Government and CENIT have agreed to an amended power purchase agreement under which the company has decided to move to a tolling structure and to transfer all resulting cost savings to the Electricity Company of Ghana (ECG).
CENIT, a Ghanaian independent power producer (IPP) that began commercial operations in 2012, also agreed to reduce its capital recovery tariff by 38.9 per cent.
The deal is expected to save the country more than $200 million dollars.
A statement issued by the Public Relations Unit of the Ministry of Finance said the commitment made by CEL was crucial in reinforcing the Government’s efforts to build a balanced and sustainable energy sector.
“The terms agreed to between Government and CEL will produce a more favourable situation for both parties and ultimately reduce the cost of electricity for the people of Ghana,” the statement said.
Currently, Ghana pays over US$500M a year for unused electricity due to power purchase agreements entered into under the previous administration in an attempt to end power outages.
The tariffs agreed were not competitive and have contributed significantly to the build-up of debt in the sector and oversupply of energy.
The statement said the government, in collaboration with the World Bank, created the Energy Sector Recovery Programme (ESRP), identifying the policies and actions needed for financial recovery in the energy sector over a five-year horizon (2019-2023).
As part of the reforms, the Government is taking steps to institute competitive bidding for future additional capacity, to ensure that future tariffs were fair and in line with expected pricing benchmarks.
The statement said Government had demonstrated its commitment to the ESRP by actively developing whole-of-sector initiatives and reforms, including; implementing the Cash Waterfall Mechanism (CWM) in April 2020, which allows Electricity Company of Ghana’s revenues to be distributed in a more transparent manner, and managing payments of arrears despite the challenging fiscal situation, which has been exacerbated by the COVID-19 pandemic.
The ESRP Steering Committee, established by the Energy Sector Recovery Task Force under the helm of the Senior Minister, is working closely with IPPs and gas suppliers under the ESRP Consultation Process to negotiate more favourable agreements for both parties and to achieve a balanced energy sector capable of delivering fair, long-term solutions.
Government has undertaken discussions in good faith and urges all IPPs to continue working closely with the ESRP Steering Committee to conclude negotiations as soon as possible.
The statement quoted the Minister for Finance, Ken Ofori-Atta as saying, “We welcome CENIT Energy’s commitment to Ghana and its role in regenerating the energy sector. CENIT is an important partner and a significant energy producer in Ghana.
We encourage other IPPs to join CENIT in collaborating to help reduce onerous debts and to provide a stable energy supply for the people of Ghana.”
We are committed to building a competitive and dynamic energy sector where private investments can thrive, and the interests of the Ghanaian people and businesses continue to flourish.”