A member of the Mines and Energy Committee of Parliament, Mr. Joseph Cudjoe has backed calls for government to review the purchasing agreement between Early Power Limited and the Electricity Company of Ghana to provide a 400MW power plant at a cost of 953 million dollars.
This follows a report released by the African Center for Energy Policy (ACEP), pointing out a window of opportunity for a review of the cost before closure of the financial agreement.
Speaking to Citi Business News in an interview, Mr. Cudjoe maintained that the call is in agreement with the position of the minority to reduce the cost of the project to enhance value for money purpose.
“A lower price for every commodity including this power deal is a good thing for any buyer to push for. So from the view point of ACEP I think when they say, push for a lower price, they are talking in the sense of the public good”
He explained that there are many provisions in the agreement such as the risks cost of the project which can be brought down.
“When it comes to the 953 million, even though such price encompasses the interest or finance cost, so far as the cost is factored into the tariff so there is room for a renegotiation,” he said.
ACEP calls for review
The African Centre for Energy Policy (ACEP) urged government to review the power purchase agreement.
The $953.4 million project,which is currently before Parliament and expected to provide 400MW of power was originally designed as an emergency project but changed to a regular long-term IPP.
Some Members of Parliament have criticized government’s decision to sign onto the project, saying it will not ensure value for money.
But analyzing the agreement, ACEP has pointed out that government still has an opportunity to cut down the total cost before financial closure of the agreement.
“It is our understanding that the $953.4 million is the maximum negotiable cost of the project and the actual EPC and financing costs will be what is agreed at financial close,” ACEP said.
In a statement released by ACEP, it explained that it was unable to estimate the additional EPC cost of the revised project design since the document provided no breakdown of the original project cost of $647.7 million.
“However, estimating non-EPC cost at 30% (industry standards) of the original project cost, the EPC cost could have been put at $453 million. Therefore, with a revised EPC cost of $636.8 million, the additional EPC cost of the steam installation could be put in a range of $150 – $190 million, which is on the high side for an additional 50MW,” it explained.
Positive impact of the project
The report, however pointed out some positive impact for Ghana in both the short and long term.
It cited for example that the project aims to rapidly deploy an initial power of 144MW in six months from contract signing which is a good move.
“This will help meet near term shortages. Also it offers ECG certain flexibility – its first stage includes 5 gas turbine units of 28.5 MW each that can operate independently and which can be started, stopped and then restarted all within one hour,” it said.
It added that it will also allow ECG to efficiently dispatch to match actual power demand.