Mahama gov’t started process to renegotiate ‘take or pay’ power contracts – Seth Terkper

A former Finance Minister, Seth Terkper, says the announcement by the government to renegotiate contracts with the various Independent Power Producers (IPPs) to change the existing ‘take or pay’ arrangement was started under the John Mahama administration.

He said the government’s recent announcement is not new and so must not tout it as such.

Seth Terkper in an interview said the Mahama government’s efforts experienced a “usual” delay hence its inability to finalize a renegotiation.

The Finance Minister, Ken Ofori-Atta, while delivering the 2019 Mid-Year Budget Review in Parliament on Monday, said the government will from August 1, 2019, pay Independent Power Producers for only power the country consumes.

Ghana pays a number of IPPs for power supplied, including those not consumed under a “Take or pay” agreement.

The minister stressed that such an arrangement costs the country nearly $500 million every year, noting that the government will ensure that all of such contracts are renegotiated in the interest of the country.

“All take-or-pay contracts will be renegotiated to convert to Take-and-pay for both PPAs and Gas Supply Agreements (GSAs). Government has resolved as follows: to convert all Take-or-pay contracts to Take-and-pay contracts,” Ken Ofori-Atta said.

But Seth Terkper said suggestions that the Mahama administration was responsible for the ‘take or pay’ contracts was false.

He said, “this [take or pay arrangement] is not something unique to the Mahama Administration. It is not unique to the Mills administration. Bui Dam, Sonon Asogli and others that were signed under the NPP era are on ‘take or pay’.”

He said the Mahama government wanted to renegotiate the deals to a Put/Call Option Agreement which could have also saved the country from paying for excess power.

“It was the Mahama administration that rather attempted to change this from take or pay to PCOA [Put/Call Option Agreement], which means you pay for what you take. As usual, there was a delay in the implementation. We had already started the process of changing to the Put Call Option. It is verifiable,” he said.

He added that “…We were in a process in collaboration with the World Bank  to organize a meeting on this conditions including whether we should use gas and LNG and talk to the IPPs and start the process of negotiations. All new agreements were to be on the PCOA, the old ones to be negotiated and that is exactly what the minister is announcing as if it is new,” he added.