The challenges facing the energy sector resulted in obnoxious take-or-pay contracts signed by the previous government, which obligated the country to pay for capacity it does not need, Mr Ken Ofori-Atta, Minister of Finance said.
The Finance Minister explained that the country’s installed capacity of 5,083 MegaWatts (MW) was almost double at its peak demand of around 2,700 MW, adding that 2,300 MW of the installed capacity was contracted on a take-or-pay basis.
Mr Ofori-Atta stated in the presentation of the Mid-Year Fiscal Policy Review of the 2019 Budget Statement and Economic Policy & Supplementary Estimates in Parliament in Accra.
The Finance Minister said the country was contractually obliged to throw away money for this excess capacity which we do not consume. “This has resulted in us paying over half a billion U.S. dollars or over GHȼ2.5 billion annually for power generation capacity that we do not need”.
On Gas, Mr Ofori-Atta said the country contracted around 750 Million Standard Cubic Feet per Day (MMSCF) per day by 2023, after government terminated two other LNG contracts in 2017.
“Current demand is around 250 MMSCF per day, and this is projected to rise to between 450 and 550 MMSCF per day by 2023. About 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning we have to pay whether we use it or not,” he said.
He said from 2020, the country will be facing annual excess gas capacity charges of between US$550 and US$850 million every year from 2020, and that government would from August1, 2019, with the support of Parliament, make Take or-pay contracts a beast of the past.
Source: GNA