May 21, 2024

Latest World Bank’s assessment of Ghana’s economy has confirmed assertions by the Nana Akufo-Addo-led government that highly expensive and ‘wrong’ power contracts signed by former President John Dramani Mahama have been a massive drain on the country’s finances.

Government has consistently maintained that Power Purchase Agreements (PPAs) agreements with Independent Power Producers (IPPs) by the Mahama-led National Democratic Congress (NDC) administration were too expensive, contributing significantly to the country’s ailing economy.

This assertion was made after the Mr. Mahama government signed Take-or-Pay contracts that have compelled Ghana to pay GH¢12 billion for power that was not consumed.

Confirming this, the Country Director of the World Bank responsible for Ghana, Sierra Leone and Liberia, Pierre Frank Laporte, indicated that many of the country’s PPAs for power generation were signed at the wrong rate and price.

According to him, Ghana is paying more for power than it should be, even for electricity not used, due to the terms of the PPAs.

Pierre Frank Laporte, World Bank Country Director

“In the aspect of Ghana, those contracts you signed with the PPA are too expensive. The kind of PPA you signed it means, Ghana is paying for electricity not in used through doubling of capacity.

“The fact is, in the last few years, Ghana entered into some PPAs that were wrong. These types, in our view, were at the wrong rate and at the wrong prices and today you’re paying duly for it. And today the country is being billed for many of these wrong PPAs”, Mr. Laporte told JoyNews last Thursday.

He has therefore called on government to urgently restructure some of these contracts.

Minister for Finance Mr. Ken Ofori-Atta managed to be resourceful from 2017 to 2021 to meet Ghana’s financial commitments to Independent Power Producers (IPPs).

This has ensured continued power supply without the ‘dumsor’ experienced in the Mahama administration.

However, the PPA appears to be now biting the country’s economy harder and the is now called for the review of some of PPAs to revive the country’s economy under the International Monetary Fund (IMF) bailout.

Government has started talks with IPPs to renegotiate some of these PPAs.

“I know that the government has started some talks with the IPPs to renegotiate some of these PPAs,” Mr. Laporte noted.

ECG criticised

Meanwhile, the World Bank has criticised the Electricity Company of Ghana (ECG) for not collecting enough revenue and supported the reforms it is implementing in the power distribution sector.

The energy sector debt still poses a threat to Ghana’s economy, with the renegotiation of contracts seen as a solution.

Ghana has an installed power capacity of about 5,000 megawatts and dependable capacity of about 4,700MW with the all-time high peak demand of 2,700MW.

The Energy Sector Reform Programme (ESRP) has been crafted to address the issues in the energy sector and convert purchase agreements from Take-or-Pay to Take-and-Pay, which would end the payment of excess capacity.

 

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