Government negotiates to buy Teshie desalination plant after US$235m arbitration award

The government is negotiating with Befesa Desalination Developments Ghana Ltd to acquire the Teshie Desalination Plant at a cost significantly lower than the US$235 million awarded in an international arbitration case.

According to the Office of the Attorney-General and Minister of Justice, discussions for the acquisition began before the arbitral proceedings were concluded and the final award was issued.

The government believes purchasing the facility would give the state full ownership of the plant while avoiding additional costs beyond those required to maintain water supply to about one million residents in the eastern parts of Accra.

The development follows a Final Award by an arbitral tribunal in International Chamber of Commerce (ICC) Case No. 29029/CPB, which arose from the Water Purchase Agreement (WPA) between the Ghana Water Company Limited (Ghana Water) and Befesa over the Teshie plant.

The arbitration was initiated by Befesa and Standard Bank of South Africa Limited against Ghana Water on October 23, 2024.

The Attorney-General's office said the dispute stemmed from the failure of the then New Patriotic Party (NPP) government and Ghana Water to pay for water produced and supplied by the plant to Teshie and surrounding communities over several years.

“Befesa therefore had no option than to terminate the WPA and sue for compensation for loss of profit,” the statement said.

“The Award addresses claims arising from the termination of the WPA, as well as issues concerning the condition, maintenance and handover of the desalination plant.”

A separate but related arbitration, ICC Case No. 29030/CPB, was also brought by Befesa against the Republic of Ghana under the State Guarantee.

The statement said the tribunal's final award in that case substantially followed and referred to the decision in ICC Case No. 29029/CPB and principally held Ghana liable for the obligations of Ghana Water.

On the monetary claims, the tribunal found that Befesa had validly terminated the WPA and that Ghana Water was liable for the contractual Termination Payments resulting from the termination.

The claimants had presented 2 principal monetary claims. The first, Claim 1, sought approximately US$402 million in alleged unpaid charges, while Claim 2 sought approximately US$235 million in contractual Termination Payments arising from the termination of the WPA.

The tribunal ruled that the 2 claims could not be recovered cumulatively. It held that following the termination of the agreement due to Ghana Water's breach, Befesa's contractual entitlement was to the Termination Payments and that it could not additionally recover the unpaid water charges that had been cited as the basis for the termination.

Claim 1 was therefore dismissed in its entirety, while the tribunal awarded Befesa and Standard Bank US$235 million, net of taxes, as the Termination Payment.

The amount included pre-award interest calculated up to March 31, 2026.

The Attorney-General's office said the award also provided for continuing interest from April 1, 2026 on the Debt Due component of the Termination Payments.

It noted that the award significantly reduced the amount originally being sought by the claimants.

According to the statement, the tribunal itself noted that, using the approximately US$402 million Claim 1 as the benchmark, the US$235 million award represented 58.4 per cent of the monetary claim.

The claimants were consequently awarded 58.4 per cent of their reasonable defence and representation costs, reflecting their proportion of success on the monetary claims.

Despite the arbitral award, the government said negotiations with Befesa had made significant progress and remained focused on acquiring the plant for an amount substantially below the US$235 million award.

The government expressed hope that the negotiations would be concluded within the shortest possible time to enable the Teshie Desalination Plant to return to full operation.