We’ve renegotiated 6 ‘Mahama’ PPAs to save Ghana US$13.2bn – Ofori-Atta

Finance Minister Ken Ofori-Atta has said “for balanced” and “sustainable energy partnerships that provide affordable power for industrial, commercial and residential use, we have kept our promise and successfully renegotiated Power Purchase Agreements (PPAs) with six Independent Power Producers (IPPs), namely: Karpower, Cenpower, Early Power, Twin City Energy (formerly Amandi), AKSA Energy and Cenit”.

These renegotiated agreements, according to Mr Ofori-Atta, “are expected to have savings estimated at US$13.2 billion over the life of the PPAs through a combination of reduced capacity and energy charges”.

“In other words, we are saving the Ghanaian taxpayer US$13.2 billion from power contracts signed by the previous administration”, he told parliament on Monday, 25 July 2022 when he presented his mid-year review.

The cancellation of one of those PPAs by the Akufo-Addo government cost Ghana $170 million in judgment debt last year.

In June 2021, however, Attorney General Godfred Dame said Ghana “clearly, was saved incalculable financial loss by the decision taken by the New Patriotic Party (NPP)” to cancel some power purchase agreements (PPAs) signed with some independent power producers (IPPs) by the erstwhile Mahama government in the heat of the energy crisis between 2013 and 2016.

He said a review committee report on the PPAs, including that of the Ghana Power Generation Company (GPGC), whose cancellation in 2018, cost the state $170 million in judgment debt, “shows that if all the agreements had been allowed to run, we were going to suffer $17.6 billion over the period.”

“That legal decision taken in the context of the global solution of saving the nation an amount of $17 billion over 12 years, for me was better,” Mr Dame told Citi TV’s Point of View on Wednesday, 23 June 2021.

Meanwhile, Pru East MP Kwabena Donkor, who was the Minister of Power in the erstwhile Mahama administration and signed the power purchase agreement with GPGC, said he was ready to face a probe by the Criminal Investigations Department of the Ghana Police Service as hinted at by Attorney General Godfred Yeboah Dame.

Mr Dame had said the previous administration was to blame for the $170-million judgment debt slapped on the country by a London commercial court regarding the 2018 unlawful termination of the PPA.

He, thus, intended lodging a formal complaint with the CID to probe the deal, which was signed between the two parties in the Mahama administration, since, according to him, a report by a committee constituted in September 2016 revealed that the agreement had issues and consequently resulted in excessive power supply.

“The fact, as borne out by the PPA committee’s report, was that the agreement, together with other agreements, had resulted in such excessive power supply to the state”, he told Accra-based Joy FM, adding: “The state was going to lose $586m per annum and a cumulative cost of about $7.6billion dollars between 2013 and 2018.”

“So, I think that when it comes to financial loss, it is so clear in my mind that the responsibility lies clearly with those who entered into the agreement”, he noted.

The basic point, he said, “is that the entry into this transaction was unnecessary”.

“The entry into this transaction was what resulted in financial loss to the state.”

He revealed: “I, on account of all of this, am going to write a formal complaint requesting an enquiry by the CID into the conduct of the public officers who acted in the manner which resulted in the signing of an agreement which resulted in financial loss to the state.”

“I think that first and foremost, the entry into the agreement itself was wrong”, he asserted.

“There was no justification because their own committee determined that the agreement was going to result in excessive power.”

“The committee set up by the NDC in 2016 – against the background of a recognition that there were so many PPAs entered into by the NDC administration, and, therefore, those agreements were going to result in excessive capacity development, as it was termed – came to a conclusion that this agreement had to be terminated. The committee singled out this particular agreement for termination”, he stressed.

Responding to the AG’s comments, Dr Donkor, who superintended the contract in 2015, said government work is a continuum and, so, “if today, another attorney general, who, the London court said had slept on the job, suddenly thinks he can divert attention by recommending investigations by the CID, it is his right”.

“They can always conduct investigations but the truth always stands out”, he told Valentina Ofori-Afriyie on Class91.3FM’s mid-day news 12Live on Wednesday, 23 June 2021.

“This particular agreement”, he noted, “had the shortest duration of four years and it was the only one that did not require any financial security from the Ghanaian state”.

“It was signed in July 2015. I exited public office in December 2016. I signed it going through the appropriate processes. It went to cabinet, it came to parliament; you can refer from the Hansard and find out whether there was any argument from their side on the floor of parliament”, he argued.

Concerning the AG’s claim that a committee recommended the termination of the deal during the Mahama administration, Dr Donkor said: “It is not factual”, stressing: “No committee was set up to review this contract”.

According to him, “a committee was set up, having come out of dumsor, to review the whole power sector and that committee made some recommendations, which did not include, as far as we know, the termination of any contract”.

He noted that “assuming they were even to terminate, the termination should have come out of a negotiation, not a unilateral decision”.

