Govt pays $937.5m to IPPs for excess capacity charge

The Minister of Finance, Mr Ken Ofori-Atta, has told Parliament that the government paid $937.5 million to three independent power producers (IPPs) for excess capacity charge between 2017 and 2020.

He said out of the amount, AKSA was paid $347 million, Karpower $359 million and Cenpower $251 million.

Giving a breakdown of the payments, Mr Ofori-Atta stated that AKSA was paid $35.7 million in 2017, $59.4 million in 2018, $136.8 million in 2019 and $115.3 million in 2020.

In the case of Karpower, he said, the company received $65.5 million in 2017, $108.9 million in 2018, $138 million in 2019 and $46.8 million in 2020.

With regard to Cenpower, the finance minister indicated that the company received no payment in 2017 and 2018 but was paid $86.5 million in 2019 and $144.8 million in 2020.

Urgent question

Mr Ofori-Atta disclosed these when he answered a question by the National Democratic Congress (NDC) Member of Parliament (MP) for Tamale North, Mr Alhassan Sayibu Suhuyini, who asked which IPPs had received payment from the government for excess capacity charges and how much was paid to the companies in the last four years.

The MP also sought to know the quantity of megawatts (MW) that was determined to be the excess power for which the $937.5 million was paid.

In response, Mr Ofori-Atta described the latter question by the MP as a “legitimate question” but told the House that he had to go and prepare to furnish the House with the accurate answer.

He, however, told the House that the power sector was a crucial area, for which reason the government had been negotiating with the three IPPs to bring down the cost of excess capacity charges.

“Mr Speaker, we have gone a long way with AKSA, Karpower and Cenpower and co, so that the whole issue of take-or-pay will be reviewed and we’ll come down to more tolerable and sustainable levels,” he said.

McKinsey & VRA

On the question why McKinsey and Company Inc. Ghana and the Ghana Revenue Authority (GRA) agreed to suspend a June 2018 contract, which was aimed at increasing tax revenue collection, Mr Ofori-Atta said the two entities signed a three-year service agreement which would have ended in 2021.

However, because of a leadership change at both the board and the management levels of the GRA in 2019, the McKinsey agreement, among others, was reviewed to ensure that it was in line with the new strategic direction.

The finance minister said after the review, the GRA and McKinsey mutually agreed to change the focus of the agreement from supporting only the immediate need to increase revenue collection in the 2018/2019 fiscal year to a long-term objective to create a sustainable revenue collecting entity.

“Mr Speaker, the new contract, therefore, represents this new strategic direction and is focused on three areas of digitisation, performance management and supporting the creation of a transformation office to build internal capacity,” Mr Ofori-Atta said.

The finance minister said per the contract agreement, McKinsey had been paid $7 million up-to-date and the new contract summed up to about $9 million.

Answering an urgent question by the Minority Leader, Mr Haruna Iddrisu, on total amount of temporary advances from the Bank of Ghana (BoG) to the government of Ghana for the 2020 financial year, Mr Ofori-Atta said the devastating impact of the pandemic required urgent actions to contain its negative and harsh impact on lives and livelihoods.

The minister said as part of measures to mitigate the impact of the pandemic on public finances, the Governor of BoG, the Controller and Accountant General and he triggered the central bank’s asset purchase programme, in line with Section 30(6) of the BoG Act, 2002 (Act 612) to provide the government with GH¢10 billion through the purchase of the government of Ghana COVID-19 Relief Bonds to help finance COVID-19 and related residual expenditures.

He said since the facility was raised under Section 30 of Act 612, which related to borrowing under emergency, it was structured as a long-term facility and not subjected to Section 30 (3) where repayments were to be done within three months after granting the advance.

“The terms of the COVID-19 relief bonds programme are as follows: programme size GH¢10 billion, tenure 10 years or two-year moratorium and repayment (amortising after repayment),” he said.

Mr Ofori-Atta said the GH¢10 billion was issued in two tranches, with the first tranche issued being GH¢5.5 billion on May 15, last year, and the second GH¢4.5 billion issued on September 9, last year.

“Mr Speaker, consequently, the first repayment (principal and domestic interest due) will be reflected in debt repayment schedule for the 2022 budget statement and economic policies of the government.

“Mr Speaker, the GH¢10 billion was the clear major transactions that were done from our own drawdown of deposits and from the BoG,” the finance minister said.

Mr Ofori-Atta added that there were no temporary releases from the central bank to the government last year.