{"id":667691,"date":"2019-07-30T12:10:57","date_gmt":"2019-07-30T12:10:57","guid":{"rendered":"
\n\t\t\n

John Peter Amewu \u2013 Energy Minister<\/strong><\/p>\n\n\n\n

FINANCE\nMINISTER Ken Ofori-Atta yesterday mentioned that Ghana\u2019s energy sector was\nbedeviled with serious challenges that posed grave financial risks to the whole\neconomy. <\/p>"},"modified":"2019-07-30T12:10:57","modified_gmt":"2019-07-30T12:10:57","slug":"energy-contracts-for-renegotiation","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2019\/07\/30\/energy-contracts-for-renegotiation\/","title":{"rendered":"Energy Contracts For Renegotiation –"},"content":{"rendered":"

<\/p>\n

\n

John Peter Amewu \u2013 Energy Minister<\/strong><\/p>\n

FINANCE
\nMINISTER Ken Ofori-Atta yesterday mentioned that Ghana\u2019s energy sector was
\nbedeviled with serious challenges that posed grave financial risks to the whole
\neconomy. <\/p>\n

\u201cAt
\nthe heart of these challenges is the obnoxious take-or-pay contracts signed by
\nthe NDC, which obligate us to pay for capacity we do not need. We must urgently
\naddress these challenges to protect the hard-earned economic gains we have made
\nin the past two-and-a-half years and continue with our economic growth and jobs
\nagenda to improve the lives of Ghanaians,\u201d he said.<\/p>\n

Reading
\nthe mid-year budget review he said \u201cThis Supplementary
\nBudget therefore proposes a number of bold measures to confront the issues to
\nensure that the energy sector delivers the services required by Ghanaians,
\nwhile maintaining financial viability.\u201d<\/p>\n

Renegotiation<\/strong><\/p>\n

Starting
\nAugust 1, this year, Government is to pay for energy and gas that the country
\nactually consumes. This forms part of its determination to convert all
\ntake-or-pay contracts into take-and-pay contracts.<\/p>\n

\u201cAll
\ntake-or-pay contracts will be renegotiated to convert to take-and-pay for both Power
\nPurchase Agreements (PPAs) and gas supply agreements (GSAs), Minister of
\nFinance, Ken Ofori-Atta, disclosed yesterday in Parliament.<\/p>\n

Touching
\non the two main issues that confronted the energy sector, Mr Ofori-Atta noted:
\n\u201cFirstly, excess electricity generation which was procured during the NDC
\nregime from Independent Power Producers (IPPs), including Emergency Power
\nProducers, at exorbitant prices were under flawed take-or-pay contracts. <\/p>\n

Wasteful generation<\/strong><\/p>\n

\u201cCurrently,
\naccording to the Energy Commission, the country has installed power generation
\ncapacity of 5,083 MW, dependable capacity of 4,593 MW and peak demand of around
\n2,700 MW. So, our installed capacity is almost double our peak demand. Notably,
\n2,300 MW of the installed capacity has been contracted on a take-or-pay basis.
\nOn average, less than 40 per cent of the contracted take-or-pay capacity is
\nactually used, meaning that we are basically throwing away money by paying for
\nthe remaining 60 per cent of excess capacity which we do not actually consume.
\nIn monetary terms, what this means is that we are paying over half a billion
\nU.S. dollars or over GH\u00a22.5 billion annually for power generation capacity that
\nwe do not need.\u201d<\/p>\n

Gas<\/strong><\/p>\n

On
\nthe issue of gas, he said Ghana had contracted for around 750 mmscf per day by
\n2023 adding that current demand was around 250 mmscf per day. \u201cThis is
\nprojected to rise to between 450 and 550 mmscf per day by 2023. All things
\nbeing equal, there is projected oversupply of 200 to 300 mmscf per day by 2023.
\nAbout 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning
\nwe have to pay whether we use it or not.\u201d<\/p>\n

\u201cFrom
\n2020, we will be facing annual excess gas capacity charges of between US$550
\nand US$850 million every year. Currently, for Sankofa Offshore Cape Three
\nPoints gas alone, we pay over $51 million a month under a take-or-pay contract
\nfor 154 mmscf per day even though we only actually take 60 mmscf per day on
\naverage.\u201d<\/p>\n

Other challenges<\/strong><\/p>\n

He
\nsaid additionally, there were still other challenges in the energy sector, including
\nelectricity tariffs that did not cover the costs of non-portfolio (PPAs); low
\ncollection, high technical and commercial losses; absence of a proper system
\nfor measuring and paying for the costs of power for street lighting; non-payment
\nof utility bills by MDAs; and a high level of net sector arrears of US$2.7
\nbillion (GH\u00a214.04 billion) as of January 2019.<\/p>\n

\u201cMr.
\nSpeaker, the total costs in the energy sector that Government had to cover in
\n2018 amounted to US$520 million (GH\u00a22.7 billion). Moreover, by end- June this
\nyear, Government had made total payments of US$604 million (GH\u00a23.14 billion),
\nand if we do not urgently address the problems in the sector, the projected
\nGovernment payments in 2019 will be at least US$1 billion, (GH\u00a25.2 billion).\u201d<\/p>\n

The
\nMinister highlighted that Ghana\u2019s macroeconomic stability and the hard earned
\neconomic gains it had made were at serious risk of being derailed if Government
\ndid not immediately take drastic steps to arrest the reprehensible legacy
\nissues in the energy sector. <\/p>\n

\u201cJust to put this in context, the over US$1 billion (or over GH\u00a25 billion) extraordinary payment that Government is having to make in the energy sector this year and on an ongoing basis, if not addressed, is more than two times the amount of all of Government\u2019s social expenditures on goods and services, which includes Free Senior High School, our School Feeding Programme and Livelihood Empowerment Against Poverty (LEAP).\u201d<\/p>\n

BY Samuel Boadi<\/strong><\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

John Peter Amewu \u2013 Energy Minister FINANCE MINISTER Ken Ofori-Atta yesterday mentioned that Ghana\u2019s energy sector was bedeviled with serious challenges that posed grave financial risks to the whole economy. \u201cAt the heart of these challenges is the obnoxious take-or-pay contracts signed by the NDC, which obligate us to pay for capacity we do not […]<\/p>\n","protected":false},"author":1,"featured_media":652095,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-667691","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"\nEnergy Contracts For Renegotiation - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2019\/07\/30\/energy-contracts-for-renegotiation\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Energy Contracts For Renegotiation - 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