Addressing the AG’s assertion that the agreement, together with other PPAs, was costing the state $586 million per annum for needless excess capacity charges, Dr Donkor said: “It is just political noise-making”.

“As for the figures they are bandying around, no energy professional takes those figures seriously. They need to be interrogated”, he claimed.

Asked if he did nothing wrong and ready to face the CID, Dr Donkor said: “Absolutely”, adding: “As one of our colleague MPs says, ‘you don’t frighten a chief warrior with a musket. You don’t frighten me with a police CID. I’ve been there several times. My integrity will always defend me. I do things in the national interest”.

What Happened In London Court

Feednews.com within that period that the Commercial Court in London refused to allow Ghana to bring a belated challenge to an UNCITRAL award worth over US$134 million in favour of a power contractor, ruling that national elections and COVID-19 pandemic did not make the state’s delay reasonable.

The case started under Gloria Afua Akuffo, when she was the Minister of Justice with Godfred Yeboah Dame as her deputy.

State attorneys, including Helen Akpene Awo Ziwu, Anna Pearl Akiwumi Siriboe and Grace Oppong Dolphy in Accra, were also mentioned in the case as having failed to beat a 28-day deadline.

However, the state attorneys, together with Mr Dame, who took over from Gloria Afua Akuffo, went sleeping on the job, leading to a delay in contesting the judgment debt.

The result of that deep sleep is that poverty-stricken Ghana will be paying a whopping US$170 million in damages to the claimants; Ghana Power Generation Company (GPGC) located at 1 Airport Square Building, 7th floor, Accra.

Mr Dame and his subordinates’ attempts to hide behind the 2020 general election and the COVID-19 pandemic as excuses for the delay was rebuffed by the London court.

In a ruling on Wednesday, 8 June 2021, Mr Justice Butcher refused to grant the government a time extension to apply to set aside the award – adding that the state’s grounds for challenging it were “intrinsically weak”.

Global Arbitration Review previously reported on the award in favour of GPGC against Ghana.

GPGC was represented before the court by Charles Kimmins QC and Mark Tushingham, where Ghana was said to have been too late to challenge the decision against it.

Ghana had used Khawar Qureshi QC of Serle Court and Volterra Fietta, having initially retained Omnia Strategy.

In the arbitration, GPGC, used Three Crowns and Ghanaian firm, Kimathi & Partners, along with damages experts from FTI Consulting.

Ghana also had representation from the attorney general’s office and Amofa & Partners in Accra.

The underlying dispute concerned the government’s alleged wrongful repudiation in 2018 of a contract for a “fast-track power generation solution” – involving the relocation of two aero-derivative gas turbine power plants to the government’s territory.

A London-seated UNCITRAL tribunal composed of former ICC Court president John Beechey as chair, J William Rowley QC and Ghanaian academic, Albert Fiadjoe, issued its final award in January, ordering the government to pay a contractually defined “early termination payment” of more than US$134.3 million plus interest and costs.

It also dismissed the government’s counterclaim.

The award is said to be worth around US$170 million. Under English law, the government had 28 days to bring a challenge to the award.

Three days before the expiry of that deadline, the government’s then solicitors, Omnia Strategy applied to the court for a 56-day extension.

Omnia said it had only just been instructed and that bureaucratic processes had been delayed because of national elections in the country and because key members of the attorney general’s office had contracted covid-19.

The court agreed to extend the deadline for any challenge to March 8, but the government only brought its set-aside application on April 1, now represented by Volterra Fietta.

The law firm explained that, the new attorney general, had only been sworn in on March 5, and the firm had been instructed 10 days later.

In the latest ruling, Butcher J, said the government’s delay was “significant and substantial”, as its request for a second extension had come 38 days after the statutory deadline and 27 days after the first extension expired.

The fact that a large sum was at stake in the arbitration was not a reason for the challenge taking longer to make. The fact that the attorney general had not been sworn in until March 5, did not mean the government was unable to act in the meantime, the judge said.

The government had still managed to instruct Omnia during this June 12, 2021, 10:37 Pagina 2 di 5period and the new AG, who was previously deputy attorney general, had been among the counsel in the arbitration.

Echoing a ruling in the P&ID v Nigeria case, the judge said the fact that a party is a foreign state is a matter of “little significance” when it comes to compliance with court directions.

That an entity may have “bureaucratic decision-making processes” does not justify the delay.

As for arguments about covid-19, the judge said the evidence as to the way in which the pandemic had affected the government was “wholly inadequate”.

There needed to be a detailed explanation of how it had affected “particular people or particular processes”. The judge also said that the grounds of the government’s proposed challenge to the award were “intrinsically weak”.

One argument that the tribunal failed to be “guided by the terms and conditions” of the contract was a “clear case of an attempt to present alleged errors of law as errors of procedure”.

Butcher J. was likewise sceptical of the government’s other complaint that the tribunal failed to deal with all issues put to it. The judge said that the tribunal had dealt with the issues raised and that the government was in fact arguing that the tribunal’s reasons were inadequate.

