We wish to commend the Minister of Power for providing clarifications on the AMERI\u00a0power deal in a press statement following a publication by a Norwegian Newspaper,\u00a0which also quoted ACEP\u2019s views on the deal. However, the statement provides further\u00a0questions that need urgent answers.<\/p>\n
Under normal circumstances, we would not have responded to the statement because it\u00a0was not directed at us.<\/p>\n
However, given that we were the first to raise issues relating to the\u00a0deal in March 2015; our interest is further strengthened by our quest to ensure an\u00a0informed public discourse on it.<\/p>\n
Our response to the statement is therefore articulated as\u00a0follows.<\/p>\n
Ministry of Power:<\/strong> The Ministry wishes to state that the agreement with AMERI is a\u00a0Build, Own, Operate and Transfer (BOOT) agreement and not an outright purchase of\u00a0generating plants.<\/p>\n Response:<\/strong> The monthly fees to be paid by VRA for the power produced in the BOOT\u00a0arrangement inherently includes the leasing or payment charges for the turbines over the\u00a0five-year period. Indeed since it is the Government that is supplying the fuel through\u00a0VRA, it stands to reason that all the payments to be made to AMERI consists of the\u00a0leasing charges as well as O&M costs. So while there is no doubt that it is not an outright\u00a0purchase (which would have been the best option for Ghana), the cumulative payments to\u00a0be made over the BOOT period of 5 years constitute the cost of procuring the turbines.<\/p>\n What the BOOT arrangement has only done is to spread the payments over a five-year\u00a0period. The key issue is whether the spreading of payments for a US$220 million project\u00a0over 5 years end up as US$510 million excluding O&M costs, given that the benchmark\u00a0cost of capital (Libor) is less than 1%? Is this value for money?<\/p>\n Ministry of Power:<\/strong> The Government of Ghana has not made ANY PAYMENTS to\u00a0AMERI and will not be making any payments for the cost of the equipment.<\/p>\n Response:<\/strong> This is erroneous. We know that Government has not made any payment to\u00a0AMERI. But when VRA makes the monthly payments prescribed by the contract, it will\u00a0constitute payment for the turbines and the use to which it is being put. Indeed for the\u00a0entire 5 years, these payments are to be made to AMERI. AMERI will be paid\u00a0US$850,000 per turbine per month. This will amount to US$8.5 million for the ten\u00a0turbines, with cumulative annual payments of US$102 million. In addition, an amount of\u00a0US$16.6 million will be paid as variable cost. This brings the total payment due to\u00a0AMERI and its partners to almost US$120 million.<\/p>\n Ministry of Power:<\/strong> Per the agreement with AMERI, the Government of Ghana through\u00a0the Volta River Authority (VRA) will only make payments to AMERI for power\u00a0produced and supplied to the VRA just like any other Independent Power Producer\u00a0(IPP).<\/p>\n Response:<\/strong> No. This is not a classical IPP arrangement. VRA is paying for the\u00a0equipment as well and will own it after 5 years. Typical IPP arrangements will not be for\u00a05 years when the equipment can have an operating life of 20 years. As stated earlier, the\u00a0Government\/VRA is supplying fuel so all payments to AMERI will be towards the cost\u00a0of the turbines plus O&M which is minor compared to the leasing (or Fixed cost)\u00a0charges.<\/p>\n Ministry of Power:<\/strong> Also, per the agreement, Government was required to provide a\u00a0standby Letter of Credit (LC) for an amount of US$51 million, which LC has been\u00a0raised.<\/p>\n Response:<\/strong> This standby LC is to ensure that the monthly payments for the cost of the\u00a0turbines are secured and in case of default, AMERI will fall on it to redeem any\u00a0outstanding payment defaults. Note that the LC is revolving so will need to be replaced\u00a0after being drawn down. Also since fuel supply is on the Government\/VRA, the LC is\u00a0practically a security for payments towards the equipment.<\/p>\n Ministry of Power:<\/strong> Ghana will however assume eventual ownership of the equipment\u00a0after five (5) years of production and sale of the power to the VRA.<\/p>\n Response:<\/strong> This confirms our point that Ghana is paying for the equipment because it is\u00a0not possible to take ownership without paying for them assuming as the Ministry said we\u00a0are only paying for the power produced from the turbines. In deed, AMERI is not a\u00a0charity to \u201cdonate\u201d 250 MW to Ghana for \u201cfree\u201d.<\/p>\n Ministry of Power<\/strong>: It must also be explained that the quoted price of $220 million in the\u00a0Norwegian story for outright purchase of similar turbines is exclusive of all other costs\u00a0such as auxiliaries, balance of plant, civil works, sub-station, installation of equipment,\u00a0cost of financing, operation and maintenance etc.