The World Bank has debunked claims suggesting that it imposed four Independent Power Producers (IPPs) on Ghana during the era of former President John Dramani Mahama.
The Briton Woods institution also said it did not make financing or guarantees to IPPs to cover Power Purchase Agreements (PPAs) with the Electricity Company of Ghana during the (Dumsor) energy crisis from 2014 to 2016.
Former Chief Executive Officer (CEO) of the Ghana National Petroleum Corporation (GNPC) and a leading member of the main opposition National Democratic Congress (NDC), Mr Alex Mould claimed the former administration signed costly PPAs with IPPs because of World Bank conditionalities.
Speaking in an interview last week, Mr Mould claimed that four IPPs constructed under the Mahama government were in fulfillment of a condition for the $750 million World Bank guarantee in respect of the ENI-led Sankofa-Gye Nyame gas project.
According to him, one of the conditions for the $750 million World Bank guarantee was that the Mahama government will either build a pipeline or do the convertibility so that the gas can go from the west to the east and there would be off-takers – IPPs that are ready to take the gas.
The former GNPC CEO alleged that the World Bank therefore supported the government of Ghana to support the four IPPs to be built mainly because the Bretton Woods institution needed guarantees for the off-takers of the ENI-Sankofa-Gye Nyame gas.
The World Bank, he alleged, “supported Ghana to give what we call a Government Support and Consent Agreement to these IPPs for them to be able to take to their financial institutions to say that, we have a guarantee from the Ghana government which is backed by the World Bank; and, as such, they were able to get the financial decision to build these plants.
“That is what we have to understand; that there was a reason for these plants to be built.
“It wasn’t like these guys came willy-nilly, they had a PPA, they went to their banks, they got financial [support] and now we are saddled with that. No”.
Capacity charges
In the 2021 Expenditure in Advance of Appropriation for January to March 2021 government paid GH¢12 billion in excess energy capacity charges between 2017 and 2020.
In an attempt to justify the take-or-pay PPAs that have imposed huge debts on Ghana, Mr Mould tried to blame the World Bank for four of the IPPs.
World Bank
In a swift rebuttal, the World Bank in a statement stated categorically that it has not provided any financing or guarantees to IPPs to cover PPAs with the Government of Ghana.
It explained that to secure Ghana’s energy future, the World Bank rather supported the Energy Sector Recovery Plan (ESRP) of the Government of Ghana for affordable and reliable electricity supply and enhance the accountability in the energy sector.
The World Bank explained that the ESRP mandated the rationalization of gas and power purchase costs in line with the demand and approved the procurement of energy supply and service contracts in a competitive manner.
“The implementation of this policy will be essential to ensure that new power generation capacity is procured competitively and transparently based on the most cost-effective basis.
“This will prevent a recurrence of over-supply of generation capacity in future,” the World Bank stated.
The statement added that the World Bank Group provided financing and a guarantee to the Sankofa Gas Project, which since 2019 had increased the availability of natural gas for power generation by leveraging private capital investment and promoting a cleaner energy mix.
“The World Bank is committed to support Ghana in its efforts to sustain economic growth, accelerate poverty reduction, and enhance shared prosperity in a sustainable manner,” it added.
The current government reviewed 26 out of 30 PPAs the Electricity Company of Ghana (ECG) had initiated.
The other four were not reviewed because they were already operational.
The combined generation capacity of the 26 PPAs reviewed amounted to 7,838MW.
The review recommended that:
I. 8 PPAs with a combined capacity of 2070 were to proceed without modification;
II. 4 PPAs with a combined capacity of 1,810MW were to be deferred to 2018-2025;
III. 3 PPAs with a combined capacity of 1,150MW were to be deferred beyond 2025; and
IIII. 11 PPAs with a combined capacity of 2,808MW were to be terminated.
The review noted that the projected capacity additions from the PPAs were far in excess of the required additions inclusive of a 20% system reserve margin from 2018 to 2030 and would result in the payment of capacity charges for the dispatched plants.
The estimated cost for the termination is $402.39 million, compared to an average annual capacity cost of $586 million each year or a cumulative cost of $7.217 billion from 2018 to 2030. This yields an estimated saving of $6.8 billion over the 13-year period
