Through the collaboration of the One Energy Consortium, the global partnership of Endeavor Energy, Eranove, General Electric and Sage Petroleum will modernise Ghana’s power production, and combat its estimated annual loss of up to 6% of GDP, due to insufficient wholesale power supply.
With innovative advancements in technology, diverse experience and long-term investment, Ghana 1000 will be a transformative project for the country’s economy, massively increasing the nation’s capacity by 1,300MW by 2019.
One Energy Brings Power to Ghana
The Ghana 1000 project is a turning point for power generation in West Africa. With deep private sector expertise allied to strong government support and the latest technology, this gas-to-power project will deliver electricity faster and cheaper to Ghanaians.
It is an all too familiar event across the continent: the lights go out, and a generator fires up to bring them back on again. Patients in hospitals are put at risk. Children finish homework by kerosene lamp. Businesses are hit, translating to lost wages and missed opportunities.
Ghana is not immune. The power crisis of the past three years has made life tough for everyone. Buying and running generators reduces the amount households can spend on other critical goods and services. The country loses an estimated 2-6% of GDP annually due to insufficient wholesale power supply.
Fixing Ghana’s energy crisis has become the number one priority for the government. “I do not intend to manage the situation as has been done in the past, I intend to fix it,” said President John Mahama during his February 2015 State of the Nation address. “I owe it to the Ghanaian people.”
The Ghana 1000 project is transformational in the sense that it brings fuel solutions to enable secure power. This solution displaces expensive and “dirty” fuel. It pulls together leading international and local companies to build what will be one of Africa’s largest single power park, aiming to deliver 1300MW of generation capacity once its final phase is complete.
Under its incorporated Ghanaian entity, One Energy, the consortium – US-based Endeavor Energy and General Electric, France-based Eranove, and Ghana-based Sage Petroleum – bring years of experience in the developing, constructing, financing and operating of power projects globally and in Africa.
Specifically, each of the consortium members bring different strengths to the project: Endeavor is an Africa-focused developer with a highly experienced management team, GE is a global technical leader with a strong local presence in Ghana, Eranove is a leading operator of power projects in West Africa and Sage Petroleum is a strong Ghanaian Petroleum Products trader and management company. The Ghana 1000 project has also selected world-class power generation technology and will partner with leading service and finance providers to build a state-of-the-art integrated gas-to-power project that will not only deliver reliable, low-cost power, but will run on clean natural gas produced from Ghana’s burgeoning natural gas industry. The consortium also has strong international financial backing.
“Endeavor is supported by Denham Capital, a leading energy and resources-focused global private equity firm with more than $7.9 billion of invested and committed capital that has made a number of power investments in Africa and other emerging economies, and by the U.S. Government’s Power Africa initiative. And we maintain very close relationships with various U.S. and international financial institutions,” says Endeavor CEO Sean Long. “We also serve as a strategic advisor to the World Bank’s Global Infrastructure Initiative. We are the lead investor for the Ghana 1000 project and co-lead the overall development, financing and construction of the project.” Strong financial backing is critical, as the consortium has structured the project to minimize direct costs to the government. “This allows the government to spend its resources where it’s needed most like schools and hospitals,” says Leslie Nelson, CEO, GE Ghana.
In addition, the project consortium partners are working to enhance Ghana’s domestic skills base and local capacity, creating links with local universities, and boosting employment. “This partnership is about job creation, skill and technology transfer as well as capacity development for Ghanaians,” says Emmanuel Egyei-Mensah, CEO of Sage Petroleum.
One key example of the Ghana 1000 project’s commitment to the local community is a current program aimed at helping youths in the Aboadze community in the Shama District of the Western Region of Ghana, where the Ghana 1000 project will be located. Although access to basic schools is good, youth unemployment remains high, as students drop out of school in search for work in a local economy based almost exclusively on small-scale fishery, forestry products and agriculture.
Even before construction of the power plant begins, the consortium has already initiated a series of youth career workshops to help those in the area understand the requirements needed to find their chosen careers and prepare them for jobs that can be found throughout the region. “The Ghana 1000 consortium is committed to working with youths, to help them attain high skill, higher wage jobs in the future,” says Long.
Insufficient power generation
Today, Ghana’s power situation represents a critical obstacle to the country’s continued strong economic growth.
Ghana currently has nominal generation capacity of about 2,400MW and dependable generation capacity of around 1,750MW. “Currently, Ghana has a power generation deficit in excess of 600MW as a result of lower than expected output from its hydroelectric installed base and the reduced output of many of its thermal power plants due to maintenance and fuel issues,” explains Louis Josiah of Ghanaian partner Sage Petroleum.
