Issue 117 • 29 June 2007
IPPs in the works to tackle Ghana’s power crisis
With water levels in Lake Volta at their lowest for more than 20 years, the government is under fire over its management of the energy crisis, but help is at hand from the private sector, writes Our Accra Correspondent.
Lake levels behind the Akosombo hydroelectric dam have fallen to their lowest levels since 1984, and output from the two functioning turbines has been cut from 170MW to 115MW. And the government is under fire from the parliamentary opposition over the continuing national load-shedding programme that began last August, and the handling of a sector that has seen four ministers in the last six years.
In a 6 June statement to parliament, Energy Minister Joseph Kofi Adda outlined the government’s short- and medium-term plans for generation capacity expansion, with an additional 392MW of additional power expected to come on stream by end-2007, and an extra 539MW by end-2009. But he did not make public any details of the proposed financing and ownership arrangements, or the size of the investment required from the government and its private sector partners.
In the immediate phase, the UK’s Wood Group is to install a 50MW plant at Tema.
Shenzhen Energy Group Company Ltd (SEC) is building a 200MW, $500m combined cycle plant, fired by West Africa Gas Pipeline (WAGP) gas, for completion in December, to be financed by the Chinese company (AE 108/7). Visiting Accra in early June, SEC board chairman Gao Zi Min said discussions were ongoing with Electricity Company of Ghana (ECG) about a power purchase agreement, and that expansion would eventually raise the plant’s total capacity to 560MW.
In a first phase, due for completion by December, the plant is set to begin producing 65MW at a cost of $150m.
Elsewhere, a 220MW unit is being procured from Alstom Turbines of Switzerland, to be operational by September 2008, and to be converted later into a 330MW combined cycle plant.
Ranhill of Malaysia is to provide an 84MW plant, scheduled to start production in July 2008.
The government says it remains committed to expanding the Takoradi International Company (Tico) component of the Aboadze thermal plant, acquired in February by Abu Dhabi National Energy Company (Taqa) in its purchase of CMS Generation (AE 114/19). But Adda questioned the project’s cost; having paid $110m for the initial 220MW capacity installed in 1998, the 110MW expansion is projected at $215m.
Independent producers
Four IPPs – CenPower, Gecad, Ranhill and SEC – have agreed PPAs or MoUs with Volta River Authority (VRA) and/or ECG since the energy crisis began, to provide up to 1,400MW, according to Adda. The government is seeking support from a range of other companies too. Among projects on the agenda:
• Gecad – the local subsidiary of General Electric Energy Systems in Ghana and Côte d’Ivoire has a track record of partnership with VRA, with whom it is installing a126MW emergency thermal plant at Tema. However only two-thirds of the available power is being generated, due to dust from a nearby cement factory, leading to more frequent breakdowns and the need for more intensive maintenance;
• CenPower – the local company’s UK-based partner Infraco has begun work on the $300m, 400MW Kpone IPP at Tema (AE 108/7). The group hopes to supply power directly to private sector consumers;
• Cinergex – the Canadian firm is to be the sole financier of a 52MW capacity waste-to-energy plant in Kumasi, costing $136m. Construction was launched by President John Kufuor in mid-May and is due for completion within 14 months. Ghana’s second city produces 1,000 t/d of waste, from which the plant will generate 30MW, rising to full capacity if the metropolitan authorities can feed it with 1,600 t/d. Cinergex has signed a PPA with ECG. The plant will run on gas converted from waste from the landfill site at Oti; it is being built under a build-operate-transfer agreement with Kumasi Metropolitan Assembly.
• Brazilian consortium – the government is also hoping that Brazilians will join the fray, following an urgent request for help to President Luiz Inacio Lula da Silva, made during the Africa-South America Summit in Abuja last November.
Budgetary implications
Demand-side solutions are also being sought. The importation and free distribution to all consumers of 6m compact fluorescent lamps is projected to save 200MW of consumption during peak hours (between 6pm and 10pm).
Meanwhile policy debates rage on. The budgetary implications of the government’s emergency generating plan have not been spelt out, although it involves a mix of government- and privately-financed projects. But the speed with which the plans have had to be put together suggests that prices will be high.
The government hopes the cost of IPP-generated power will be no more than $0.07/kwh, but much depends on the timing of the first delivery of WAGP gas, with free flow expected within the next three months, but no fixed date for the arrival of compressed gas.
Adda told the Financing for Development conference on 31 May that a total of $3.5bn was needed for investment in the power sector in the next five years, with $1.3bn required for generation additions, a similar amount for improvements to the transmission system, and $600m for distribution. Some $1bn is currently available from government, and $1.5bn from donors, for investment in both the power and petroleum sectors, with the latter requiring $500m for exploration and production, $340m for additional refining capacity, and $695m for the Bulk Oil Storage Company to add to strategic stocks.
One way to close the financing gap may be through the government’s planned flotation of its first sovereign bond on the international markets, for which Citigroup and UBS have been appointed as transaction advisers. Accra believes this should raise $500m-750m.
New World Bank facility
World Bank energy group sector manager for the Africa Region S Vijay Iyer told African Energy that the Bank had made a “substantial increase in its commitments, with the regional allocation doubling from $550m in 2006 to $1.1bn this year, compared with just $200m in 2002.”
Ghana’s share of this assistance is $70m, to be considered at a World Bank board on 3 July, with an additional $130m coming from the Global Energy Facility, Africa Catalytic Growth Fund and African Development Bank. This will support rehabilitation of the antiquated distribution system, and improve access to energy in rural areas, rather than increase generating capacity. “We have scaled up, and are working to get more,” Ayer said: “We see our mandate as helping to lead and build partnerships among the donors. We could do even more, but are constrained by the size of donor contributions to IDA [International Development Association]. Discussions on the IDA 15 replenishment are ongoing, but the current three-year funding cycle ends in 2008.”
The political cost of the energy crisis is bound to be high. Domestic consumers are getting power only 75% of the time, while subsidies on industrial tariffs have been lifted. According to Ghana Chamber of Mines (GCM) president Jurgen Eijgendaal, mining companies are spending $6.8m/month to make up for the supply shortfall.
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