Presentation on Ghana Power Compact to UK-GHANA TRADE & INVESTMENT FORUM Wednesday nesday, , June 28 2017
Presentation Objectives Introduce MiDA and what it does Explain the goal and objectives of Compacts I & II Discuss Ghana Power Compact and how it seeks to address the root causes of unreliable and unavailable Power Explain the importance of the PSP in ECG and its roadmap Explain the structure of the ECG PSP Transaction. Discuss the role of the Council of State
Background- MiDA Statutory organization established in 2006 under Act 702, and Acts 709 & 897 as amended Located in the office of the President Has a Board, a Management Team, Staff and will have Stakeholder Committees Designated as the Accountable Entity to implement the Ghana Compact II Program To perform GoG’s rights and obligations to oversee, manage, and implement the Compact Programs Allocate resources and manage procurements To implement any other national development programmes funded by GoG and /or development partners
The Compact: What is it? An agreement between states or nations. Ghana has signed Compacts with the US Government MCC-- US Government Agency Compact approved by Parliament. It has the force of international law. Enters Into Force (EIF) when certain agreed or pre- determined conditions are fulfilled
Compact Goal “ Poverty reduction through economic growth”
Compact I Ghana signed 1 st Compact with the U.S.A in 2006 US$547 million Grant Focused on Agriculture & Road Infrastructure Entered into Force in Dr Paa Kwesi Nduom, Minister of Public Sector Reforms and Chairman of the Millennium Challenge Authority Board signed for Ghana, while Ambassador 2007 John Danilovich, Chief Executive Officer of the MCC, signed for the U.S. Completed in 2012
Compact I: Objectives Enhance the profitability of cultivation, services to agriculture and product handling in support of the expansion of commercial agriculture among smallholder farmers Reduce transportation costs affecting agricultural commerce at sub-regional and regional levels Strengthen the rural institutions that provide services complementary to and supportive of, agricultural and agri-business development
Benefits of Compact I GREATER ACCRA EASTERN/ VOLTA Upgrades to sections of N1 Highway Improvements of Lake Volta Ferry Services Irrigation schemes Improvements of Trunk Roads (and feeder roads)
COMPACT II-- THE POWER COMPACT
Compact II Also called the “Power Compact” US Grant: US$ 498.2M o Program Funding of US $469.3 million o Compact Implementation Funding of US $ 28.9 million GoG Contribution: US$ 37.4M Total Project Funds (projected): US$ 535.6M Compact term: Five (5) Fin. Min. Seth Terkper signs COMPACT II for Ghana and CEO Dana Hyde for MCC. Pres. Mahama and Sec. Kerry look on. years from EIF
Objectives of Compact II ❖ Increase private sector investment and the productivity and profitability of micro, small and large scale businesses ❖ Increase employment opportunities for men and women ❖ Raise earning potential from self- employment and improved social outcomes for men and women
Compact II-- Choice of Projects Constraints analysis (2012) revealed binding constraints to private sector investment and economic growth in Ghana. Inadequate and unreliable supply of electricity Lack of access to credit Lack of access to secure land rights GOG selected the first constraint as the key area to address in Compact 2. Problem tree to identify root causes of constraints
The power sector problem tree LEGEND: Lower “Effects” are in purple productivity for “Starter problem” from CA in red businesses and Key nodes in orange firms Root causes in blue Reliance on High production High cost of Low quality of Limited Household diesel and other losses for energy intensive social services Income generation energy sources businesses production Low reliability Insufficient of power access to supply power Governance and Distribution system is regulatory Insufficient power Transmission capacity constrained & framework does not supply to meet demand is constrained inefficient meet needs of all stakeholders
EFOT and the Power Sector Problem Tree Low reliability of LEGEND: power supply “Effects” are in purple “Starter problem” from CA in red Key nodes in orange Distribution system Distribution Root causes in blue is constrained & system is inefficient constrained & inefficient Inadequate capacity of Frequent High System Dx network to Losses accommodate growth outages in demand Utilities do not High costs of Dx system High commercial Uncontrolled High Dx tech have balance credit and short equipment is old development in losses sheets that allow term repayment losses urban areas & obsolete them to borrow periods
Problems identified are resolved through compact projects and activities and through government actions mandated by the Compact
Efforts to improve power sector – (The Power Sector Reforms) Energy crisis in late 1970s and early 1980s led GoG to consider reforms in power sector GoG Commissioned SYNEX of Santiago, Chile, to study power sector led to set up of Power Sector Reform Committee and development of Action Plan in 1994 Energy Commission & PURC formed later Reforms consistent with changes in Chile, UK, Norway, Argentina, Ireland, Ivory Coast etc. Motivations for the Reform then, were: Make the operation of the existing electric system effective and eliminate power shortage. Provide private capital for the Power Sector as the existing Public Utilities were overwhelmed with debts and could not expand. Need to privatize Public Sector Enterprises to make them more effective.
