of 2019 was $12.18 per barrel, versus $20.51 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.92 per mcf, compared to $4.12 per mcf in the second quarter of 2018.
Net production, excluding Libya, was 273,000 boepd in the second quarter of 2019, up from second quarter 2018 net production of 247,000 boepd, or 234,000 boepd excluding assets sold. The higher production was primarily driven by the Bakken and the Gulf of Mexico.
Libya net production was 20,000 boepd in the second quarter of 2019, compared with 18,000 boepd in the prior-year quarter.
E&P capital and exploratory expenditures were $664 million in the second quarter of 2019, compared to $525 million in the prior-year quarter, reflecting increased drilling in the Bakken and greater development activity in Guyana.
For full-year 2019, Hess’ E&P capital and exploratory expenditures are projected to be $2.8 billion, down from original guidance of $2.9 billion.
Source: Offshoreenergytoday.com
The Minority in Ghana’s Parliament has hinted of plans to further investigate the operations of the Power Distribution Services Limited (PDS).
According to the Minority Spokesperson on the Mines and Energy Committee, Adams Mutawakilu, government has been unfair to Ghanaians by not adhering to earlier concerns raised about the agreement.
This comes after the government announced a suspension of the concession agreement with PDS, after the detection of fundamental and material breaches of obligation in the provision of Payment Securities.
Adam Mutawakilu said government should have been more diligent prior to the signing of the concession agreement with PDS claiming the documents presented by PDS prior to the signing of the deal was not genuine.
Mr. Adam Mutawakilu further accused government of not sticking to aspects of the deal which was approved by Parliament.
“The Minority raised issues about the same guarantee or security and insisted that the PDS was expected to have provided the right document before the handing over of the assets of ECG. On several occasions we called on Government that PDS had not provided the right documents and that it was paper documents that was not backed on liquidity and cash…”
“Government had to wait for all this while before coming out to say they had done their due diligence… Government has not been fair to the people of Ghana by not sticking to what Parliament had approved and amending it to suit PDS.”
The Member of Parliament for Damongo also argued that Government’s decision to scrap the agreement deal could have dire consequences for the country on the International front in the future.
He also accused some government officials of sidestepping the agreed rule of engagements for the concession deal.
“We believe that the suspension of PDS goes beyond the provision of the guarantor…We have information on of alleged people fronting and the agreements we had as challenges and in the coming days, we will come out with the truth.”
“The inconsistencies of Government in respect to the concession will cast some bad image for Ghana in the international community but I still maintain that doing the right thing should have been done a long time ago.”
Source: Citinewsroom.com
Ghana’s Information Minister, Kojo Oppong-Nkrumah, has dispelled concerns that a decision by government to review some of the current power purchase agreements (PPAs) will result in judgement debts.
According to him, the government is cautiously working to convert the take-or-pay agreements to take-and-pay with some Independent Power Producers (IPPs) in a way that will prevent possible legal issues like a breach of contract.
“Not that we intend to force it down their [IPPs’] throats. We can’t do that. The idea is also to explain to them where the sovereign tends to go, where the red line is, so we begin to work with them,” he said.
The Finance Minister declared “a state of emergency” in the energy sector on Monday, a situation he said was causing the state to bleed scare financial resources.
The challenges in the energy sector, Ken Ofori-Atta stated, could pose grave financial risks to the entire economy.
“At the heart of these challenges are the obnoxious take-or-pay contracts signed by the NDC, which obligate us to pay for capacity we do not need,” Mr Ofori-Atta indicated while presenting the mid-year budget review to Parliament.
He said the country was paying over GH¢2.5 billion annually for some 2,300MW in installed capacity which the country does not consume.
“We shall from August 1st 2019, with the support of Parliament, make take-or-pay contracts a beast of the past,” he stressed.
However, some energy analysts have raised concerns over the issue, arguing that former the move to review the agreements could lead to judgement debt.
Reacting to these concerns, however, Mr Oppong-Nkrumah said the successes already achieved in renegotiating some power deals are evidence that other renegotiations will also be successful.
Oilfield services provider, Baker Hughes, a GE company, managed to reduce its loss as its revenues increased in the second quarter of 2019.
BHGE on Wednesday posted revenue of $6 billion for the second quarter 2019, up 7% sequentially and up 8% year-over-year. The company’s revenues in 2Q 2018 were $5.55 billion.
The company’s GAAP operating income was $271 million for the quarter, which means it increased 54% sequentially and increased more than three times year-over-year.
Adjusted operating income (a non-GAAP measure) of $361 million for the quarter was up 32% sequentially and up 25% year-over-year.
Net loss attributable to BHGE was $9 million compared to a loss of $19 million in the prior-year quarter.
The company’s orders in the period, which totaled $6.6 billion, were up 15% sequentially and up 9% year-over-year.
Lorenzo Simonelli, BHGE Chairman and Chief Executive Officer, said: “We delivered a solid second quarter 2019 both commercially and operationally. The trends for our longer-cycle businesses remain intact. The Liquefied Natural Gas (LNG) new-build cycle is a strong positive for our company and our international Oilfield Services (OFS) business continues to be very successful.”
