‘Dumsor’ due to ‘liquidity challenges’ – Think tank counters govt’s explanation

Business News of Tuesday, 27 November 2018

Source: Myjoyonline.com

2018-11-27

John Peter Amewu, Energy Minister

The Institute for Energy Security (IES), a think tank in the African energy sector, wants the government to come clean on the cause of the current intermittent and unannounced power outages across the country.

IES said Monday in a press statement that, contrary to the explanation by Energy Minister, John Peter Amewu, that the power cuts, popularly called ‘dumsor’, are due to localised faults, huge debts in the sector is to blame.

Mr Amewu said at a press conference on Monday that part of the reason for the intermittent power cuts is due to gas supply challenges to Karpower, a power barge. However, IES said this explanation is backed by facts.

”To be charitable, the explanations offered by the Minister of Energy during the Press Conference is misleading and half-truth,” the energy think tank countered.

“… [w]hat Ghanaians are experiencing is largely due to liquidity challenges in the power sector as heavily-indebted Electricity Company of Ghana (ECG) is unable to redeem its debt obligations to especially Independent Power Producers (IPPs); leading to Power Plants fuel procurement challenges and load shedding,” IES said in the release.

This assessment by IES aligns with the Minority’s evaluation of the situation.

Minority Spokesperson on Energy, Adam Mutawakilu, said had the government not had liquidity challenges, it would have been able to purchase crude to address the issues.

Buttressing its position, IES states, “for the year 2018, there was a projected thermal generation of 11,301.65 GWh and a projected fuel cost of Ghc4.7 billion (US$1.0 Billion). Despite the biting debt on the Volta River Authority (VRA)’s books, in the 2018 Power year, they are required to cough out Gh¢1.57 billion representing 33.57% of the cost while the remaining Gh¢ 3.13 billion representing 66.43% will be required by the Independent Power Producers.”

Ghanaians are dreading a return to the dreaded load shedding era of 2013 which frustrated economic activities and homes for close to three years.

The government has meanwhile assured that Ghana will not return to that era because it is making progress with efforts to address the temporary challenge in the energy sector.

Read IES’ full assessment of the current power situation in the release below.

26th November 2018

GOVERNMENT MUST COME CLEAR ON ‘DUMSOR’

The Institute for Energy Security (IES) has followed with keen interest developments surrounding the decision by Ghana Grid Company (GRIDCO) and its counterparts to ration power for various parts of the country for weeks under an excuse of “low gas pressure”, a problem they suggested was of a technical nature. Accra, Kumasi, Takoradi, the Central and the Northern Regions have been most affected. We have also noted the additional information from the Energy Ministry pinning the re-occurring scourge of ‘DUMSOR’ to a technical gas supply challenge from Nigeria.

At last, the Energy Minister has admitted an existence of DUMSOR which the government is working to resolve; in sharp contrast to the Deputy Minister’s claim that the problems had been solved.

While there seem to be unanimity between the Ministry of Energy and its agency about an alleged technical problem, it is, however, our considered view that what Ghanaians are experiencing is largely due to liquidity challenges in the power sector as heavily-indebted Electricity Company of Ghana (ECG) is unable to redeem its debt obligations to especially Independent Power Producers (IPPs); leading to Power Plants fuel procurement challenges and load shedding.

It is worth noting that for the year 2018, there was a projected thermal generation of 11,301.65 GWh and a projected fuel cost of Ghc4.7 billion (US$1.0 Billion). Despite the biting debt on the Volta River Authority (VRA)’s books, in the 2018 Power year, they are required to cough out Gh¢1.57 billion representing 33.57% of the cost while the remaining Gh¢ 3.13 billion representing 66.43% will be required by the Independent Power Producers.

It is on record that as at July 2018, VRA, NEDCO, VALCO, and ECG’s indebtedness to GRIDCO was ¢957 million which is a cause for alarm; prompting IES to warn of the possible return of DUMSOR if this cyclical chain of debt is not addressed.

We are aware that the impact of these debts has affected the GRIDCO and the Northern Electricity Development Company (NEDCO) directly leading to operational challenges nationwide, which to mention a few include capacity constraints on Shield-Wire Transformer at Techiman which serves Abofour and Nkenkansu in the Ashanti Region, a Transformer overload challenge at Wa township and its environs; among many others.

IES wishes to state again for the record that the incidents of ‘DUMSOR’ are a problem of liquidity and poor planning.

To be charitable, the explanations offered by the Minister of Energy during the Press Conference is misleading and half-truth.

In any case, what is the essence of almost all the Plants being dual-fired in terms of fuel? Where is the backup plan for the natural gas which we are so much dependent on as a country? Why were ASKA and Karpower down until today?

IES wishes to call on the government to come clear with the people of Ghana on the true state of affairs in the Power sector and as a way forward, publish a workable power time-table as soon as possible as it fashions out a strategy to address the indebtedness before it looms into a full-blown crisis.

Signed:

Paa Kwasi Anamua Sakyi (Executive Director, IES)

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