- Insist Ghana is being shortchanged
The National Executive Council (NEC) of the Volta River Authority (VRA) Senior Staff Association (SSA), has expressed “grave concerns” over government’s Engineering, Procurement Construction (EPC) Contract to the Greek company, Mytilineos SA, for the relocation of the 250MW AMERI Emergency Thermal Power Plant, from Aboadze to Anwomaso, to improve the supply of power to the area.
Aside the outrageous cost which they insist is not in the interest of the country, the VRA senior workers, were unhappy about the request from their sector minister, Matthew Opoku-Prempeh, for the Authority to support the relocation with the establishment of payment security.
In a protest letter on February 1, 2022, sent to the Energy Minister, the VRA workers, noted “while we applaud the Government for the takeover of the plant and the relocation of same, we however have grave concerns over the EPC contract cost, handing over the Operations & Maintenance (O&M) to MytilineosSAand the request for VRA to support with the establishment of payment security.
The protest letter signed by Cephas Duse, the National Chairman ofVRA Senior Staff Association in the custody of The Herald, revealed how “per a letter dated December 17, 2021 from the Ministry of Energy, the Energy Ministry and Mytilineos SA have reached an agreement for the latter to undertake the EPC works associated with the relocation of the AMERI Plant to Anwomaso at a total cost of US$35,679,025.00.
According to them, after careful scrutiny of the information available to them, they have noted the huge disparity between EPC contract cost offered by Mytilineos SA and the actual EPC contract sum.
The total cost of the project at its current form, will see the state coughing up a whopping US$71.6 million.
“Per the agreement, Mytilineos SA is to also undertake the Operations & Maintenance (O&M) activities at a cost of US$1,000,000.00 per month for 36 months. The letter from the Ministry of Energy further indicates that, the contractor has requested the Government of Ghana (GOG) to provide an irrevocable Standby Letter of Credit (SBLC) to the tune of US$30,000,000.00 for both the EPC and O&M costs.
“Owing to the budgetary constraints of the Ministry of Finance according to the Minister of Energy by a letter dated December 17, 2021 and addressed to the Chief Executive of VRA, requested VRA to consider providing the SBLC on behalf of GOG to facilitate the conclusion of the contract negotiations with Mytilineos SA.
“The EPC contract value of US$35,679,025.00 agreed on between the Ministry of Energy and Mytilineos SA beats our imagination because per a letter dated March 22, 2021 and addressed to the Honourable Energy Minister, Mytilineos had offered to undertake the EPC works at a total cost of US$25,480,000.00.
“Per the Mytilineos SA offer letter, the US$25,480,000.00 EPC cost would cover the dismantling, relocation, installation and commissioning of existing ten (10) TM Units and related 161KV Substation and BOP equipment form Takoradi Power Plant to Kumasi Plant”.
But “as concerned citizens of Ghana and workers of VRA, we think that the decision to entrust the O&M activities to Mytilineos SA instead of VRA is not in the best interest of VRA and the Nation at large in view of the fact that “VRA has the requisite capacity and technical-know-how (knowledge, skill mix, experience, etc.) in hydro, thermal (heavy duty and aero derivative) and solar power generation and can effectively and efficiently undertake the O&M activities of the plant without any challenges. It is only expedient that VRA is allowed to undertake the O&M activities”.
Additionally, “VRA undertaking the O&M activities would lead to lower cost of power (lower tariff) to consumers since VRA’s cost of generation is generally lower than that of the IPPs”.
More so, “VRA undertaking the O&M activities will lead to creation of employment opportunities for Ghanaians instead of the opportunity being given to foreigners (Mytilineos SA)
Furthermore, “if VRA undertakes the O&M activities, any value from it would be for the benefit of Ghanaians and not foreigners (Mytilineos SA). Mytilineos SA is likely to repatriate the money received to their home country and this would have a negative impact on the Ghana’s exchange rate performance.
Added to that “VRA undertaking the O&M activities would lead to the Authority recovering some of the losses (US$11.28 million per month) incurred under the five-year Ameri deal.
They insisted that “VRA undertaking the O&M activities would result in GOG/VRA not paying penalties for O&M delayed payment, reduction in SBLC and any associated fees and charges as well as the avoidance of the exchange losses associated with the O&M payments.
On VRA’s cash flow challenges, “the request for VRA to provide the SBLC on behalf of GOG is likely to have negative consequences on the Authority’s cash flow. At various Management and Staff Groups meetings including the just ended 2021-2022 negotiations, Management complained of Cashflow problems. They indicated that even though the Authority made some profit in 2020, the company is currently confronted with serious cash flow challenges as a result of the implementation of the ‘cash waterfall’ mechanism, huge outstanding receivables etc. Any attempt to compel VRA to take on the responsibility of providing the payment security for the Mytilineos SA contract would only exacerbate the Authority’s cash flow challenges.
The staff of VRA were also unhappy that “the Authority would be taking over an asset that would require major retrofitting if Mytilineos SA operates the plant for 3 additional years before the envisaged handing over. This is based on the fact that the 3 additional years added to the already 6 years of running the plant would bring the total usage period to 9 years out of the 15 year expected economic life. Such a plant would require major capital investment to increase its economic life and improve its performance.
They pointed out that “the deal in its current form, means that GOG/VRA would be required to pay O&M charges of US$1million per month for 3 years. GOG/VRA would have to pay Mytilineos SA the O&M charges in instances where Mytilineos is ready to generate power but are unable to do so through no fault of theirs. This situation would be avoided if the Authority is made to carry out the O&M activities.
“Just as VRA is being tasked to provide the SBLC, there is the possibility that VRA would be required to directly/indirectly service the EPC debt. If VRA would be required to service the EPC debt, then it is only proper that the Authority is allowed now to carry out the O&M activities. Allowing VRA to do the O&M would also help the Authority to recover some of the losses it has incurred on the plant over the last six years.
The workers letter to the Minister stated “we are of the view of that the Ministry of Energy is not being fair to the Authority by assigning the O&M activities to Mytilineos since per the Deed of Assignment signed between GOG, VRA and AMERI on August 17, 2016, the Assignor (GOG) was to transfer the ownership of the 250mw AMERI emergency thermal power plant to the Assignee (VRA) free and clear of all liens, claims and encumbrances upon expiration of the Build, Own, Operate and Transfer (BOOT) Agreement. In the Deed of Assignment, the Assignor transferred and assigned its rights under the BOOT agreement to the Assignee together with any changes and amendments to be made.
In conclusion, the letter said that “based on the reasons advanced above, we wish to humbly appeal to the Honourable Minister of Energy to: Take a second look at the agreed EPC contract, cost of US$35,679,025.00 vis a vis the Mytilineos SA offer of US$25,480,000.00 and the decision to allow Mytilineos SA to only undertake the EPC activities.
They want the minister to “reconsider and make the Authority undertake the O&M activities instead of Mytilineos SA in order to reduce the financial burden on GOG/VRA, Explore other avenues of financing the EPC and O&M costs if the Authority would not be allowed to take over the plant now and undertake the O&M activities.