14.07.2006 Disaster

VRA expansion in danger

By The Chronicle
Listen to article

The desire by the country's energy giant, Volta River Authority (VRA), and its partners to expand their facilities to meet the increasing demand of electricity in the country seems to be suffering some setbacks.

Available information indicates that the government of Ghana has still not appended its signature to guarantee a 215-million dollar-loan being sourced from the International Finance Corporation (IFC) by Takoradi International Company (TICO) to put up another generating plant at Aboadze to increase the total capacity of the Takoradi power plant to its projected 660 megawatts. VRA owns 10per cent shares in TICO.

The government of Ghana apparently does not want to be saddled with any debt secured for a private company. But the IFC, a private wing of the World Bank, is reportedly insisting that until the government guaranteed the loan, the 215 million dollar would not be released to carry out the expansion of the plant.

If the government guaranteed the loan, and the securing private company, TICO and its partners fail to redeem the debt, the IFC could take on the government to reclaim the money.

Following the energy crisis that rocked the country in the early 80s, the VRA commissioned a Canadian company, Acres International, to do a feasibility study for the construction of a thermal plant at Aboadze, near Sekondi, to generate electric power to supplement those generated from hydro base at both Akosombo and Kpong.

After the feasibility study, Acres International suggested the construction of the thermal plant with a total capacity of 660 megawatts.

The government, acting as real owners of VRA, entered into negotiations with the World Bank, which also agreed to finance half of the project. The remaining half was to be financed from the private sector. Subsequent to this, the World Bank released funds to construct the first part of the plant with a capacity of 330 megawatts.

After the construction of this first part of the project, the VRA as directed by the World Bank went searching for private partners to construct the remaining 330 megawatts to bring the installed capacity of the plant to 660 megawatts as suggested by Acres International. CSM Energy of Michigan, USA, which is also the owner of TICO, agreed to partner VRA to construct the plant.

CSM Energy subsequently invested 110 million dollars to construct a 220 megawatts generating plant, which is still short of the 330 megawatts needed to complete the plant.

CSM owns 90 per cent in this 220 megawatts plant with the remaining 10 per cent going to the VRA. In order to complete the whole project, TICO approached the IFC asking for a loan to facilitate the successful completion of the project.

The consortium then managed to put together 215 million dollars but for the money to be released to TICO, the IFC is insisting that the government should provide a sovereign guarantee for the loan.

Although a proposal for government intervention had been sent to both Cabinet and Parliament, nothing had come out of it. The government guarantee should have come for the money to be released this month, but so far there are no clear indications that the money would be released on schedule.

The board chairman of TICO, Malcolm Wrigley, said that his company was still waiting for the government approval of the loan to complete the project. He would however not go into detail.

When the Parliamentary Select Committee on Energy visited the Takoradi power plant sometime last year, the NDC MP for Upper West Akyem, Salas Mensah, raised concerns about the loan being secured by TICO because the World Bank did not deal with private entities.

The VRA officials present explained in their reaction that if the Ghanaian Parliament approved the loan, there would be no fears because it would have been deemed that the government had guaranteed it.

ModernGhana Links