He added: “Our outlook for 2019 is unchanged and we remain focused on our priorities of gaining share, improving margins and delivering strong cash flows.”
An Energy Think Tank in the Republic of Ghana, Africa Center for Energy Policy (ACEP), has advised the government to focus on addressing excess power generated by the Independent Power Producers and not renegotiating the take or pay agreements with the producers.
Executive Director of the Think Tank, Ben Boakye has noted that the sector’s real challenge is the reckless signing of power agreements which must be addressed.
“The problem the energy sector has is not because we have take-or-pays. It is because we have excess [capacity]. The problem is the reckless signing of more than we need.”
During the mid-year budget review, the Finance Minister said the country was in a “state of emergency” as far as the energy sector was concerned.
The “obnoxious” take-or-pay contracts were cited as a critical risk to the economy by the Minister.
The West African country’s installed capacity of 5,083 MW is almost double the peak demand of around 2,700 MW.
Of the installed capacity, 2,300 MW has been contracted on a take-or-pay basis meaning Ghana is contractually obliged to pay for the excess capacity though it does not consume it.
“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,” the Finance Minister said during the budget review.
He noted that the government intended to renegotiate and convert all take-or-pay contracts to take-and-pay contracts.
But Mr. Boakye said the country could also explore other alternatives beyond converting all contracts.
As another option, he suggested that the country could opt out of some contracts “and pay the damages.”
“If you recognize that damages for cancelling the contract is better to wait for five years to pay $1 billion, then you take the option and pay the $200 million to save the difference.”
Source: citinewsroom.com
Ghana Energy Awards, GEA, is set to launch the third edition of the Awards at the Challenge House, Abelemkpe, Accra on Wednesday, July 31, 2019.
The launch is to announce the theme for this year’s awards and open nominations for the various categories for energy sector companies and personalities in the country to apply for nominations.
Dr Kwame Ampofo, the Chairman of the Awarding Panel, said the Awards is chiefly to honour hardworking individuals and organizations in the country’s energy sector while at the same time promoting competition and quality service.
According to him, the award scheme is programmed to get better every year in terms of quality delivery, attendance, assessment of nominees which is a totally transparent process and a reflection of major activities in the industry.
Last year, he said, was far more impressive in terms of attendance, publicity and the overall organisation, however, this year, “we are expecting and working toward a better event in all regards,” he added.
The Awards is considered by industry players and regulators as truly the ‘Mother of all awards’ in the country’s energy sector.
He believed innovative awards such as the special Non-Competitive category which both previous editions have been received by noble personalities make the awards scheme unique and separate it from all other awards.
Dr Ampofo revealed that the 2019 Awards will feature a special set of awards for high-level achievers in the country whose patriotism and efforts have moved the country forward. This set of awards is non-political but for politicians who the entire country will admit deserve acknowledgement for their labours to ensure economic growth.
Henry Teinor, organiser of the awards said that this third edition of the awards will be exciting as more industry stakeholders will be involved in the entire awards process.
He said the Organising Committee decided to do the launch three clear months to the event so that prospective candidates will have ample time to gather their documents and evidences to support their applications.
“We are watching out for projects, new deals, strategic achievements of companies in the sector. We are also looking out for organizations that ensure compliance with industry regulations and standards,” he added.
Some prominent categories of the awards are the Energy Personality of the Year, both male and female categories, the Rising star award, Energy Reporter, Energy Institution, Energy efficient organization of the year, as well as the Non-Competitive categories.
Ghana Energy Awards is scheduled for the last Friday of every November and is endorsed by the Ministry of Energy and World Energy Council, Ghana and is validated by Mazars Ghana.
The Public Distribution Services (PDS) Ghana Limited has responded to the decision by government to suspend the concession agreement between them.
In a statement signed by CEO of PDS, it said, “PDS wishes to state for the record that it has always acted and will continue to act in good faith at all times.
“PDS will go through due process by complying with the terms of the Transactions Agreements executed between it and ECG on one hand and GoG through MoF on the other hand.”
Government, through the Information Minister, Kojo Oppong Nkrumah, yesterday July 30, 2019, announced that it had suspended its agreement with PDS over some breaches.
Government of Ghana has, with immediate effect, suspended its concession agreement with Power Distribution Services (Ghana) Limited.
PDS took over the power distribution business from the state power distributor, Electricity Company of Ghana (ECG), from March 1, 2019.
However, barely four months into its operation, government has suspended the deal.
A statement from the Ministry of Information said the decision was taken after government had discovered some breaches in the company’s obligation in the provision of payment securities.
It would be recalled that the Independent Power Producers (IPPs) in the West African country threatened to shutdown their power plants over failure of ECG/ PDS to settle their huge indebtedness to the tune of about $700m.
After weeks of debate, the Ministry of Finance intervened by releasing an amount of GHc 200m to settle part of the debts.
It is not clear whether the recent issue also influenced government’s decision to suspend the deal.
