Ghana’s independent power plant that will ease power blackouts
TAR: Given some of the instabilities in the economy, were there difficulties in raising finance?
Theo Sackey: There were huge difficulties because you need people who are committed and who are going to sell their shirts. But your shirt is not enough, you need to have a coat too. They found a good site. They did the right studies. They were able to attract financing support in the form of a partnership with a company called InfraCo. These guys then brought in additional money and support. They did the studies up to a point, and that was when the Africa Finance Corporation (AFC) got in.
What were the other challenges?
When AFC got into the project, InfraCo and the founding shareholders had a power purchase agreement with the Electricity Company of Ghana (ECG), but after our analysis it was obvious that [it] was not bankable. At that time, [Ghana] didn’t have gas. The gas was going to come in from Nigeria. We hadn’t even found oil yet, and the West African Gas Pipeline was still being built.
We changed the whole thing and said forget about gas being the only source of electricity. Let’s go out to the market and ask people to bid again to give us a thermal power plant that can use gas, light crude oil, diesel or anything else.
Fortunately for us, in 2009/10, after the financial crisis, a lot of projects had been cancelled. So we were able to get lots of interest. However, in order to make this project bankable Cenpower had to take on a lot of responsibilities. In our instance, ECG was adamant that it would not provide the fuel. So we had to make investments in fuel development facilities.
Little things increased the cost because of the structuring of the project, but c’est la vie. Then, of course, the bottom line of that was: Does it still bring the project cost in line with what the public utilities regulatory commission would agree? So we had to present our financial case to them, give them the models. They reviewed it. They were comfortable and gave the green light to ECG.
What is the pricing model like with the ECG?
There’s a power purchase agreement. [It] has a very detailed formula […]. They have their models, so every month they would look: How much did we ask you, and how much did you give us? If you gave us all of this, then you’ll have your fixed charge. How much was the price of fuel? Was it $60 per barrel or was it $70 per barrel? If you have gas, is it $5 per million BTU or is $10 per million BTU? The calculations are based on this.
What will this project do for Ghana in terms of power and the economy?
It will provide 350MW in addition to what’s already available – that’s about 13%. For now, over the construction period we have about 1,500 people employed and 90% of them are Ghanaians. When the construction is over and we get into the operational period, the project is going to employ 65 to 70 people for the next 20 years. We are increasing the skills sets of the people in the project so they will be able to work on other projects.
With Cenpower, there is significant local participation in the shareholding structure – 21% belongs to Ghanaians. You have the AFC [with 46%], which is also African – we also have a large voice in how this company operates and how its DNA gets created. The whole idea is to create an African institution with international standards. It’s acknowledging the fact that we can play at the highest level: proper principles, proper values, the right attitude, to create an institution that can stand with any other international institution.
“It’s acknowledging we can play at the highest level: principles, values, attitude”
From the May 2017 print edition