ACEP’s Assertion On The AMERI Renegotiated Contract Is Wrong

I have taken my time to read through the analytical write-up by ACEP on the newly negotiated deal on the AMERI contract, and I must say that, I do not understand why the so-called think-tanks in Ghana are so quick to be heard on pertinent issues without taking their time to digest things properly, maybe just to whip the unnecessary public sentiments for cheap publicity? I am beginning to be seriously concerned about the thinkability of these Think-tanks such as the Africa Centre for Energy Policy, that of IMANI Ghana and others, as to how they get their analysis so wrong, and yet calling themselves Think-Tanks.

Making analysis on the ACEP's own write-up, juxtaposing their with the excerpts from the new AMERI contract, clearly depicts that the NPP govt has indeed saved Ghana over $400 million with the renegotiated contract with the new company taking over from AMERI. Clearly, the ACEP assertion is absolutely wrong and I will tell you why.

In all, What ACEP has achieved doing on this matter is just a hot air blown onto the new deal, coupled with schemed propaganda to bamboozle Ghanaians for undue publicity. Technically, the new deal also puts money into Ghanaian consumers pockets as the production tariff has reduced from 14.5918 cents/KWh under the existing contract to the new tariff of 11.7125 cents/KWh in the proposed amendment, for the same amount of power, 250MW being generated under the agreement.

Will try and put it in simple layman's explanation for all to understand how mischievous ACEP's has been with their analysis. Basically what's happening is that the power plant brought to Ghana, that costs about $250 million on the open market was sold to Ghana at a price of $510 million, to be paid off in 5 years.

The Ghana government agreed under the previous administration to pay $250 million, plus a commercial credit/interest of $210 million loans with no grace period for a 5-year term (total $510 million) to AMERI.

The AMERI company signed an agreement with Ghana govt, under Prez. Mahama's gov't to deliver and install the plant to Ghana, in which Ghana will pay to AMERI about $9.9 million in monthly instalments for the plants over a period of 5 years. Also in this agreement, Ghana pays for the fuel and other operational and other servicing costs.

As at last month, Ghana government has about two and half years left to own the 250MW power plant, conditioned on the payment of the outstanding balance of $339million including all outstanding debts. The govt sought for a new company taking over from AMERI.

Now, leading to a new management company's takeover from AMERI, the Government, in a proposed amendment commits was to pay $39 million of the $91 million outstanding amount for the executed part of the original AMERI contract, which will bring direct government payments to AMERI to $210million, so that new contract starts on a clean slate.

*Agreed settlement terms for Novation and Amendment of the AMERI contract*

A new company called Mytilineos International Trading Company Ltd was approved to take over from AMERI, has pledged to settle any outstanding indebtedness and pay off the $300 million to AMERI to end the no-breathing space 5 years contract term. In exchange, the existing AMERI contract of $510 million agrees for 5 years becomes a new contract with the new company "Mytilineos" under a tenure of 15 years for Ghana to pay $825 million in instalments. Meaning that Ghana pays $4.58 million per month instead of $9.9 million/month as agreed by the previous government.

It is save to note here that, unlike the NDC govt contract with AMERI, to pay $510 million in 5 years, the NPP govt has rather negotiated to pay Mytilineos contract an amount of $825 million in 15 years, also with a reduced tariff from 14.59 cents/KWh to 11.7 cents/KWh under the proposed amendment, and they agree to generate the same amount of power, 256MW.

What it also means is that, if Ghana was to sign a new contract with AMERI today under the same terms to extend their payment tenure to 15 years, Ghana would be paying AMERI over $1.33 billion in 15 years, not $825 million as we see under the new Mytilineos Contract. Brilliant move by the govt!

Government’s claim of $400 million savings under the proposed amendment to the existing AMERI contract.

Under the original AMERI contract, the plant management company METKA was entitled to $72 million for five years as the EPC contractor to AMERI. For this amount, METKA was supposed to manage the plant for five years. Now, the new company taking over from METKA management/AMERI contract will receive a total of $75 million for 15 years.

This also means that, if the existing management company METKA was to be contracted again for the next 15 years with the same terms as charged $72 million under AMERI for 5 years, (thus: $14.4 million/year), meaning Ghana would be ended up paying the existing management company $216 million for the 15 years.

However, the new contract with Mytilineos, the government pays only $5 million/year. Here alone, the govt saves over $144 million in 15 years.

Government tagged as savings the difference between the original tariff of 14.5918 cents/KWh under the existing contract and the new tariff of 11.7125 cents/KWh under the proposed amendment. However, the ACEP believes that government's computation is not reflective of the true savings to the State of the renegotiated deal. This is because government’s renegotiation ought to have been in relation to capacity charges component of the tariff only.

Now, going by ACEP’s own analysis of the data in the Minister’s memo to parliament, they believe that government’s renegotiation would lead to a reduction in capacity charges by 1.8201 cents/kWh (the difference between 5.6253 cents/kWh of capacity charges in the existing contract and 3.8052 cents/kWh of capacity charges in the proposed amendment).

Assuming the savings for the remaining 2.5 years of the existing AMERI contract translates to $89.69 million. From 2020, the government would pay $937.5 million for 12.5 years at 3.8052 cents/kWh under the proposed amendment as against savings of $89.69 million over the remaining 2.5 years under the existing agreement. Overall, the government will incur the cost of $937.5 million under the proposed amendment. However, the gov't would have rather incurred over $1.25 million if the original 5.6253 cents/kWh had remained for the next 15 years. Getting the tariff reduced to 3.8052 cents/kWh is over $300 million to consumers. Another huge savings right there.

Therefore, it feels so dumbfounding as to why a think-tank in Ghana should just make noise about nothing due to their own lack of understanding and for propaganda sake. If they want some of us to take them serious, then the so-called think-Tanks in Ghana should put acts together and make an intelligible argument on pertinent issues. I think the basis for ACEP's disagreement with Government’s calculation of alleged savings of $405.06 Million is baseless and preposterous.

It is sometimes mind boggling to see these supposed reputable institutions (think-tanks like ACEP and IMANI) raise unnecessary bloodcurdling alarms where there's no even a bedbug present.

Folks, do you remember in June 2017, it was the same ACEP that raised the unnecessary fear and panic in Ghana that, BOST has allowed over 5 million litres of contaminated fuel unto Ghana market. This scaring news, let to the the Energy Ministry setting up an eight-member investigative committee to look into the Bulk Oil Storage and Transportation (BOST) company’s controversial sale of 5 million litres of contaminated fuel. However, at the end of the investigation, the BNI, National Security cleared BOST MD over the alleged contaminated fuel saga. Think about these so-called think-Tanks in Ghana, always getting it so wrong.

Peter Antwi Boasiako
London.