The KarPower Ship has finally docked at the Tema Port from Turkey with optimism and fanfare. However, the barge which is expected to generate 225 megawatts will use heavy fuel oil (HFO) which is quite expensive. Meanwhile, the second barge which has been retrofitted to generate about 400MW is expected to arrive in Ghana within the first quarter of 2016. The total generation capacity from the two barges will constitute 625MW to be added to the national grid.
Paradoxically, these power plants may not be a solution to the perennial electricity crisis in Ghana, unless adequate financial engineering is carried out to improve revenue mobilisation, and fix realistic electricity tariffs at the downstream power sector. This is imperative due to the shift of the generation mix in favour of thermal plants. Therefore, the fanfare that accompanied with the KarPower ship arrival on the 29th November, 2015 was understandable because at least it will add another 225MW towards resolving the power crisis, but cost implications need to be assessed quickly to ensure its smooth operations going forward.
The issue is that these floating power plants have to be fuelled with HFO, but as it stands now, the country appears not to have enough financial wherewithal to procure the fuel feed stock. Power generation economists have projected that the 225MW capacity barge will consume over 30,000 tonnes of HFO, with an estimated value of about $9 million monthly. The agreed tariffs for the barge is 20 cent per kilowatt/hour, which is exorbitant as compared to the approved tariff of 13 cent per kilowatt/hour for existing thermal producers. This will automatically have cost implications in the generation mix which will be passed on to domestic and industrial consumers.
As envisaged by policy makers, the major problem with the barges will be the fuel source. Heavy crude oil that will be used to power the barges should be made available to achieve their full utilisations. Therefore, as part of the contractual agreements, GNPC has been made to give a fuel guarantee to the barges. It has already deposited a guarantee of 100 million dollars to an escrow account for this purpose. This guarantee is aimed at addressing the fuel problem in the short to medium term basis. It will be interesting to see how competently this contractual obligation will be discharged when the barges start commercial operations in due course.
Meanwhile, Africa and Middle East Resource Investment (AMERI) power units that have been moved to Aboadze power enclave will be adding 250MW to the National Electricity Grid, comprising ten units of generators with each one having the capacity of 25MW. The recent acute electricity supply was as a result of its connectivity to the Ghana National Gas Company (GNGC) at Aboadze. This has compelled Ghana Gas Company to shut down completely for safety concerns. Fortunately, both technical and mechanical works have been completed and GNGC has begun its normal operations to Aboazde.
The country’s generation capacity is currently about 2,900MW, peak demand is about 2,050MW and currently available capacity of 1,450MW. Hence, the generation deficit hovers around 400MW to 600MW depending on prevailing circumstances. This deficit has been responsible for the load shedding for almost four years which is unprecedented in the annals of Ghana. However, it seems there are glimmers of hope on the horizon for Ghanaians and industrial consumers.
The two barges and AMERI’s intervention alone can add up to 875MW as soon as possible to the national grid, which is almost close to the total generation capacity of Akosombo (1,020MW). Some power plants are also on-going, while others are in the pipeline. For instance, the Kpone Power Plant expansion Project is expected to inject 110MW into the national grid by December and its second stage will also add 110MW to the generation stock within the first quarter of 2016.
Similarly, Asogli Power Ghana Limited is working assiduously to increase its generation by 360MW in 2017. However, half of this is on course to be delivered in December, 2015. Tracking the progress of work by the Cen power Project reveals that it is also on course to deliver 350MW by the end of 2017. Also, coming on stream by the end of this year are the TICO Expansion (110MW) and Tema Thermal Plant Project (38MW). A huge power generation feat, by all standards, any single government has ever achieved in Ghana.
Sadly, supplies of lean gas from Nigeria Gas (G-Gas) and the Ghana National Gas Company (GNGC) have been erratic due to technical glitches and financial challenges. The Volta River Authority (VRA) owes N-Gas and GNGC $180 million and $150 million respectively as a result of several factors including low tariffs and poor revenue mobilization. Banks are also on the heels of the VRA to recover $1.3 billion debts which has accumulated over the years.
The power sector has therefore become highly indebted with frightening future prospects, unless adequate steps are taken to clean their balance sheets of the companies. Hence, fuelling of these thermal plants would remain a major challenge if these high levels of indebtedness are not systematically addressed as soon as practicable.
