Independent power producers play larger role in Ghana's energy generation capacity

 

The participation of independent power producers (IPPs) in Ghana has continued to grow since the thermal Takoradi Power Station was first built in Aboadze in 2004. Indeed, IPPs are quickly catching up to public generation in terms of capacity. As of October 2017, the power capacity that is provided by IPPs and non-state-run power plants in Ghana stands at 1925 MW, compared to 2456 MW of installed capacity at the state-backed primary electricity generation utility Volta River Authority (VRA). In total, there are nine IPPs providing electricity, including the 400-MW Bui Dam, seven thermal plants with installed capacity of 1505 MW, and the 20-MW solar plant completed by BXC Ghana, a subsidiary of China-based industrial conglomerate Beijing Fuxing Xiao-Cheng Electronic. The interest in IPPs is likely to continue into 2018 and beyond as additional projects come on-line and policies encourage the engagement of private energy players.

Current Status

According to a 2016 World Bank report, there are 126 IPPs present in 18 countries in sub-Saharan Africa, providing more than 13% of total installed generation capacity. Ghana has the fourth-highest capacity generated by IPPs and ranks third in terms of investment, after South Africa, Kenya and Nigeria, with both metrics growing. As reported in the 2016 energy outlook published by the Energy Commission, permits issued to potential IPPs went from 10 in 2015 to 14 at the beginning of 2016. In addition, the April 2017 government decision to start selling VRA-operated thermal plants to IPPs in an effort to augment sector efficiency should further increase the number of participating private players.

Kpone Update

The Kpone IPP, Ghana’s largest to date, was scheduled for commission by end-2017, according to local press. Located in the Tema Industrial Zone, the 350-MW project is expected to provide 13% of the country’s dependable capacity. As a combined-cycle facility, it can run on both crude oil and natural gas. Developed by special purpose vehicle Cenpower Generation Company, the project is funded by a consortium of South African banks and finance institutions.

Oliver Andrews, then-Cenpower project director, told local press in early 2017 that the “near $1bn transaction has been largely financed by African institutions, [and] reflects the growing capacity of indigenous lenders and equity investors to begin to address Africa’s ongoing infrastructure deficit”. The Electricity Company of Ghana (ECG) has agreed to buy Kpone’s electricity for 20 years, with pricing linked to the US dollar to guard investors against a decline in the cedi.

Further Projects

In April 2017 construction began on the $953m, 400-MW Bridge Power Project located near the Tema Oil Refinery. The project, capable of being fuelled by liquefied petroleum gas, natural gas and diesel, will be executed in two, 200-MW stages, with the first set to be complete by end-2017. Bridge Power is being developed by the Early Power consortium, comprising US power generation company Endeavor Energy, Ghanaian energy trading firm Sage and General Electric.

In May 2017 the Lagos-based ARM-Harith Infrastructure Fund began construction of the $552m, 203-MW Amandi Energy Power Plant Project in the western town of Aboadze, which is expected to produce 1600 GWh each year. Project financing comes in the form of equity from firms such as Endeavor Energy, Amandi Energy and Aldwych International, as well as debt from a group of lenders, including South African banks and the US government’s development finance institution, Overseas Private Investment Corporation.

Looking Ahead

Given the 2030 goal of providing universal electricity access, and its commitment to limit reliance on inefficient fossil fuels and diesel generators, there will be ongoing opportunities for commercial involvement in the sector. While public funding has been the largest source of finance for expanded power generation capacity in the past, the continued approval of large-scale IPPs and the growing demand for energy bodes well for private companies looking to engage.

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The Report: Ghana 2018

Energy & Utilities chapter from The Report: Ghana 2018

The Report: Ghana 2018

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