The power sector has significant financial, technical, and managerial challenges. These challenges are worsening over time and manifesting in unsustainable debt accumulation. In 2020 and 2021, the government shouldered total under-recoveries from the sector to over GHS 14 billion (GHS 6.8 billion in 2020, and the cedi equivalent of $1.257 billion in 2021). In addition, the sector’s outstanding payments for gas and IPPs are in excess of $1.2 billion for the first half of 2022.
The proposed relocation and O&M cost $71.6 million for three years to be recovered from the already anaemic Cash Waterfall Mechanism (CWM). Additionally, the gas infrastructure and discounts on the commodity cost to support the relocation would require about $50 million cumulatively per year. At the same time, the transmission infrastructure requires urgent investment, particularly upgrading the Western Corridor Transmission Lines and the 330KV Pokuase-Anwomaso Transmission Line, which are more critical infrastructures to facilitate the stable transmission of power to the middle belt of the country.
ACEP agrees that the power system will need some power generation dotted across the country in the medium to long term. However, given the current debt situation and the multiplicity of the challenges in the sector, more optimal planning should prioritize efficiency, effectiveness, and economy for power delivery. Strengthening the transmission system to coincide with a stable power supply for the middle belt from the Bui Dam is more urgent. This would require converting the Bui Dam from a peaking plant to an operationally possible baseload supply plant to support the NITS. If, for any reason, this recommendation is not an option for the Ministry, which appears to be the case for the past two years, the worst they can do is to ensure that the relocation and contracting processes are done in the most transparent and competitive manner. The current processes have no semblance of that transparency required to generate the most optimal cost. The O&M being sole sourced to Mytilineos SA is just an unnecessary cost addition in the face of the fact that VRA has the capacity to manage the plant.
Based on the foregoing, we recommend the following:
- The Ministry of Energy must immediately subject the EPC contracting process to competitive bidding that accommodates local contractors to achieve the most optimal contract cost.
- Under no circumstance should the operations and maintenance of the plant be outsourced to any contractor. VRA must own and operate the plant per the Deed of Assignment dated 17th August 2016 for which they were trained by AMERI.
- We maintain that in a cash-strapped power sector, prioritizing the retooling of the NITS is a far optimal option than the attempts to relocate plants and its attendant unnecessary cost additions.
- Cabinet and Parliament should assume critical responsibility for the efficient planning of the sector.
- Government should be transparent about plans to renegotiate power plants.
