Looking to increase revenue generation in Ghana’s power sector, the country on Thursday announced plans to launch the private sector participation (PSP) in the Electricity Company of Ghana (ECG) by February 2019.
“The processes being considered under the Electricity Company Ghana private sector participation has gone through and by February 2019, the PSP will take over ECG and start its operations,” the country’s energy minister, Boakye Agyarko said, adding that, “We are expecting a lot more efficiency in revenue collection, power delivery in the system and the general management of the distribution networks.”
A concession agreement between the government of Ghana and a consortium of investors, led by Manila Electric Company (Meralco), for private sector participation in ECG which has since been in parliament after a Memorandum of Understanding (MoU) was signed in July this year.
Banking on private sector business-led initiatives which have the potential to kick-start development; enable productivity gains; generate better quality jobs; strengthen skills and promote technological advances, Agyarko noted that had the energy sector reforms begun earlier on, the country would already be witnessing a stable electricity supply.
“Had we been bold to take that path in 1995, my prediction is that the concession period would have been over by 2015 and ECG would have been in a far better place than now. The supply of electricity to our consumers and citizens would have been in a much better, more stable condition than present,” Agyarko said.
The West African country is currently at the final stages of meeting all the conditions precedent to the PSP coming into force. A committee has been set up to ensure all outstanding conditions are met by January 2019 to enable a smooth flight of the private partnership.
In the past decade, Ghana has experienced severe electricity supply challenges costing the country an average of $2.1 million in loss of production daily. This situation has worsened despite an increase in installed capacity generation from 1,730 MW in 2006 to 3,795 MW in 2016.
These challenges can be attributed to losses in the distribution system, which is mainly because of the obsolete nature of distribution equipment, as well as nonpayment of bills by consumers. Hopefully, the PSP will address the challenges and boost supply.
Details of the agreement
In the concession agreement, all ECG workers transferred to the concessionaire will not lose their jobs and the collective bargaining agreement. Also, the period of the concession will be reduced from 25 years to 20 years and the Ghanaian participation component will be increased from 20 to 51 percent.
Under this agreement, the private partner will invest some $580 million into the distribution system during the first five years, while the US government also invests $498 million. Tariffs are also expected to be set by the Public Utility Regulatory Commission (PURC) and not the concessionaire, to ensure Ghanaians can afford it.