World Bank: Mahama’s wrong PPAs breaking Ghana’s economy

The World Bank has attributed Ghana’s current economic challenges to the implementation of Power Purchase Agreements (PPAs) during the tenure of former President and flagbearer of the opposition National Democratic Congress (NDC), John Dramani Mahama.
Following the tenure of the NDC led by Mahama, Ghana found itself burdened with Take-or-Pay contracts that obligated the country to pay GH¢12 billion for unused power.
Speaking in an interview on Joy FM, the Country Director of the World Bank responsible for Ghana, Sierra Leone and Liberia, Pierre Frank Laporte, said these agreements have had a detrimental impact on the country’s financial stability and have contributed to its ailing economy.
He stressed that many of the country’s PPAs for power generation were signed at the wrong rate and prices. Consequently, Mr Frank Laporte indicated that Ghana is paying more for power than it should be, even for electricity not used, due to the PPA’s terms.
“The PPAs negotiated and approved during John Dramani Mahama’s presidency have resulted in excessive financial burdens on Ghana’s energy sector. These agreements, which were intended to secure stable electricity supply for the country, have instead led to unsustainable financial commitments, draining resources and hindering economic growth,” he added.
“In the aspect of Ghana, those contracts you signed with the PPA are too expensive. The kind of PPA you signed it means, Ghana is paying for electricity not in used through doubling of capacity,” he stated.
He reiterated that in the last few years, Ghana had entered into some PPAs that were wrong. “These types, in our view, were at the wrong rate and at the wrong prices and today you’re paying duly for it. And today the country is being billed for many of these wrong PPAs,” he noted.
He, therefore, called on government to urgently restructure some of these contracts, revealing that “I know that the government has started some talks with the IPPs to renegotiate some of these PPAs”.
Concerns
According to the World Bank, some of the country’s PPAs with Independent Power Producers (IPPs) signed under Mahama administration were “too expensive and wrong”. It expressed concerns that they need to be reviewed urgently to return the economy to normalcy.
In the meantime, from 2017 to 2021, the Minister of Finance, Ken Ofori-Atta, demonstrated resourcefulness in meeting Ghana’s financial obligations to Independent Power Producers (IPPs). This ensured a consistent power supply and prevented a recurrence of the energy crisis known as ‘dumsor’ that was experienced during the Mahama administration.
However, it seems that the Power Purchase Agreements (PPAs) are currently having a more detrimental impact on the country’s economy. In response, the World Bank has urged Ghana to reassess some of its PPAs in order to revive its economy, with the assistance of the International Monetary Fund (IMF) bailout programme.
The World Bank further criticised the Electricity Company of Ghana (ECG) for not collecting enough revenue and supported the reforms it is implementing in the power distribution sector.
The energy sector debt still poses a threat to Ghana’s economy, with the renegotiation of contracts seen as a solution.
Ghana has an installed power capacity of about 5,000 megawatts and dependable capacity of about 4,700MW with the all-time high peak demand of 2,700MW.
The Energy Sector Reform Programme (ESRP) has been crafted to address the issues in the energy sector and convert purchase agreements from Take-or-Pay to Take-and-Pay, which would end the payment of excess capacity. The government has started talks with IPPs to renegotiate some of these PPAs
As Ghana grapples with the consequences of the PPAs, the World Bank’s revelation should serve as a wake-up call for the government and policymakers to address the issue promptly. The findings highlight the need for transparency, accountability, and sustainable economic planning to ensure the country’s long-term growth and stability.