The Government of Ghana is set to convert all ‘take-or-pay’ power contracts to ‘take-and-pay’ agreements as part of efforts to save the country money paid for unused power.
Finance Minister Ken Ofori Atta disclosed this while presenting the Mid-year Budget Review on the floor of Parliament on Monday, July 29.
With take-or-pay contracts, government pay for the capacity of power produced whether or not that capacity is consumed, but with the intended pay-and-take contract, government only gets to pay for the exact amount of power consumed and not what is produced.
Per the existing contract signed by the previous administration, he said government only consumes an average of 40% of the power generated but it’s forced to pay for the extra 60% though it is not consumed.
This development results in government doling out money for power that is not used; hence the decision to convert the existing contract to one that enables government pay for exactly what is used.
“In monetary terms, what this means is that we are paying over half a billion U.S. dollars or over GH¢2.5 billion annually for power generation capacity that we do not need,” Ken Ofori-Atta explained.
According to the Finance Minister, the conversion will take effect from August 1, 2019.
“Accordingly, starting August 1st 2019, Government is to pay for energy and gas that we actually consume. All take-or-pay contracts will be renegotiated to convert to take-and-pay for both PPAs and Gas Supply Agreements (GSAs). Government will seek Parliamentary ratification where appropriate.”
Mr. Ofori atta explained that the existing contract is one of the major causes of the energy sector woes since it leads to wasteful expenditure which could have been channeled into settling debts.
As part of efforts to deal with challenges confronting the energy sector, government will also terminate or indefinitely suspend Power Purchase Agreements (PPAs) and immediately place a complete moratorium on signing of new PPA’s and Put Call Option Agreements (PCOA’s).
By Josephine Aku Selorm Gator| 3news.com|Ghana