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Accommodate Local Contractors To Achieve Optimal Cost -- ACEP To MOE



Reported by, Nsor Paul mensah.


The Africa Centre for Energy Policy (ACEP), is calling on the Ministry of Energy to immediately, subject the EPC contracting process to competitive bidding that accommodates local contractors to achieve the most optimal contract cost.

According to Mr  Kodzo Yaotse , Lead Policy , Petroleum and Conventional Energy of ACEP under no circumstance should the operations and maintenance of the AMERI plant be outsourced to any contractor.

Mr. Yaotse,  was speaking at a press briefing  yesterday held at Africa Center For Energy Policy ( ACEP) headquarters in Accra  emphasized that, VRA must own and operate the plant per the Deed of Assignment dated 17th August 2016 for which they were trained by AMERI.

Adding that "We maintain that in a cash-strapped power sector, prioritizing the retooling of the NITS is a far optimal option than the attempts to relocate plants and its attendant unnecessary cost additions”, he said.

He observed that Cabinet and Parliament  should assume critical responsibility for the efficient planning of the sector saying, government should be transparent about plans to renegotiate power plants. "The power sector has significant financial, technical, and managerial challenges. These challenges are worsening over time and manifesting in unsustainable debt accumulation." 

According to Mr. Kodzo Yaotse , in 2020 and 2021, the government shouldered total under-recoveries from the sector to over GHS 14 billion (GHS 6.8 billion in 2020, and the cedi equivalent of $1.257 billion in 2021). In addition, the sector’s outstanding payments for gas and IPPs are in excess of $1.2 billion for the first half of 2022”.

He furthered that  the proposed relocation and O&M cost $71.6 million for three years to be recovered from the already anaemic Cash Waterfall Mechanism (CWM). 

Additionally,  he said the gas infrastructure and discounts on the commodity cost to support the relocation would require about $50 million cumulatively per year. At the same time, the transmission infrastructure requires urgent investment, particularly upgrading the Western Corridor Transmission Lines and the 330KV Pokuase-Anwomaso Transmission Line, which are more critical infrastructures to facilitate the stable transmission of power to the middle belt of the country

Kodzo Yaotse address, made known that ACEP agrees that the power system would need some power generation dotted across the country in the medium to long term. However, given the current debt situation and the multiplicity of the challenges in the sector, more optimal planning should prioritize efficiency, effectiveness, and economy for power delivery.

“Strengthening the transmission system to coincide with a stable power supply for the middle belt from the Bui Dam is more urgent. This would require converting the Bui Dam from a peaking plant to an operationally possible baseload supply plant to support the NITS." 

"He said "if  for any reason, this recommendation is not an option for the Ministry, which appears to be the case for the past two years, the worst they can do is to ensure that the relocation and contracting processes are done in the most transparent and competitive manner."

Stressing that "the current processes have no semblance of that transparency required to generate the most optimal cost. The O&M being sole sourced to Mytilineos SA is just an unnecessary cost addition in the face of the fact that VRA has the capacity to manage the plant”.

Mr. Kodzo Yaotse therefore disagreed with Ministry of Energy’s negotiations with Mytilineos SA to relocate and install the AMERI plant from Aboadze to Kumasi with a firmed contract price of $35.6 million. 

The contract he said grants the Operation and Maintenance (O&M) to Mytilineos SA for three years at the cost of $36 million, bringing the total cost of the relocation and maintenance of the plant to $71.6 million barring any unforeseen upward adjustments. 

ACEP is emphatic on the contract costs even though the Ministry denies it is conclusive. The following events affirm ACEP’s conviction on the contract cost: The Ministry has received PPA approval to sole source the EPC contract to Mytilineos AS.

The Ministry confirmed to Parliament on 15th June 2022 that it had received a legal opinion from the Attorney General’s Office on the EPC contract to Mytilineos AS. iii). 

Again, in a 17th December 2021 letter, the Ministry requested support to establish payment security in the form of an irrevocable Standby Letter of Credit (SBLC) of $30 million from VRA to secure the commitment of Mytilineos SA for both the EPC and O&M”.

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