Business News of Monday, 19 January 2015
Source: B&FT
The Millennium Development Authority (MiDA), which is spearheading the executionof the Millennium Challenge Account (MCA) Second Compact that is meant to restructure the power sector, has said there will be no job-losses at the Electricity Company of Ghana (ECG).
“We do not anticipate any job-losses. We are talking about partial privatisation; ECG is not being sold. We are only inviting the private sector to come in to participate and share with government in managing ECG,” Mawunyo Robson, a Power Consultant at MiDA, told the B&FT.
The second compact of the Millennium Challenge Account (MCA), which comes into force this June, could see Ghana draw up to US$498.2million to transform, mainly, the power distribution sector and make it more viable.
The ECG is supposed to be the largest beneficiary of the funds, on condition that it partners “an internationally reputable power distribution utility”, which has led to fears that privatising the company will lead to massive job-losses.
A total of US$339.6million will be committed to what has been christened the “ECG Financial and Operational Turnaround Project”.
According to Mawunyo Robson, due to the premium MiDA places on the welfare of ECG’s workers, it will prioritise preventing job-losses; but in the event such losses become inevitable, affected workers will be very well compensated.
“The well-being and welfare of employees are very key to the whole business of ECG, so whoever is coming on board will ensure as far as possible preventing losses — but should there be any, whoever is affected will be duly compensated,” he added.
The Power Consultant said implementation of the MCA Compact II is very crucial to businesses, particularly at a time instability in power supply has led to companies having to cut down on production or incur additional operational costs by running on fuel plants.
The focus on power distribution rather than generation, Mr. Robson said, is to ensure that losses (commercial and technical) within the sector are reduced, making ECG a viable organisation.
“The idea is that they are the final off-takers of power from the producers. At this point in time, we are talking about more independent power producers (IPPs) coming on board in order to increase generation; but if they are not assured of their revenue streams, if ECG is not a credible off-taker, then we have a problem and we are never going to get them on board. That is why it is critical to focus on the distribution sector and make it healthy enough, financially viable so that IPP’s can feel comfortable to come on board,” he explained.
MCA Compact II
The five-year compact is divided into two: the first tranche will see the Millennium Challenge Corporation commit US$149.6million to the ECG Financial and Operational Turnaround Project, whereas other projects will receive combined resources of US$158.6million under the first tranche.
If certain conditions are met within two years of the Compact coming into force, a further US$190million will be provided for the ECG Financial and Operational Turnaround Project under Tranche Two.
In creating a sustainable power sector, the Compact will pursue a two-pronged approach — changing the governance and management of ECG by bringing in a private sector operator, coupled with infrastructure and foundational investments designed largely to reduce losses and improve service quality.
The Compact is aiming to achieve this objective, which will benefit at least 4.8 million people in the short-term and 7.8 million people in the long-run, by encouraging reforms such as Private Sector Participation (PSP) and modernising ECG’s operations.
The Compact is also targetting a reduction in commercial losses and increased revenue collection, which will be done mainly through improvement in metering systems and the installation of more prepaid meters in areas accustomed to the postpaid system.
Further interventions will focus on reducing technical losses through the lowering of thermal losses in distribution systems. Overall, all these improvements should see relative stability in power supplied to homes and factories.
To reduce outages, the Compact will oversee the introduction of improved system protection and sectionalising devices in the power distribution system, which currently dispenses close to 2,000MW during peak periods of demand.