Mr Ken Ofori-Atta, the Minister of Finance, on Wednesday announced government’s intention to rationalise commercial agreements in the Energy Sector as well as reassess all take-or-pay contracts.
He said government would also impose a moratorium on the signing of new agreements in the sector with a view to establishing a managed transition to overcome the unsustainable excess supply situation that continued to pose a grave risk to the country’s economic progress.
Presenting the 2020 Budget and Economic Policy to Parliament, Mr Ofori-Atta said the ministries of Finance and Energy, on August 26, 2019, hosted Ghana’s Independent Power Producers (IPPs) and Gas Suppliers (GSs) at a stakeholder forum, during which government reiterated the need for those interventions and outlined the approach to implementing them.
Mr Ofori-Atta said government invited the IPPs and GSs to partner, collaborate and managed transition from the onerous Take-or-Pay paradigm towards a balanced contractual relationship capable of delivering fair, enduring energy solutions that reflected reality and offered long-term sustainability for Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs) in the country.
He said on October 28, this year, government inaugurated a Steering Committee under the Energy Sector Recovery Task Force, to take responsibility for the collaborative, bilateral consultation process between government and each IPP and GS to manage transition towards a more balanced, long-term relationships and sustainable energy partnerships.
He said the collaboration had been welcomed by the investor community and would provide a forum for stakeholders to contribute to Ghana’s energy strategy, which was fundamental to the country’s industrialisation and sustainable growth.
Mr Ofori-Atta disclosed that government’s negotiating teams had also been constituted and were close to completing the first round of bilateral consultation meetings with several IPPs, as well as project sponsors.
“Significantly, government views these collaborative bilateral consultations as an essential exercise, which not only limits downside risks to investors over the medium to long term, but also demonstrates government’s full commitment to progressively restoring confidence in the energy sector as well as across other key sectors in the rapidly growing economy”.
He said to ensure the success of the bilateral consultation process, government, in line with the decision taken in the Mid-Year Review, had instructed sector Ministries, Departments and Agencies (MDAs) to suspend all ongoing negotiations on PPAs and GSAs, Liquefied Natural Gas Sale and Purchase Agreements, or any other long term Take–or-Pay contracts for power or gas until further notice.
To this end, government had placed a complete moratorium on the signing of new PPAs, GSAs, and Put-Call Option Agreements.
It has also instructed Electrical Company of Ghana, Ghana National Petroleum Commission, Ghana National Gas Company, and Volta River Authority to abstain from entering into any new contracts.