Finance Minister Ken Ofori-Atta announced this as part of engagements with stakeholders including diplomats on recent development in Ghana’s Energy Sector at a meeting in Accra on Monday.
He said government was hopeful that the country’s Energy Sector would witness improved efficiency when ongoing reviews in the sector are completed.
Speaking on Government’s decision to terminate the Power Distribution Services Limited (PDS) concession, Ofori-Atta said the action was at variance with the Millennium Challenge Corporation’s (MCC) own position on the matter.
He explained that “the United States relied on the report of FTI Consulting, an independent auditing firm, which suggested that the concession contract was valid as of March 1, 2019.
“This contrast to the report submitted by the Government’s investigation team which insisted that the payment guarantee which was in issue, was invalid.
“Since July, when Government became aware of the invalidity of the payment guarantee, it first took steps to confirm the information regarding the legitimacy of the guarantee.
“Indeed, the resolution which Government has arrived at took some time because once Government had become fully apprised of the situation, it was keen to engage with the MCC, including a meeting between the President of the Republic and the Chief Executive Officer (CEO) of the MCC on the sidelines of the UN General Assembly, to find a mutually acceptable common solution”.
Ofori-Atta however stated that government remains committed to the essential principles underlying the relationship between the MCC and the Government of Ghana, as well as the overall bilateral relationship between Ghana and the United States.
He said government was fully committed to private sector participation in ECG and focused on moving forward with urgency to find a suitable alternative to PDS.
” We do recognize the need to improve significantly the management of ECG, by bringing in private sector expertise and attracting private capital. This will reduce losses and improve service quality, with a view to creating a financially viable power distribution sector that is sufficiently equipped to meet the current and future needs of Ghanaian households and businesses,” he stated.
A review of take or pay clauses in power purchase agreements is currently underway following the set-up of a steering committee under the Energy Sector Recovery Task Force tasked to advised on Ghana’s energy sector and its long term sustainable development.
Ofori-Atta told the stakeholders in Accra that government has held discussions with representatives of the Independent Power Producers (IPPs) and Gas Suppliers (GSs) for a collaboration to find lasting solutions that would result in a fair outcome for all stakeholders.
“The purpose of the Steering Committee is to take responsibility for the consultation process with the IPPs and GSs over the coming months, with the objective of ensuring a well-managed transition towards a more balanced relationship with each IPP and GS towards sustainable energy partnerships,” he added.
Ofori-Atta stated that government was working hard to establish a long-term sustainable strategy for a competitive and dynamic energy sector where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.
“We have made significant progress, but there is still a lot to be done. We need to act urgently, but in doing so, also chart a course which is respectful and fair to our private partners,” the Minister said.
During the presentation of the mid-year budget review, Mr Ofori-Atta warned that macroeconomic stability and the hard-earned economic gains made are at serious risk of being derailed if drastic steps are not taken to arrest reprehensible legacy issues in the energy sector.
The situation in the energy sector is shocking the economy and creating a state of emergency, he added.
To address the situation, he announced far-reaching measures to save the country from throwing away hundreds of millions of dollars.
GH¢2.5bn capacity charges annually
Ghana is paying GH¢2.5 billion annually, the equivalent of over half a billion US dollars, for power generation capacity that is not needed.
60% of 2300MW take-or-pay power not consumed
The amount represents 60% of 2,300 megawatts (MW) of installed capacity of electricity contracted on a take-or-pay basis.
Only 40% of take-or-pay power is consumed
This is because only 40% of the contracted take-or-pay capacity is actually consumed.
$2.7 billion arrears in energy sector
In addition, the country is struggling with a high level of net sector arrears of $2.7 billion (GH¢14.04 billion) as of January 2019.
GH¢5bn out of GH¢6.3bn to pay energy debts
Of the GH¢6.3 billion (GH¢6,370,355,925.82) supplementary estimates government is seeking approval for, about GH¢5 billion will go into the payment of energy sector debts.
Take-or-pay contracts to be converted to take-and-pay
To address the situation, Mr Ofori-Atta said government has decided to convert all take-or-pay contracts to take-and-pay contracts.
August 1 starts new regime
Accordingly, he said, starting August 1, 2019, government is to pay for energy and gas that we actually consume.
“All take-or-pay contracts will be renegotiated to convert to take-and-pay for both PPAs and Gas Supply Agreements (GSAs). Government will seek parliamentary ratification where appropriate,” he added.
4593MW dependable capacity
According to the Energy Commission, the country currently has installed power generation capacity of 5083MW, dependable capacity of 4593MW and peak demand of around 2700MW. Therefore, installed capacity is almost double our peak demand.
750 Mmscf contracted
Regarding gas, Mr Ofori-Atta said Ghana has contracted for around 750 million standard cubic feet of gas (mmscf) per day by 2023.
Current gas demand is 250 mmscf
He explained that current demand is around 250 mmscf per day, and this is projected to rise to between 450 and 550 mmscf per day by 2023.
200 – 300 Mmscf over supply projected by 2023
All things being equal, the Minister said there is projected oversupply of 200 to 300 mmscf per day by 2023.
640 Mmscf on take-or-pay basis
Mr Ofori-Atta explained that about 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning Ghana has to pay whether the gas is consumed or not.
$550m and $850m annual excess gas capacity charges from 2020
He stated that from 2020, the country would be facing annual excess gas capacity charges of between $550 and $850 million every year.
$51m paid to ENI a month
He added that, currently, for Sankofa Offshore Cape Three Points gas alone, Ghana pays over $51 million a month under a take-or-pay contract for 154 mmscf per day even though Ghana only actually takes 60 mmscf per day on average.
$520m debt in 2018
The total costs in the energy sector that government had to cover in 2018 amounted to $520 million (GH¢2.7 billion).
$604m paid by govt by June 2019
According to him, by end-June this year, government had made total payments of $604 million (GH¢3.14 billion).
$1 billion projected payment in 2019
The projected government payments in 2019 will be at least US$1 billion (GH¢5.2 billion).
(Selorm) | 
(Nana Kwesi)