The country has historically depended on hydro-power to run its power stations. But increasingly, lower reservoirs at the Akosombo dam have increased dependency on light crude oil (LCO) to fuel Ghana’s thermal power generators. While oil remains dependable and the recent drop in oil prices has had a positive impact on the cost of electricity generation, oil remains one of the most expensive fuels to generate electricity over the long run – both from a financial and emissions perspective.
As a result, the Ghana 1000 project is designed to run off of cleaner, cost-effective natural gas to generate electricity and not depend on imported light crude oil. In early 2015, however, the short term urgency of the power crisis became apparent with increased load shedding, which has affected all households and sectors of the economy.
Sage, Endeavor and GE formed the consortium to develop an additional 340MW of power to be located in the Tema Oil Refinery complex in Tema, east of Accra. Using GE’s aero-derivative technology – which, is designed for fast track construction and installation - and fueled initially by liquefied petroleum gas (LPG), the Bridge Power consortium will deploy the first stage of the project, totaling approximately 140MW, within a few months of approval by the Ghanaian parliament.
Additionally, although the Bridge Power project is a fast track project, it will generate power at a cost effective tariff. Through the combination of Bridge Power and Ghana 1000, the projects’ sponsors aim to install and deliver more than 1,500MW of power for Ghana over the next several years.
Integrated gas to power projects
The Bridge Power and Ghana 1000 projects are integrated gas-to-power projects which means that they incorporate unique fuel solutions – LPG in the case of Bridge Power and the utilization of domestically produced natural gas which can be supplemented in the future with the import of liquified natural gas (LNG) in the case of Ghana 1000. Utilizing natural gas, especially domestically produced gas, will yield other significant benefits for the country including additional job creation, kick starting a burgeoning new natural gas industry in Ghana, and reducing the need to pay for imported LNG.
Mindful of the need for flexible and reliable electricity, both Bridge Power and Ghana 1000 are capable of running off of other fuels: “It is a tri-fuel gas turbine capable of burning natural gas, heavy fuel oil, and LCO. The flexibility and reliability of GE’s 9E technology is evident in the fact that during recent gas shortages in Ghana, these power units were the only ones that remained operational,” says Leslie Nelson.
Given the pressures that Ghana’s currency has faced in recent times, the reduction in spending dollars on importing LCO will help strengthen the cedi.
Indeed, the impact the Ghana 1000 project will have on the economy is significant: new employment, increased revenue to government, and a stimulant to GDP growth. According to an Economic Impact Assessment conducted by IHS in 2014, the Ghana 1000 project could result in the creation of an additional 253,000 jobs, 450 million cedi ($115m) in additional government revenue, a 2 billion cedi ($520m) increase in annual labour wages, and a 4 billion cedi ($1.05bn) rise added to GDP.
“As we provide consistent power for Ghanaian residents and businesses, the quality of life will improve for families and having access to reliable power will have a significant positive economic impact on Ghanaian industries,” says Long. “Reliable low-cost power will help bring down production costs and increase labour productivity, which should lead to capital investments in machinery and other technological advances for businesses and the increased economic activity will generate increased tax revenue for the government. Additionally, by increasing power generation capacity alongside critical business reforms, Ghana will move closer to becoming a key industrial and manufacturing hub in West Africa.”
A flexible fuel solution
Ghana’s domestic gas market is just beginning to develop, so the project will play a critical role in this industry’s success. The project plans to utilize natural gas produced from the offshore Sankofa field. “By becoming a stable, long-term downstream user of Sankofa gas, the Ghana 1000 project will help to develop and bolster the local hydrocarbons industry, which will create more local jobs. Currently, the downstream gas market in Ghana is in its infancy so Ghana 1000 will play a vital role for the Sankofa project as a substantial anchor offtaker of gas,” explains Long.
In order to ensure the project gets sufficient natural gas supply for its full 1,300MW, the consortium is also developing the capability for Ghana 1000 to import LNG. “A key principle for the consortium in this regard was to structure a flexible fuel solution to ensure that it will not only support Ghana’s burgeoning natural gas industry but also not unnecessarily burden Ghana and to allow for maximum fuel flexibility and security,” emphasizes Michele van der Westhuizen, Project Lead for GE. “The LNG supply can be tailored to meet Ghana’s changing needs - either decreased as indigenous gas comes on line, or increased as Ghana’s need for power increases beyond that which can be supported by the current fuel mix,” indicates van der Westhuizen.
Benefits to West Africa
The Ghana 1000 project will also have positive spill-over effects to the rest of the region. Neighbouring West African countries also suffer similar electricity shortages, with many reliant on the importation of expensive LCO or diesel to fuel power generation.
By bringing more power to Ghana, the country will be able to export power to neighbouring countries such as Togo, Benin, Burkina Faso. As a result, Ghana can serve as an export hub for power that will help unlock the economies for millions beyond Ghana’s borders, a concrete contribution to the regional economic integration agenda of ECOWAS and other regional bodies.