He said there was no unfairness in denying an extension, as the government had already been granted one extension and was solely responsible for having missed the deadlines. This followed delays in the arbitration for which the government was also apparently solely responsible.

World Bank Support

In February 2021, a former CEO of the Ghana National Petroleum Corporation (GNPC), Mr Alex Mould, said the Mahama government gave World Bank-backed guarantees to four of the independent power producers (IPPs) to set up in Ghana during the period of the energy crisis (Dumsor) because the Bretton Woods institution saw the need for them at the time.

“What people don’t know is that the World Bank supported the government of Ghana to support four IPPs to be built mainly because they needed guarantees for the off-takers of the ENI-Sankofa-Gye Nyame gas”, Mr Mould told Eugene Bawelle on Class91.3FM’s current affairs programme ‘The Watchdog’ on Saturday, 20 February 2021.

He said because the World Bank “had given Ghana $750 million in terms of guarantees to guarantee the ENI-led Sankofa-Gye Nyame gas project, one of the conditions was that we would either build a pipeline or do the convertibility so that the gas can go from the west to the east and we would have off-takers – IPPs that are ready to take the gas”.

“And, as such, they supported Ghana to give what we call a Government Support and Consent Agreement to these IPPs for them to be able to take to their financial institutions to say that: ‘We have a guarantee from the Ghana government which is backed by the World Bank; and, as such, they were able to get the financial decision to build these plants”, he explained.

“That is what we have to understand; that there was a reason for these plants to be built”, he argued, noting: “It wasn’t like these guys came willy-nilly, they had a PPA, they went to their banks, they got financial [support] and now we are saddled with that. No”.

The Daily Guide newspaper reported at the time that a source at the Finance Ministry said the government of Ghana had, so far, had to pay GHS12 billion as cost of excess energy capacity charges inherited since 2017 by the Akufo-Addo government from the Mahama administration due to the ‘Take-or-Pay’ PPAs the previous government signed to deal with dumsor.

The government, at the time, said the country was paying over US$500 million a year for unused electricity, since most of the PPAs were an “uncoordinated and hasty” attempt to end dumsor.

Gabby Asare Otchere-Darko’s take

In April 2019, Danquah Institute founder Gabby Asare Otchere-Darko, said the governing New Patriotic Party (NPP) inherited “financial and legal burdens” in the power sector, “as a result of National Democratic Congress’ strange decision to agree to over 7,000 of excess capacity contracts”.

According to the cousin to President Nana Akufo-Addo, the NPP government “saved Ghana over $7 billion that we otherwise would have paid because John Mahama decides to sign us on for power we had to pay for even though we would never get to use”.

In a write-up, Mr Otchere-Darko said as of the end of 2016, the Electricity Company of Ghana (ECG) “had signed 14 Power Purchase Agreements (PPA), which were operational with a combined capacity of 1104MW”.

He said another 18 PPAs were signed by ECG with a combined capacity of about 6,000MW and 8 PPAs were under discussions with a total capacity of 2116MW.

“This, in addition to existing generation capacity from hydro, the VRA plants at Aboadzi and Tema; and the TICO plant, will result in a total installed capacity of about 11,000MW if the committed capacity were all deployed. This will by far be more than the current peak demand of 2400MW. Even at an annual growth in demand of 10%, our country will not be able to utilise this capacity in two decades”, Mr Otchere-Darko wrote.

In his view, “the over-contracting of capacity imposed serious financial and legal obligations on the government and power consumers”.

To address these, he said the Ministry of Energy tasked a Committee led by the Energy Commission to review all PPAs signed by the Electricity Company of Ghana (ECG) for conventional thermal power projects.

The Committee, he noted, “reviewed 26 out of 30 PPAs ECG had initiated. The other four were not reviewed because they were already operational. The combined generation capacity of the 26 PPAs reviewed amounted to 7,838MW”.

Mr Otchere-Darko said the “review noted that the projected capacity additions from the PPAs were far in excess of the required additions inclusive of a 20% system reserve margin from 2018 to 2030 and would result in the payment of capacity charges for the dispatched plants”.

According to him, the review recommended that:

I. 8 PPAs with a combined capacity of 2070 were to proceed without modification;

II. 4 PPAs with a combined capacity of 1,810MW were to be deferred to 2018-2025;

III. 3 PPAs with a combined capacity of 1,150MW were to be deferred beyond 2025; and

IIII. 11 PPAs with a combined capacity of 2,808MW were to be terminated.

He noted that the government stood to make “significant savings from the deferment and/or termination of the reviewed PPAs”.

“The estimated cost for the termination is $402.39 million, compared to an average annual capacity cost of USD 586 million each year or a cumulative cost of $7.217 billion from 2018 to 2030. This yields an estimated saving of $6.8 billion over the 13-year period”, Mr Otchere-Darko asserted.