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General News | Jan 31, 2005

Bui Will Add 17% to Ghana's Hydropower

Public Agenda

The Energy Commission says the Bui Hydropower Project when complete will increase Ghana's power supply by 17% and this would represent an increase of about 1000GWh generation capacity to the Akosombo Hydroelectric Dam, operated by the Volta River Authority (VRA).

This, the Commission says, would further bring the total of hydroelectric energy generation capacity of the three plants of Akosombo, Kpong and Bui, to a yearly average of 6,900KWh.

This, however, falls short of the energy requirement of about 19,421KWh to achieve the government's socio-economic development goals by the year 2015 as contained in the Ghana Poverty Reduction Strategy Programme and the Coordinated Programme for Economic and Social Development.

"At present, however, the Bui hydropower project is in its early stages of development and does not constitute a bankable project yet," according to the Energy Review, an official mouthpiece of the Commission.

The Commission says a lot of work is required to bring the project to a level where developers, investors and operators would be interested and prepared to commit themselves to participating in the provision of technical and financial support.

"Investors need the assurance that Bui will generate output at its design capacity and to attract serious developers, investors and operators, who must be satisfied that the technological processes are feasible for commercial application."

The Commission, therefore, advises that an engineering consulting firm, with experience, credibility and international reputation, be chosen to undertake a feasibility study on the 'bankability' of the Bui Dam.

"Government has no alternative than to appoint an internationally recognised transaction agent to establish a solid feasibility framework for the project," the Commission stressed.

The Commission has also suggested that in the search for investors and developers to operate the Bui hydropower project, the Build-Operate-Transfer (BOT) concept, should be given prime attention.

In the BOT concept of infrastructure development, the burden of financing a project is shifted to the private investor or developer, and must have inherent competitive structures for bidding, pricing and financing, unlike other forms of construction investment such as engineering procurement contract or loan, where funding is restricted, non-competitive and open to abuse leading to inflation of cost.

In the BOT concept too, investors and developers would look up to the project's assets and revenue stream as sources for repayment rather than go in for government guarantees.

"By any standards, the BOT is a superior concept," says the Commission.

Thus, in applying the BOT concept to the Bui hydropower project, a private company would be given a concession to build and operate the power plant for a number of years. "The company would be responsible for the designing and financing of the project and at the end of the concession period, the company or developer would return ownership of the plant to the government".

The concession period is fixed primarily by the length of time needed for the facility's revenue stream to pay the private operators' debts and provide a reasonable rate of return for its efforts and risk.

Touching on efforts so far to bring the Bui hydropower project to fruition, the Energy Commission said several studies have been conducted since 1964 to date. These studies and reports include Bui Hydroelectric Station on the Volta River, by the Soviet Union.

Another was the Bui Hydroelectric Project Feasibility Report of December 1976 by Snorry Mountains Engineering Corporation and the Bui Hydroelectric Development Feasibility Study Update Final Report of 1995, prepared by Coyne et Bellier, among others.

In January 2002, the Government set up a committee of lawyers, academics, economists and surveyors, to solicit proposals and select the best and the most promising developer, to build the Bui Project on a BOT basis.

But developers expressed doubts about the bankable feasibility level of the project, and those who showed interest in carrying out the project were also not found as satisfactory developers.

But as energy experts consider Bui a channel of hope in providing sufficient energy for Ghana, some environmentalists and Civil Society Organisations are kicking against attempts to construct the dam. Fearing it would destroy the environment and dislodge the communities along the dam. The hardships the Akosombo brought on communities when it was constructed is a stark reminder, say environmental campaigners.

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