Efforts to improve power sector – (The Power Sector Reforms) In 1994: VRA -- sole generator and transmitter of power, ECG /NED -- distributors, and Ministry of Energy -- technical & economic regulator. Some progress made at reform but not enough Generation to be opened to private sector competition (i.e. IPPs)-- Completed Distribution: ECG to be horizontally unbundled and private sector participation introduced in each regional distribution company Transmission would be open-access. Need to unbundle VRA (2008) -- COMPLETED
Rationale for Compact II Projects • US$ 8b -- US$ 12b required for • With other constraints in new power generation plants generation, transmission and in the next 10 years. distribution, it is initially critical o Needed to meet increasing power to resolve issues with load growth demands distribution now. o GoG alone cannot meet funding requirements • Other constraints in respect of • IPPs to provide needed tariff setting and fuel investments availability are impediments and require resolution • Perception of no credible off- taker hampers IPP investments • Projects selected based on in power sector these facts and constraints o Fear of failure to recover investments in current off-taker distribution arrangements
MiDA Compact II Project Listing 1. ECG Financial & Operational Turnaround Project 2. NEDCo Financial & Operational Turnaround Project 3. Regulatory Strengthening & Capacity Building Project 4. Access Project 5. Power Generation Sector Improvement Project 6. Energy Efficiency and Demand Side Management
COMPACT PROJECTS & ACTIVITIES ECG NEDCo Energy Financial Power Financial & Regulatory Efficiency & & Generation Operationa Strengthenin Demand Operation Access Sector l Side g & Capacity al Improveme Turnaroun Building Managemen Turnaroun nt d t d Development Private Private Operationaliz and Sector Sector e “Gas to Sector Enforcement Participation Participati Power” Value of Standards Performanc on Infrastructur Chain e Monitoring and Labels Modernizing e Upgrades Capacity Utility Modernizi Building Operations Improved ng Utility Energy Operation Commercial Facilitate Auditing s Loss LNG Reduction Development Tamale Education & Service Public Technical Area Social Information Loss Improvement Tariff Inclusivenes Reduction Strengthen Review & s & Sector Commerci Improved Regulation Planning & al Partnerships Demand Side Outage IPP Developm Infrastructure Reduction Framework ent
The ECG Financial & Operational Turnaround (EFOT) Project 1. Private Sector Participation (PSP) in ECG 2. Modernizing Utility Operations 3. Reduction in Commercial Losses and Improvement of Revenue Collection Rates 4. Technical Loss Reduction 5. Outage Reduction
Private Sector Participation. PSP vs. Privatization PRIVATIZATION PRIVATE SECTOR PARTICIPATION Used loosely to refer to PSP Umbrella term describing forms of private sector involvement in the public space has a more focused meaning Includes: outsourcing, management contracts, It is therefore: leasehold, the process of transferring Concession and privatization ownership of a business, In the ECG Concession, enterprise, agency, public ownership remains with GoG. service or public property from a public sector to a private sector Therefore it is NOT privatization
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