Energy Policy & Research Institute (EPRI) have already raised concerns in investing heavily into thermal power sources in the generation mix due to its cost implications and erratic gas supply to guarantee us reliable and affordable electricity supply in Ghana. Payment of realistic tariffs for electricity might be unpopular, but it is one of the prudent decisions to make. The Public Utility and Regulation Commission (PURC) should therefore grant the request of the VRA, Ghana Grid Company (GRIDCo) and Electricity Company of Ghana (ECG) to avoid another unpleasant bout of load shedding in the near future.
Most inputs in the power sectors are imported overseas and priced in dollars. Therefore, managers of the country’s economy therefore have a huge responsibility to play in ameliorating the forex losses. The spiral depreciation of the cedi over the years means any tariff hikes outlive their usefulness in the power sector. In this regard, the Economic Management Team, Ministry of Finance and Bank of Ghana must step up their game. The effective management of the currency would assist to sanitise the tariff regime, and subsequently cushion the bills paid by electricity consumers.
The aforementioned issues indicate that the moment the electricity crisis is fixed as promised by the president, an emerging obstacle that would be hotly discussed in the media is the payment of actual tariffs, to make generation companies have value for their investments. Hence, if tariff increments are discussed dispassionately devoid of partisan connotations, it will strengthen balance sheets of the valued chain companies, enabling them to supply reliable and affordable electricity.
Didn’t we know this already! The government of this country called Ghana have no idea what they are doing or what they need to do. They don’t know their left from right. If this nation continues to be led by folks like this then aluta!
Thank you, Alhaji Mustapha Iddrisu, for the insightful article but does it not worry you that internal debts are capitalised in dollars, i.e. debts by VRA to GNGC quoted in dollars? Is this not a violation of the directives by BOG which repeatedly frown on ‘dollarisation of the economy’.
Also, I think there are too many agents along the value chain, rendering the whole essence of value creation defeated. Going by the principles of intermediaries and disintermediaries I do not think we are promoting lean production lines and consequently, these issues combine to reinforce our already precarious position with power generation and distribution. Thank you!
If you read the article closely, I made point that most of inputs in the power are imported and priced in dollars. It is only ECG in the value chain that sales electricity in cedis. The rest are traded in dollars. However, the power purchase agreement makes it mandatory for the ECG to pay the IPPs in dollar equivalent using current foreign exchange rates.
The fact is that companies in the value chain prefer to trade in dollars due to forex violitity. In any case, if there is any violation on my part, then it is the making of the companies. However, point is well noted, Maxwell. Thanks for reading and critiquing.
Since the time I started following Ghanaian politics I have never seen a broad day light corruption than what I see in this #PrezMahama led administration.
how can u fuel power badges at a cost of $9m instead of $2m. so what I ask myself is where is the $7m balance?
in fact I hear some of these things and I loose hope in Mother Ghana.
who can really salvage us?
Apart from Ghana, which other Africa country uses power badges? We have hydro, thermal and now a badge; am here wondering why we didn’t opt for solar energy. Have government and other companies fully paid all arrears owed ECG? Ghana y3 onipa a anka y3b3fr3 no preman nii, efis3 oni sika nso ofiri nne3ma abo)den.
Infact bringing power badge to solve this pandemic dumsor, is like buying generator for households in Ghana without giving money for fuel!
Seriously! The only thing that differentiate human from animal is instinct!
So if you can’t think don’t you have instinct??
Maturity is your ability to analyse a problem and give a proper solution to it.
It’s about time Ghana Stop the ethno-politics!
infact dumsor is so disgusting and if a government can’t put in place proper measures to solve it . Why should we vote for them again!
It looks like this country has lost focus in everything when it comes to proper planning, talking about karpower, the ppl of ghana has been in total darkness for over three years now and we think this is the right time to go for emergency power badge. In any case what is emergency? To my own understanding emergency is something which has happen an unexpectedly that needs instant remedy. but we have been in darkness for years so I don’t see why we should be calling what has been part of us as an emergency. we could have used 250 million dollars to buy plant permanently for the state rather than renting it and be paying 100million every year.
Ghanaians we must be watchful, the most painful of all is that the Mahama administration can buy this power badges worth of 500usd but we are been bid to pay for it every yr worth of millions of dollars for 10 years .provoking fact is not of it to solve dumsor .ohw Ghana ,the average income earner has to pay for this money with high tariffs…so is there a future for the generation to come ?
Reckoned on per square meter basis, the Ridge Hospital, Accra Ghana is the most expensive in the whole world!!! Create, loot and share enterprise. Africa……. Competent plus incompetent!!!!!! Power badge!!!!
