An insight into the Ameri brouhaha

Since yesterday the nation has once again been plunged into the Ameri Project controversy, this time, going beyond the alleged attempt by government to safe the taxpayer some money through either a renegotiation of the current deal, an abrogation of the agreement because of alleged fraud or both, to the seeming suggestion that the minority members on the Mines and Energy Committee are unpatriotic by their action not to take part in the deliberations on the referral brought to the committee by Mr. Speaker with respect to the Ameri project.

I will attempt to share a few insights into this developing story.

Reasons For Boycott

The Minority Members of the Mines and Energy Committee decided upon due consideration of all relevant facts, not to take part in the deliberation of the Committee in respect of the urgent motion filed by Hon. K.T. Hammond requesting that the House rescinds the decision it gave in approving the Build, Own, Operate and Transfer (BOOT) agreement between the Government of Ghana and Africa and Middle East Resources Investment Group LLC [Ameri Energy] on grounds of gross misrepresentation.

The Minority does not want to be part of any bad precedent as far as parliamentary practice is concerned. Parliament as an arm of Government conducts its business on the dictates of the Standing Orders as stipulated under Article 110 (1) of the 1992 Constitution. In other words, any action or move taken by any Member of the House has to be within the remit of the Constitution and the Standing Orders. It is worthy to note that there is no part, section or rule of the Standing Orders that allows for a motion to be referred to a committee after it has been moved and seconded to without deliberation by the House. This cannot be found in the current Standing Orders or any Standing Orders of Parliament since independence.

Secondly, it is strange that Hon. K.T. Hammond, who is not a party to the agreement, is requesting Parliament to rescind its decision on the basis of gross misrepresentation. Hon. K.T. Hammond has no locus standi in this matter. Though we in the Minority respect the right and standing of Hon. K. T. Hammond as a member of the Committee on Mines and Energy to take up matters pertaining to the sector, in the overall circumstances of this matter, we think he is just a busy bee and should not be honoured with any consideration of the referral by the committee.

It must be noted that, though Parliament has a constitutional role in the approval of international economic or financial agreements to which the Government is a party, Parliament becomes functus officio after approving such agreements. Once approved, the agreements are now in the domain of the parties thereto which, in this case, are the executive branch of government and Ameri Energy. If there is anything untoward about the agreement, it is for the parties to say so and take the necessary action within the framework of the agreement to vindicate their rights and not for any other person.

Indeed, in the Supreme Court case of Ndebugre v. Attorney-General & Anor, Suit Number J1/5/2013 [Unreported], the Supreme Court held that where parliament exercises its constitutional function of approving an agreement without indicating that it has a future role in the termination or variation of the terms of the agreement, Parliament cannot subsequently purport to partake in terminating or varying such terms. In the specific instance of the Ameri BOOT Agreement, Parliament failed and or neglected to indicate in the approval decision that it retained a future role in the termination of the agreement. Therefore, the attempt to do so using the motion filed by Hon. K. T. Hammond is, in our considered opinion, ultra vires the powers of Parliament and hence unconstitutional.

It is however important to emphasise the point that the NDC government believes that, notwithstanding the emergency nature in which this project was done, Ghana still had value for money. It is therefore not surprising that Hon K.T Hammond does not make any reference, in arguing his case, to the contract itself that binds the Government of Ghana and Ameri Energy, but jumps to an EPC agreement between Ameri and a third party. What we should be asking Hon. K.T Hammond is, was there value for money in the execution of the project? It was to answer this very critical question that the state hired the services of Pwc, an independent Valueaudit firm to conduct a Value for Money audit on the project.  I will try to highlight a few of the findings in that audit report.

Composite Tarif

When you compare the Ameri  project to seven comparable thermal plants in Ghana (Trojan power limited, Cenit Energy Limited, Sunon Asogli Power Plant 1, Tema Thermal 2 Power Plant, TICO and Sunon Asogli Power Plant 2) the composite generation tariff for the Ameri of about USc14.59kWh is lower than the average approved composite tariff for the 7 plants at USc14.94kWh. When ranked together with the approved composite tariffs for the 7 comparable plants, the approved composite tariff for the AMERI Project is the 4th lowest and the lowest when levelised over 20 year period. Projects of this nature are typically for 15 to 20 years. Ameri project is for 20 years but the capital recovery charge is applicable for the first five years after which it drops to zero. To facilitate comparison with other projects y4with longer tenure for capital recovery, it is important to compute the comparable capital recovery charge for Ameri over the 20 year contract period.

Capacity Tariff

Furthermore When you compare the project data for the AMERI to the 9 comparable plants (Amandi, Sunon Asogli Power Plant 1, Cenpower Generation Company limited, Sunon Asogli Power Plant 2, Cenit Energy Limited,  Trojan power limited,  Jacobsen Jelco Ghana limited, TICO, Tema Thermal 2 Power Plant ) selected from Ghana, the capacity tariff for the AMERI Project of about USc5.5/kWh is higher than the average approved capacity tariff for the 9 plants at USc4.4/kWh. When ranked together with the approved tariff for the 9 comparable plants. However, when legalised over the 20 year period, Ameri’s  capacity charge is the lowest when compared with that of the 9 comparable plants.

Installed Cost Per kW

Additionally, when you compare 8 comparable thermal plants in Ghana(Amandi Energy, Cenpower Generation Company limited,  Jacobsen Jelco Ghana limited, Genser Power Ghana limited, TICO, Cenit Energy Limited , Sunon Asogli Power Plant 2, Sunon Asogli Power Plant 1) to the project data for the AMERI Project the derived installed cost per kW for AMERI of about the average installed cost per kW for the 8 plants at US$1,593/kW. When ranked together with the installed cost per kW for the 8 comparable plants, the installed cost per kW for the AMERI Project is the 4th lowest. It is also important to note that the AMERI Project has lower installed cost per kW compared to similar power plants that have been contracted or constructed over the last 3 years such as Amandi, Cenpower, Jacobsen and

Rate Of Return On Investment

One of the elements Pwc assessed was to estimate the internal rate of return (IRR) to the Ameri Energy who is the developer. The IRR represents the minimum cost of funds at which the project will break even. In their computation of the IRR, the assumed cost of site preparation and civil works of US$6.3m and this relates to all costs required to get the project site ready for installation of the AMERI plant. site preparation and civil works include land clearing, excavation and filling, road works and other civils works. Their IRR computation also took account of contingency of US$12.4m as part of the initial capital outlay. Based on this assumption, the project is expected to make IRR of 17.3% compared to GoG average cost of d3bt of 9.5% (MoP). This is close to th3 lower limit of PURC’s allowable return on power project of 17-19%. The return to the developer is also slightly below the range of industry return for IPPs which is 18-23%, based on interviews conducted in Ghana by CEPA in August 2015.

It must be made abundantly clear that the terms of the agreement contain dispute resolution mechanisms including resort to court action. Hon. K.T. Hammond can therefore make his evidence of gross misrepresentation available to the Government which is a party to the agreement for the appropriate action to be taken. Inasmuch as the Minority is not against the alleged attempt by the Government to save the taxpayer money in this transaction, we take the view that this must be done in the right way and through the right means and not through the subterfuge of a motion for rescission.

 

 

 

By Edward Bawa, MP for Bongo and member of the Mines and Energy Committee.

 

The Republic News Online

Leave a Reply

Your email address will not be published. Required fields are marked *