Ghana renegotiates power purchase deal with CENIT saving US$200m

GHANA – The government of Ghana has said it has successfully secured amended terms with CENIT Energy Limited; a independent power producer based in the country, saving US$200 million in the process.

This was revealed in a statement released by Ghana’s Ministry of Finance on the developments of a power purchase agreement renegotiation between the government and CENIT Energy Limited (CEL)

During the Renegotiations, CEL agreed to convert their power plant into a tolling structure and transfer all resulting cost savings to Electricity Commission of Ghana, the statement noted.

In addition, CEL is reported to have 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 commitment made by CEL, according to the statement, “is crucial in reinforcing government’s efforts to build 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.”

Ghana’s Ministry of Finance

Data from Ghana’s Ministry of Finance show that the West African nation pays over US$500 million a year for unused electricity.

The ministry explains that most of the power purchase agreements (PPAs) are legacy agreements, entered into under the previous administration in an uncoordinated and hasty attempt to end an electricity crisis that rocked Ghana back in 2015.

The ministry noted that  tariffs agreed were not competitive and have contributed significantly to the build-up of debt in the electricity sector and oversupply of energy.

The installed capacity according to the Energy Commission of Ghana is 5,083 MW, almost double the peak demand of 2,700 MW. Of this, 2,300 MW has been contracted on a take-or-pay basis.

This means that Ghana is contractually obliged to spend money for excess capacity that’s not being consumed.

To address the electricity challenge, Ghana in collaboration with the World Bank, created the Energy Sector Recovery Programme (ESRP).

The ESRP has been charged with identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023).

As part of the reforms, the government of Ghana also revealed that it 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.

Liked this article? Subscribe to DealStreet Africa News, our regular email newsletter with the latest news, deals and insights from Africa’s business, economy and more. SUBSCRIBE HERE

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.