Importance of local content
Local partners are critical and the consortium intends to utilize a significant amount of local content to complete the projects. “For us, localization is not an option – it’s a business imperative. Ghana 1000 was birthed by a team in Ghana," says Nelson. “Local partnerships and capacity building are not only critical for these projects’ success but the overall business environment and quality of human capital. In addition, we are committed to engaging with local companies to subcontract with the prime EPC contractor and to provide other critical on and offshore services during the project’s development, construction and operation.”
Ghana’s Sage Petroleum is certainly not just here for the ride. One contribution will be to ensure that the plants, once commissioned, are optimized for minimal downtime. “To make this happen, it is important that the fuel supply chains for the projects are robust and adjusted for the specific local circumstances of Ghana’s market,” explains Sage Petroleum's Emmanuel Egyei-Mensah. “We have extensive experience in fuel trading and management that will benefit the projects, right from development through to electricity production, in a manner that very few players can. This will ensure maximum plant uptime.”
For GE, though its involvement in power projects in Africa has traditionally been limited to equipment supply and long term maintenance agreements, “now the company is more active in facilitating earlier stage development of power projects by dedicating resources and risk capital,” explains Ron Mincy, Managing Director of GE’s project finance team in Kenya. “In addition, GE provides advocacy support, technical assistance, and engages the capital markets to meet long term financing and credit enhancement needs. Ghana 1000 is a great example of GE’s ‘total solutions’ approach."
GE’s support for Ghanaian development in the power industry isn’t limited to the Ghana 1000 and Bridge Power projects. GE is also supporting the engineering programs at Ashesi University, the Kwame Nkrumah University of Science and Technology and the Applied Sciences program at the University of Ghana.
Money freed up for government
These projects have also been helped by the continent-wide shifts to an Independent Power Plant (IPP) model, where governments help arrange foreign direct investment to build these plants and provide power purchasing guarantees and other regulatory oversight, but does not operate or build the plants themselves. The shift towards the IPP model in Africa has made it possible for governments in the region to tap into private capital markets both domestically and abroad to fund investments in the power sector,” says Steve Jernigan, Managing Director with Endeavor Energy. “This has freed up government resources for other areas of the economy where private capital may be more difficult to attract.”
So with the transformative Ghana 1000 project, the government and people of Ghana win twice: first, by the 1300MW of power delivered fast and more cheaply than before; second, capital, no longer diverted to power generation, can be spent on the education, housing and healthcare that citizens need.
Lastly, but perhaps most important, by foregrounding gas in their energy mix, Ghana will take a step towards eliminating carbon emissions. A far greener energy than oil, Ghana can bet on gas as the ideal stepping stone towards a carbon neutral future, as solar and hydropower projects eventually step up to take the weight.
Creating the enabling environment
“Without government support, we cannot even proceed on this project. The fact that we are making progress shows that government is solidly behind us,” says Nelson of GE. “I would say the Ghanaian government has so far been very responsive and supportive” he continued. This initiative is 100 per cent private-sector driven.
Government’s role in this project has essentially been in the form of regulatory approvals and facilitation, which is key for a project like this. Nelson stresses the support of the Ministry of Power, Ministry of Finance and the Electricity Company of Ghana (ECG) have been invaluable.
“Engaging in such a transformational project would not be possible without the guidance and support from both the Minister of Power and Minister of Finance. Without the steadfast leadership of both sector leaders, international investors would not embark on such an ambitious project commitment,” Nelson concludes.
Meet the partners
The Ghana 1000 project features an impressive roster of international and local companies, each with deep expertise in their field.
Endeavor Energy is a privately held IPP company, headquartered in Houston, Texas, focused on developing and investing in power generation facilities in Africa. With the financial backing of Denham Capital, an energy and resources-focused global private equity firm with $7.9 billion of invested and committed capital, the company possesses significant financial and operational capabilities to generate and participate in multiple power development projects in Africa. Endeavor Energy is also a sponsor of the U.S. government’s Power Africa initiative.
GE imagines things others don’t, builds things others can’t and delivers outcomes that make the world work better. GE brings together the physical and digital worlds in ways no other company can. In its labs and factories and on the ground with customers, GE is inventing the next industrial era to move, power, build and cure the world.
Sage is the largest licensed Oil Trading Company in Ghana. The company’s activities are carried out by experienced and highly trained professionals and supported by our key partnerships with refineries, international trading companies and local partners in various countries. Recipients of multiple consecutive International Quality Awards, our activities are managed and supported by an advanced, real time Risk Management platform that gives real time insight into all aspects of the company’s business including stocks, logistics, finance, profitability and risk exposures.
The Eranove group is a West African leader in public service management and electricity and drinking water production. The group provides operational assistance to its subsidiaries: technical supervision, procedures, procurement, cash flow, management control, legal & tax, etc.