We’ll Save $60m Yearly from Renegotiated Karpower Deal – Dep. Minister

Though the exact savings from the renegotiation of the Karpower deal from 10 to 20 years are yet to emerge, Ghana will be saving at least $60 million per year, according to a deputy Minister for Energy, William Owuraku Aidoo.

These savings will come from the utilization of gas from the Sankofa fields.

Mr. Aidoo justified the Akufo-Addo’s administration’s extension of the deal it once criticized, and said the previous deal was not cost-effective because of the 10-year duration.

It is unclear what the new terms are, but the company recently announced it will move from using Heavy Fuel Oil [HFO] to natural gas when it moves the vessel from Tema to Takoradi.

The Karpowership from Turkey has the capacity to supply 470 megawatts (MW) of power to Ghana.

“The basic structure of the deal then was totally wrong. It was nothing to write home about… We’ve renegotiated the Karpower deal and stretched it over 20 years to ensure value for money,” Mr. Aidoo said on Eyewitness News.

“If you sign a power purchase agreement over a short period of time; that was 10 years, what it meant was that the good people of Ghana would virtually have to pay through the nose over a 10-year period which necessarily means they would have to pay higher tariffs. To stretch over a longer period will [see tariffs] come down to somewhere in the region of 10 cents per [kilowatt hour].”

The tariffs under the previous deal stood at around 15 cents per Kilowatt hour.

Aside from the reduced tariffs, Mr. Aidoo added that, extending the deal also “stabilized the power in the west and at the same time utilizes gas from the Sankofa fields, which if we didn’t will cost the government somewhere in the region of $60 million dollars per year.”

Retort from Minority

The Member of Parliament for Damongo Constituency, Adam Mutawakilu, however said the renegotiation was nothing exciting.

He also said the reduced tariffs as a result of the extension was no surprise.

“We know Karpower is a ship. The moment you extend the period, the tariff will come down so it is not magic that they have done. But what they have done is that, by going that way, they will not be able to build an asset for the country. That means after 20 years, the ship goes back.”

The MP also maintained that the ship was not needed after 10 years “because we have excess capacity and that becomes an asset to the nation.”

‘Karpower barge deal makes no sense’ – Bawumia

In December 2015, Dr. Mahamudu Bawumia, then running mate to Nana Addo Dankwa Akufo-Addo, said it “made no sense” for government to secure the power barge as an emergency solution to the power crisis, explaining that the deal did not give the country value for money.

The 225 megawatts power barge docked at the Tema Port in December 2015, to augment the shortfall in power supply at the time.

Per Dr. Bawumia’s analysis, “A 225 megawatts plant like the Karpower Plant that we are renting, will cost some 225 million dollars if we wanted to purchase it; and we will own it. Under the Karpower deal, we will pay for the power from the barge for the next ten years whether we use it or not. The African Center for Energy Policy (ACEP) estimates that based on the capacity charge alone which is 5.6 percent per kilowatt hour, it will cost Ghana close to one billion dollars over the next ten years for the energy from the barge. This, however, excludes the cost of fuel which will require about 35,000 tones every month. After ten years, the barge will sail away and with this one billion dollar, we could have built a 1,000-megawatt plant for ourselves. Power from the barge will also cost at least twice what it cost to supply power from Takoradi. This really does not make sense” he concluded.

Source: Citifmonline