The Volta River Authority (VRA) has been the backbone of power generation in Ghana for over 50 years. Its two major hydropower plants – Akosomobo and Kpong generation stations – provided much of the country’s power until persistent drought conditions forced the development of its first thermal facility in 1997, a 330MW tri-fuel Combined Cycle plant. As of December 2017, VRA’s installed capacity comprised a portfolio of 2456 MW in hydro, thermal, and solar power plants, generating over 40% of the country’s total power supply. In recent years, plant availability has been hampered by fuel availability and recurring drought conditions, however conditions are improving gradually and load shedding due to supply insufficiency fell dramatically in 2017 from previous years. In addition, there are aggressive growth plans for in new generation investment, both IPPs and government-financed plants, to keep pace with the country’s burgeoning economy.
On the heels of the Concessioning process for the country’s largest power distribution company, Electricity of Ghana (ECG), and as part of a larger sector restructuring process, the Government of Ghana (GoG) has begun planning for the partial divestment of VRA’s generation asset portfolio. The dimension and structure of this sale has yet to be finalized but is expected to encompass most, if not all, the existing thermal plants (totaling 1284 MW), while leaving the hydropower and other renewable plants in the hands of the Government.
The objectives of the divestment are two-fold:
- Recapitalize the existing plants to improve the efficiency and operating capacity
- Alleviate the VRA portion of the estimated 10 billion-cedi ($2.3 million) Government debt in the power sector owed to banks and suppliers
The Government is eyeing a Public-Private Partnership (PPP) structure for the asset sale, which may be valued at up to $2 Billion USD. The country has developed a supportive legal environment for PPP and looks favorably on its past experience in the power sector and across industries as a model for leveraging private investment. The prime example of PPP success in the Ghanaian power sector is TICO thermal power plant, a joint-venture (JV) with TAQA (UAE) in which GoG has a 10% stake, and which has been operated profitably for over 15 years.
Transaction structuring and asset valuation are on-going under the direction of the Ministry of Finance. Resolution on a number of pending gate issues, including the lack of existing PPAs with VRA plants, is still needed in the process of structuring the VRA sale. The Government’s transaction advisors continue to work on transaction structuring and are addressing some outstanding issues. Once completed, we expect a call for Expressions of Interest (EOIs) this year.
Table 1 – VRA Thermal Assets Expected for Privatization
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