Prez. Mahama okays new $953M 400MW power deal

The deal, currently before the Mines and Energy Committee of Parliament, appears to be another desperate attempt by the government to contain Ghana’s ever biting power crisis which, according to analysts, continues to suffocate business and household activities around the country.

The two-decade long power deal with Early Power Limited, will see the construction, fueling and maintenance of a 400 megawatts power plant at a total cost said to be exponentially higher than the average international cost of constructing such a plant in the industry.

Industry watchers say a 400 megawatt plant should on average cost around 600 million dollars.

But, the agreement with Early Power Limited is earmarked to cost nearly 1 billion dollars in all expenses.

Although the government of Ghana is not expected to pay for the cost of constructing, fueling and maintaining the pant, Ghanaian power consumers are expected to pay, ultimately, for the entire cost of the transaction through power bills they will pay to the Electricity Company of Ghana (ECG) over time.

Already, power consumers are quivering under the crippling weight of prevailing power tariffs forced on them since January, by the arrival in Ghana of the Karpower plant from Turkey and the Ameri Power Plant from the United Arab Emirates.

Again, a toxic mix of high levies and taxes that make up the Energy Sector Levies have kept the cost of power at exorbitant levels said to be killing businesses and sucking poor household consumers dry.

Already, Ghana’s installed capacity is more than 3,000 megawatts, but the nation is unable to produce 50 of the installed capacity to ensure the lights remain on.

The power deal is expected to be approved in the next few days.

More about the power deal

Documents exclusively available to Citi News show that, the agreement for the 400MW combined cycle gas turbine power plant to be situated in Tema, will be executed by Early Power Limited, a company incorporated in Ghana only in October 27, 2014.

Early Power Limited as the main sponsor, entered into the agreement with the Government of Ghana, together with the Electricity Company of Ghana (ECG), Sage Petroleum Limited, Endeavor and EPL Holdings Cooperatie, UA, General Energy Investments (GE) IBV, and Quantum Gas Terminals.

The project involves the development, ownership, operation and management of the 400MW Combined Cycle Plant to be fueled by either Liquefied Petroleum Gas (LPG) or Natural Gas (NG) for a 25-year period by Early Power Limited in Tema, strategically close to the Tema Oil Refinery (TOR).

Beyond the 25-year period, the power plant transfers to a nominated entity by the Government of Ghana at a purchase price of US$1.00.

To expedite delivery of power to the grid, the project will be developed in two stages. Stage one has an installed capacity of 194MW of which 142.5MW, shall be installed in eight months after contract signing, and the remaining 51.5MW, commissioned 26 months after the signing. As a result, the total capacity of 400MW, shall be available within 26 months after contract signing.

Project Cost

During the negotiations, modifications were made to the project to include an upgrade of the phase 1 of the simple cycle plant to include a 50MW steam component for combined cycle operation.

The upgrade has resulted in an increase in the installed capacity from 344MW to 400MW.

The breakdown is as follows:

Total Project Costs (USD Million)

Total Power Infrastructure Costs (EPC) – 636.8

Construction Insurance Costs – 3.7

Financing Costs – 178.7

Development Costs – 39.8

Operation & Maintenance Costs – 23.5

Construction Management Costs – 13.5

Working Capital – 10.5

Other Costs (Including Miscellaneous & contingency – 46.9

Total Project Costs – 953.4

Project Financing

The project according to the document available to Citi News, shall first be finance with only equity from GE, Endeavor and Sage Petroleum, and later refinanced using the capital structure 70:30, being 70% debt and 30% equity from the open market.

As a requirement, the project refinancing shall be approved by the buyer and the Government of Ghana.

President John Mahama on July 15 2016, granted Executive approval for the implementation of the 400MW Power Plant to be constructed by Early Power Limited.