Very Interesting and Worth Sharing:
1. The government of Ghana paid $138M for a finance lease of the karpower badge for 10 years. This translates to $13.8M every year!
2. Fueling and maintenance of the power badge will cost $9M every month. This translates to $108M every year.
This means the power badge will cost us $121.80M every year! Split it for a month and we are spending $10.15M every month.
At the end of the 10 years, the cost of the rental badge and its fueling + maintenance will cost us $1,218 Billion
Basic prudent accounting prescribes that when the cost of maintaining an asset far exceeds its carrying value, then the asset is a scrap and its better to dispose of it.
The total carrying value of the asset for its 10 years is $138M yet the cost of maintenance for the same 10 years is $1,080 billion, representing 688% more than its carrying value. Who endorsed this crazy agreement.
$23.7m , 17hecters of land site, 1year ONLY #Rwanda. Comparatively 9$ per month to fuel power badge $108.00m fuel to power badge #Ghana
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Are we not totally INSANE at the highest level. Actually we be thinking like monkeys not human beings.
THIS FACILITY IS SOME METERS AWAY FROM THE SEA;YET IT HASN’T BEEN MAINTAINED. HOW MUCH MORE A POWER BADGE WHICH IS SITTING ON THE SEA?I THINK WE ARE JOKING AS A COUNTRY. DOES THAT MEAN GHANA IS NOW FULL OF COWARDS? LET’S FIGHT TO MOVE THIS NATION FORWARD!
The arrival of 225Megawats of power may look like a relief to end “dumsor”.Meanwhile,no one took time to realise whether the badge has passed through the value of money and the investment is really worth it.Gov’t of Ghana,paid $138millon for the lease of the badge for 10years…..Fueling and maintenace will cost Gh gov’t $9Billion every month,this means the power barge will cost Ghana $121.80 million every year…..spliting it for a month,ghana will be spending $10.15million every month!………the end of 10years total cost $1,218 billion!
Basic prudence accountin will tell u that whenever the cost of maintaing an asset far exceeds its carrying value,then its better to dispose the asset
The total carrying value of the asset to 10years is $138Million yet the cost of maintenance of this same asset for 10years is $1,080 Billion!…representing 688% more than carrying value!
My question is,who endorsed this crazy agreement!… Cant we get a solar plant?? this is really awfull, the future is at stake here..uhmm
PURC TARIFF INCREMENT MUST BE REJECTED BY ALL GHANAIANS
Do you now see the consequences of bad investment by the N.D.C government? Analysis published on the Facebook wall earlier explained why the government 10 years power badge a bad investment. We all as Ghanaians must say NO to the tariff increment by any legal means possible. Civil Society Groups, Pastors, IMANI GHANA, IEA among others, I challenge you to rise and defend the ordinary poor Ghanaian on the street now. Let’s ask ourselves one simple question, Have the services of Electricity Company of Ghana and Ghana Water Company changed after several increments throughout the year? The answer is NO, so why then must we pay more in the hope for a better service delivery which we will never get. The increment PURC is forcing down the throat of Ghanaians is all because of pressure from the government to finance the useless power badge. A power badge which cannot end our problem, fueling and maintenance of a power badge which will cost us $9million each month which is equal to GHS 34,245,000(GHS 35 million approximately ). Where do you think the government can get this gargantuan sum of money to finance this useless investment? This is the reason why the government want my already suffering poor market women to pay this abnormal increment. Government must learn to be sensitive to the plight of Ghanaians. Is this the way you change our lives? Is this the way we transform a country? Obviously not. I challenge National Union of Ghana students (NUGS) to join this fight. This increment is going to have a great effect on the lives of already suffering Ghanaian students as their parents are going to be compelled by forces beyond their control to adjust to this insensitive and cruel decision by the government.
Criticism without offering alternatives is often said to be stupidity at its highest degree. In the light of this, I wish to offer the following cogent suggestions. You will agree with me that in the midst of power crisis, you should expect most government agencies to reduce if not at all stop the use of air conditioners and resort to the normal standing fans and sealing fans which consumes less power but you visit government agencies to meet our officials in full air conditioners. One will expect that the first step toward reducing pressure on the national grid is by removing all government agencies from the national grid and offering them an alternative solar power. Common office can do without fridges, without microwaves, without air conditioners among other when using solar power. All you need is to power computers and use sealing fans.
#ILOVEGHANA#
# ISTANDFORTHEBEST#