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Power Generation ACEP urges review of Early Power agreement

The project was originally designed as an emergency project but has since been changed to a regular long-term IPP, prompting fierce criticism from the Minority in Parliament.

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The Executive Director of the Africa Centre for Energy Policy, Dr. Mohammed Amin Adam. play

The Executive Director of the Africa Centre for Energy Policy, Dr. Mohammed Amin Adam.

The African Centre for Energy Policy has urged government to take a second look at its power agreement with Early power.

The project was originally designed as an emergency project but has since been changed to a regular long-term IPP, prompting fierce criticism from the Minority in Parliament.

The original project consisted of a 20 year Power Purchase Agreement (PPA) with the Electricity Company of Ghana (ECG) covering 344MW plant with 142.5MW being a simple cycle plant.

The project consist of a 400MW plant, involving a conversion of the 142.5MW simple cycle to combined cycle that will add 50MW steam turbine.

After 25 years of the operation of the facility, ownership will be transferred to the Government of Ghana or its nominated agency at a price of US$1.

Parliament is considering the request by Government to approve a Put-Call Option Agreement (PCOA), intended to provide a risk guarantee against default termination of the contract.

ACEP worries the advantages the project brings may be tempered by some concerns, which may affect the level of benefits Ghana could gain from the project.

It said the initial cost of the project at $647.7 million, which has now gone up to $953.4 million, as a result of the upgrading of the simple cycle plant to a combined cycle plant and the addition of LPG infrastructure, could have been put at $453 million.

"We expect that government and ECG will take advantage of this to review some of the costs. The financing cost of $178.7 million is particularly interesting but predictable considering the negotiated project debt-equity ratio of 70:30, the longer construction period as a result of moving from an emergency solution to a regular long-term IPP solution, and the provision that allows ECG to waive its requirement to post a letter of credit equal to 2 months of total revenue under the PPA," ACEP said.

The tariffs approved for the project consist of capacity charge and energy charge and any adjustments arising from increased or decreased costs

However, ACEP said the capacity charge of 4.579 cents/kwh could be lower, however marginal.

Touching on generational general, ACEP it is worrying to sign "another PPA, which does not bring energy on-stream."

"Therefore, whether this project is necessary or not should be matched against ECG’s capacity to off-take the produced power in the medium term if Akosombo and other existing plants increasingly become available as hydrologic conditions improve. At the moment, there are shortfalls in power production caused by low water levels, gas supply interruption from Nigeria, and more recent issues with gas supply from Jubilee. However, the project remains an important one if government and VRA are unable to fix the aged and failing power infrastructure and the water levels in the hydro power dams do no improve, ACEP noted.

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