Government of Ghana under the leadership of H.E Nana Akuffo Addo recently approved by executive order the ‘improved’ AMERI deal. The initial deal was doused in controversy for being a very bad one for the nation since its inception and the new deal hasn’t been any different.
The deal was to provide a power plant for the nation, operated for 5 years by the AMERI group and then transferred to Ghana for ownership.
Many Ghanaians have expressed doubt on the government’s position that the new deal is an improvement because in just over two years the plant would have become Ghana’s property. The new deal extends the management of the plant by a new company (Mytelinous) to 15 years.
Below a member of the government tries to provide some details on why the new deal is better than the old.
The $72 million is the charge that the existing management company take for years with AMERI agreement. Then, the new company says they will take $75 million for 15 years to manage the plant. Isn’t this better than the existing 5 yrs contract for $72million? The plant has to be managed anyway.
Again, if you look at the $300 million left outstanding, this amount is a direct cost to pay for the plant. Let’s compare the price of the plant on open market, that’s $250 million. They added fixed interest of $260 million, making the total $510 million to be paid in 5 yrs. For argument sake, if you take the $300m as the price of the plant today and you calculate the same interest they put on the $250m for 5 yrs, then interest on the $300m will be about $340m if we are to pay in 5 yrs again. Adding this will be $640m for 5 yrs, 10 yrs will be about 1 billion and 15 yrs will be about $1.5 billion technically looking at it.
Now the new deal, when the plant price was was $250m, Ghana still couldn’t pay upfront to own it at once, hence, we ended up paying $510 million in 5 yrs. Today, we still owe $300m, we are struggling to pay the $102 m/yr plus the accrued debt left by the NDC.
The new company says, we will pay them off, so that we pay about $500 million interest on the $300m for 15 yrs, compare to paying $260m on $250m for 5 yrs. Isn’t this still a better deal, which also gives the the govt a breathing space use the excess of $47 million yearly that should have gone to the AMERI to do something else? With the new deal, the monthly instalment anout $4m instead of the $9.9m.
Again, suffice that there was an error in thr govt calculation, but if the production tariff reduces from about 15 cent/kWh to about 11cent/kWh, quantifying this into money for long period is a huge savings, don’t you agree with me Ben? Definitely a reduction in the production will have twinkling down on the consumer if the govt is kind enough to pass it on.
So, my disagreement with you was basically your excessive concentration on the fact fact that it was left with barely 2.5 yrs to complete. But it wasn’t easy for the NDC to pay even the $250m to own the plant, why should it be easy for NPP to $300m to own it yrs? Remember, this payment is separate and different from the purchasing power agreed by the govt to buy 1 kw of power they generate. The govt still subsidise this power purchased from them to consumers in Ghana. Therefore, any prudential means to cut down payments and manage the situation should be welcomed, and I think govt approach is currently the best.
What would have been perfect is, if the govt borrow money from somewhere to pay off AMERI and we own it fully today. But then again, even if we borrow money to pay them off, what will be the interest on $300 million for 5, 10 or 15 yrs? It can be anything more thing $1.5 billion in 15 yrs.