Ghana to encourage more private participation in power sector

Ghana’s energy sector challenges largely emanate from poor maintenance culture and
dependence on unreliable gas supplies from Nigeria. However, despite the government’s
effort to restore the county’s electricity industry, the high level of success of the two privately
owned generation stations in the country could prompt the government to explore the
privatisation option.

The privately owned Sunon Asogoli power plant which generates 200MW and CENIT Energy’s plant (126MW) remain the most reliable plants in the country, although Asogoli’s operation is heavily dependent on gas supply from Nigeria. There are indications that the country is exploring options to increase private participation in the sector via floating the state owned Electricity Company of Ghana (ECG), lease agreement with private operators and contracting the management of state-owned power plants to third parties. The government could also be considering a concession plan for its distribution companies. These steps could see private participation in the sector increase significantly and improve the funding of electricity supply in the country.

The World Bank’s International Finance Corporation (IFC) recommends that the best option to address the challenges in the energy sector in Ghana is to introduce private sector participation in the distribution section of the sector. It has presented the government with two options – a concession agreement with a private entity or
a partial privatisation of the ECG
The Government of Ghana has therefore decided to give out ECG on a concession agreement.
Under such an agreement, the private partner or concessionaire will have total responsibility for operating and maintaining assets of ECG over an agreed period of time which is between 20 to 30 years. The concessionaire will also be responsible for all capital investments as well as operation and maintenance costs of the Electricity Company of Ghana and the Northern Electricity Distribution Company (NEDCo).

Under the arrangement, the state will maintain complete ownership of ECG assets with the ECG becoming an asset holding company. The electricity market will still be regulated by technical and economic regulation, and the Public Utility Regulatory Commission (PURC) will continue to ensure quality of service and customer satisfaction and set tariffs.

Some industry analysts believe this deal will enable the concessionaire to adopt innovative solutions to problems and enhance strong incentives to make efficient investments to enhance revenue. It will also reduce political interference in the sector which will lead to a better and stable service delivery and will help in attracting private capital in the sector.

Others oppose this move, saying the objectives and rationale for government’s decision could be achieved without a private concession agreement. The major problem facing the company is the inadequate power given them for distribution to Ghanaians, they maintain.

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