Former President John Dramani Mahama has been blamed by the World Bank for Ghana’s current ailing economy due to Power Purchase Agreements (PPAs).
According to the World Bank, some of the country’s PPAs with Independent Power Producers (IPPs) signed under the Mahama administration are too expensive and wrong.
The World Bank has expressed concerns that they need to be reviewed urgently.
This comes after the Mahama-led National Democratic Congress (NDC) administration signed Take-or-Pay contracts that have compelled Ghana to pay GH¢12 billion for power that was not consumed. The Finance Minister, Ken Ofori-Atta managed to be resourceful from 2017 to 2021 to meet Ghana’s financial commitments to IPPs, ensuring continued power supply without the ‘dumsor’ experienced in the Mahama administration.
However, the PPA appears to be now biting the country’s economy harder.
The World Bank has therefore called for the review of some of Ghana’s PPAs to revive its economy under the International Monetary Fund (IMF) bailout.
The Country Director of the World Bank responsible for Ghana, Sierra Leone and Liberia, Pierre Frank Laporte, indicated that many of the country’s PPAs for power generation were signed at the wrong rate and prices, saying that Ghana is paying more for power than it should be, even for electricity not used, due to the PPA’s terms.
“In the aspect of Ghana, those contracts you signed with the PPA are too expensive. The kind of PPA you signed it means, Ghana is paying for electricity not in use through a doubling of capacity,” he told Accra-based Joy Fm on Thursday, June 2, 2023, which was monitored by DGN Online.
He added “The fact is, in the last few years, Ghana entered into some PPAs that were wrong. These types, in our view, were at the wrong rate and at the wrong prices and today you’re paying duly for it. And today the country is being billed for many of these wrong PPAs.”
He called on the government to urgently restructure some of these contracts.
“I know that the government has started some talks with the IPPs to renegotiate some of these PPAs,” he said.
The World Bank also criticised the Electricity Company of Ghana (ECG) for not collecting enough revenue and supported the reforms it is implementing in the power distribution sector.
The energy sector debt still poses a threat to Ghana’s economy, with the renegotiation of contracts seen as a solution.
Ghana has an installed power capacity of about 5,000 megawatts and a dependable capacity of about 4,700MW with an all-time high peak demand of 2,700MW.
The Energy Sector Reform Programme (ESRP) has been crafted to address the issues in the energy sector and convert purchase agreements from Take-or-Pay to Take-and-Pay, which would end the payment of excess capacity. The government has started talks with IPPs to renegotiate some of these PPAs.