<\/p>\n Response:<\/strong> Ministry of power should confirm the other costs (auxiliaries, balance of\u00a0plant, financing costs etc) in the case of the AMERI plant. It will certainly not escalate\u00a0the costs to US$510 million over five years.\u00a0Fortunately, METKA, which has a deal with AMERI to technically own, install and\u00a0operate the turbines for almost five years before handing them over to VRA, stated in a\u00a0statement that the entire project would cost US$350 million over the period, including the\u00a0cost of installation, civil works, etc. This sounds reasonable assuming that in addition to\u00a0the cost of the turbines, about US$130 million would be devoted to meet the other costs\u00a0(installation, civil works, etc). How did the payments due increase to US$510 million?\u00a0We are even worried that Parliament ratified the deal without the benefit of the right\u00a0information from the Ministry. Government informed Parliament that it would cost\u00a0Ghana US$411 million if it decided to buy the equipment outright. This departs\u00a0significantly from the Ministry\u2019s statement, which now put the cost of the equipment at\u00a0US$220 million (excluding all other costs such as auxiliaries, balance of plant, civil\u00a0works, sub-station, installation of equipment, cost of financing, operation and\u00a0maintenance), exactly the figure quoted by ACEP in March 2015. Whether Parliament\u00a0would have supported the BOOT arrangement if it knew the actual cost of the equipment\u00a0was US$220 million remains an open question.<\/p>\n Ministry of Power:<\/strong> Under the agreement with AMERI Energy, the cost of all these\u00a0auxiliary works is being borne by AMERI Energy.<\/p>\n Response:<\/strong> These costs will be recovered through the monthly payments to AMERI, so it\u00a0should not be made to seem that AMERI is bearing those costs for free. The question is,\u00a0if Government bought the turbines outright at US$220 million, how much would it have\u00a0spent to deliver them to Ghana and to install and operate them? Would that have cost\u00a0US$290 million?\u00a0We understand the reason given to Parliament for opting out of an outright purchase was\u00a0on grounds of lack of money. Assuming this is true, where will Government get the\u00a0money to pay an annual fee of almost US$120 million to AMERI (US$102 million plus\u00a0US$16.6 million)? Certainly, this would be raised through tariffs, and why Government\u00a0failed to justify adjustments in tariffs for the purpose of buying the turbines outright, yet\u00a0can push for tariff adjustments for non-supply of power over the years, remains poor\u00a0judgment in our view.<\/p>\n Ministry of Power:<\/strong> From the foregoing, it is false to claim that the Government of\u00a0Ghana signed a $510 million agreement for the plant, when it should have been $220 million.<\/p>\n Response:<\/strong> The cumulative payments for the plant is US$510 million. So there is no\u00a0falsehood. If bought outright, it would have been of the order US$220 million subject to\u00a0any additional costs that the Ministry of Power will provide on the auxiliaries, etc.<\/p>\n Ministry of Power:<\/strong> On claims that the manufacturers of the plant, GE, could have been\u00a0contacted to negotiate a direct purchase, the Ministry wishes to state that an earlier offer\u00a0from GE Consortium to the VRA for similar equipment on rental basis proved to be far\u00a0more expensive and was therefore rejected by the VRA.<\/p>\n Response:<\/strong> The Ministry of Power should furnish the public with the offer made to VRA\u00a0by GE for transparency sake.\u00a0We believe that these responses will contribute to public debate on the AMERI deal. As\u00a0we have always said; during periods of crises, people in authority resort to crises\u00a0procurements; and we believe the AMERI deal is no exception. Whilst Ghanaians want\u00a0more power produced for industrial and domestic use, it is important that we do not\u00a0compromise value for money and turn round to ask them to pay more for badly\u00a0negotiated power deals. We encourage the Ministry to in future subject such deals to\u00a0public debate to ensure that his decisions reflect the genuine concerns and interests of our\u00a0people.<\/p>\n Signed<\/p>\n Dr. Mohammed Amin Adam<\/p>\n Executive Director<\/p>\n","protected":false},"excerpt":{"rendered":" We wish to commend the Minister of Power for providing clarifications on the AMERI\u00a0power deal in a press statement following a publication by a Norwegian Newspaper,\u00a0which also quoted ACEP\u2019s views on the deal. However, the statement provides further\u00a0questions that need urgent answers. Under normal circumstances, we would not have responded to the statement because it\u00a0was […]<\/p>\n","protected":false},"author":24,"featured_media":62873,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[38,17],"yoast_head":"\n