ACEP Wants Karpower Deal Investigated

Dr Mohammed Amin Adam, Executive Director of ACEP

The Africa Centre for Energy Policy (ACEP) has called for an investigation into the power purchase agreement between Karpower and Government because the deal stinks more than the controversial $510 million AMERI Group agreement.

In a statement issued recently in Accra, ACEP, which commended President John Mahama for engaging PricewaterhouseCoopers (PwC) to diagnose the ills associated with the AMERI deal, stated: “We are of the view that the scope of the work should be expanded to cover the Power Purchase Agreement between ECG and Karpower, a different arrangement for procuring power into the country.”

“This is especially so because our analyses of the Karpower deal with ECG reveals another case of poor diligence. Further review of the deal shows that it is worse than a Build Own Operate and Transfer (BOOT) arrangement under which AMERI was procured. A typical PPA should have been over 20 years to spread the cost and thereby reduce the burden on consumers unlike the 10-year deal negotiated for the Karpower ship.”

Further basis
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ACEP said its analysis indicate that the annual capital recovery charge fixed M&O for the 225MW Karpower plant amounted to $118.4 million since the total payment in 5 years amounted to $592 million, adding that Karpower is a 10-year deal so between years 6 and 10, there would be an  additional fix cost of $495.8million.

It said the variable charge for the deal was $15.2 million while the standby guarantee was $50 million.

“As far as transfer of ownership to Ghana is concerned, Ghana will take no ownership after five years nor after 10 years when the agreement comes to an end. It is a Power Purchase Agreement (PPA),” ACEP said.

“Liquidated damages on full commercial operation default before commercial operation date is $300/MW while the stability clause of the agreement said no change of law affects the contract. Equilibrium clause is provided where there is a cost effect.

“Karpower Ghana is also exempt from all applicable taxes including personnel income tax. The Government Consent and Support Agreement guarantee this. Also, the limitations of liability are not more than 10 percent of only the annual capital recovery fee.”

Proposition
ACEP suggested that PwC should find out whether the use of BOOT or BOT was cost-effective and had value for money in procuring power projects.

Furthermore, it called for the enquiry to consider whether PURC had been conducting due diligence and setting the appropriate benchmarks on PPAs to ensure that consumers were not saddled with higher tariffs, given that PPAs did not require parliamentary approval.

“We also think that the reason for this exercise falls short of the requirements of probity and accountability. In our view, the study should also provide relevant information to accountability institutions to investigate circumstances under which a deal so cloaked with controversies was negotiated for the country and to punish those found to have exercised such extreme indiscretion and bad faith in negotiating the deal.”

By Samuel Boadi