The World Bank has lamented the state of affairs in Ghana?s power and petroleum sectors, warning that the sectors? inefficiencies could be a major drag on the economy.
In a new report being released today, the Bank recommended that Government should, within six months, set a ?professional eligibility criteria? for the selection of membership on the boards of energy sector state-owned enterprises. The role of board members, it said, is of particular importance in giving direction and supervising the performance of these entities.
The report?s findings also bring to the fore performance of staff in the entities operating in these sectors — which enjoy some of the best conditions of service in the country and are tasked to ensure that households and businesses are not deprived of energy for their day to day activities.
In a foreword to the report, titled ?Energising Economic Growth in Ghana: Making the Power and Petroleum Sectors Rise to the Challenge?, the bank?s Director for Ghana, Yusupha Crookes, said: ?Proactive leadership of the energy sector, with a focus on efficiency and timely delivery, is crucial to Ghana?s ambitions for economic growth.?
While acknowledging the impact of external factors like the lack of funding and fuel for power generation, the bank said ?poor technical and financial performance? by the ECG and the VRA has ?exacerbated? challenges in the power sector.
The report is particularly critical of the ECG, calling it ?a large, top-heavy, over-centralised organisation, with significant weaknesses in its management, corporate governance, and institutional culture that call for a profound change.?
A company the size and importance of ECG ?should be led by a first-rate Board of Directors and staffed with high-calibre managers,? the report said.
?ECG?s distribution losses are very high; they were 27% in the second quarter of 2012. ECG has to pay for lost energy it buys from VRA, but does not earn any revenue on it. Reducing these losses by 10% would save ECG US$85million per year. Other middle-income countries have successfully cut their distribution losses. The actions needed to reduce ECG?s losses have already been specified in technical studies; ECG must now implement them.?
The report however singled out the Ghana Grid Company (GRIDCo) for praise, calling it ?a well-run transmission company? which is ?the only power utility that is currently financially viable?.
It warned, however, that the failure of ECG and VALCO to pay GRIDCo on time ?will eventually jeopardise investment in transmission also?.
The ECG and VALCO owe GRIDCo about US$43million and US$8million respectively, while GRIDCo in turn owes the VRA US$8million, the report said.
?GRIDCo is now the only creditworthy utility in the country, with a profit of about US$24million for 2012 and projected US$33million profit in 2013.
?However, GRIDCo?s profits were higher in 2011, at US$56million. The reason for the lower profits is that the transmission service charge (TSC) has not been increased. If the TSC is not adjusted upward, GRIDCo?s profitability and capacity to invest for the long-term will decrease.?
With a little over 2,000 megawatts of installed generation capacity, and a lingering power crisis, Government has said it wants to achieve 5,000 megawatts by 2016.
Government is looking to Independent Power Producers (IPPs) to boost electricity generation, but the IPPs are hesitant due to the inability of ECG as an off-taker to pay on time.
The World Bank warns that without actions to attract additional generation, the country will be short of about 1,600 megawatts by 2022 since current investment plans from the Volta River Authority (VRA) and IPPs are projected to add only about 740 MW.
?Ghana needs to invest over US$4billion in the next 10 years to make up for the past investment deficit and upgrade its power sector infrastructure. Generation, transmission, and distribution all need substantial upgrading, and the necessary investments must take place in a synchronised manner,? the report said.
The World Bank is concerned that a sector to which it has provided so much support since the days of the Akosombo Dam is bedevilled with acute inefficiency and a general lack of stability of power supply in the country.
By Basiru ADAM
