Independent Power Producers (IPPs) and government have agreed suspension of the planned shutdown of power plants following fruitful engagements with the Electricity Company of Ghana (ECG).
This follows what the Chamber of Independent Power Producers of Ghana (IPPG) describes as fruitful engagements with the Electricity Company of Ghana (ECG).
As part of the understanding reached, all the Independent Power Producers (IPPs) have received an offer of payments from ECG to enable them operate in the interim thereby providing the Government of Ghana (GoG) and ECG the needed grace period to address the outstanding arrears in the energy sector and to meet their contractual obligations.”
To this end, the IPPs have agreed to keep operating their power plants after July 1, 2023.
The Chamber had in a memo to members comprising Sunon Asogli, Cenpower, Karpowpership, AKSA, Twin City Energy and CENIT directed them not to declare available power capacity to the system operator from July 1-8, 2023 if the government fails to pay 30% of the $1.73 billion owed them.
Players in the energy sector expressed fears of a looming power crisis should the IPPs carry out their threats to cut supply to the national grid over the $1.73 billion outstanding arrears.
However, in a statement released by the chamber, the IPPs have agreed to keep operating their power plants after July 1, 2023.
The IPPs which control about 50% of the country’s generation mix had highlighted that the indebtedness has hindered their access to working capital, preventing them from financing crucial inputs such as chemicals for water treatment in thermal generators and other supplies, many of which are priced in foreign currency, primarily the US dollar.
The IPPs are optimistic that this agreement reached would help yield the desired outcome of providing a permanent resolution to the energy sector debt failing which the IPPs will be left with no other choice than to revert to their earlier decision to shut down without any further notice.
The IPPs acknowledged the valuable contributions of the Chairman and Ranking Member of the Parliamentary Select Committee on Mines and Energy, and the members of the committee for their timely intervention in ensuring a fruitful engagement.
“The IPPs would also like to express their appreciation to their respective Lenders and shareholders for their support and involvement in these discussions for a resolution of the outstanding debt issues.”
The Chairman of the IPPs stated that “We are pleased to have reached an interim understanding with ECG, which enables us to continue our operations for the benefit of the good people of Ghana. We recognize the importance of our operations to the nation, and all the IPPs jointly remain committed to Ghana in delivering reliable power to the country. We also appreciate the support and collaboration we have received from the general public and all well-meaning Ghanaians throughout this process.”
The IPPs say they will individually remain actively engaged with the government and ECG in order to address the outstanding financial issues and will work on a sustainable resolution to address the issues at hand.
The Chamber is confident that a mutually beneficial solution can be achieved through ongoing cooperation to enable the Chamber to continue making its important contribution to the development and stability of the energy sector in the country and to the economy.
$937.5m paid for excess capacity charge in 4 years
Government paid $937.5 million to three independent power producers (IPPs) signed during the John Mahama era for excess capacity charge between 2017 and 2020.
AKSA was paid $347 million, Karpower $359 million and Cenpower $251 million.
AKSA paid $347m
AKSA was paid $35.7 million in 2017, $59.4 million in 2018, $136.8 million in 2019 and $115.3 million in 2020.
Karpower paid $359m
In the case of Karpower, the company received $65.5 million in 2017, $108.9 million in 2018, $138 million in 2019 and $46.8 million in 2020.
Cenpower paid $251m
With regard to Cenpower, the company received no payment in 2017 and 2018 but was paid $86.5 million in 2019 and $144.8 million in 2020.
Biggest driver of national debt
According to the Fitch Ranks, the energy sector is the biggest driver of national debt as Ghana currently owes independent power producers to the tune of $ 1.73 billion.
IPPs reject $1.73bn
Meanwhile, IPPs have rejected a government proposal to restructure $1.73 billion in arrears owed them by the state.
