Samuel Nana Brew-Butler, Chairman, CenPower Generation: Interview

Interview: Samuel Nana Brew-Butler

How did you assuage investors’ concerns about the creditworthiness of the Cenpower Kpone Independent Power Plant (KIPP)?

SAMUEL NANA BREW-BUTLER: This was the main concern of potential investors in developing the thermal plant. Our board created a team of financial, technical and legal experts to find conditions that would make the plant commercially viable. CenPower finally reached a compromise deal with the government instead of a sovereign debt guarantee. Under the deal, the debt of the Electricity Company of Ghana debt is securitised to ensure payment in the event of a default. If this fund is exhausted, the government has agreed to provide funding. By providing these guarantees of payment, KIPP was able to attract financing. That 68% of senior debt for the plant was ultimately African-owned is an indication of increased regional appetite for Ghanaian infrastructure projects.

What can the private sector do to improve power provision outside of urban areas?

BREW-BUTLER: Power generation by the state is insufficient, and the private sector will be increasingly important to make up the deficit in demand. Electricity consumption is forecast to grow by 8% annually until 2018, increasing pressure on the grid. Many cities in Ghana require no more than 40-60 MW ofcapacity, and installing power supplies locally will relieve stress on the national grid. The shortages have been difficult for industrial centres. A localised approach to production for residential consumers could free up capacity for industries that have been working below capacity due to the shortfalls.

What are the major challenges in achieving the goal of 3665 MW of additional capacity by 2020?

BREW-BUTLER: This will be difficult but it is achievable. Efficient resource mobilisation must be at the forefront of this effort. This is a call for independent power producers (IPPs) to invest in Ghana, yet IPPs must have confidence that there will be offtake for their supply. The government must continue to provide business-friendly arrangements. The implementation of appropriate tariffs will attract investors.

How can universal electricity access be balanced with commercially viable tariffs for IPPs?

BREW-BUTLER: IPPs in emerging markets will want their risks to be rewarded with profit. If the costs cannot be justified, they will do business elsewhere. On the other hand, it is the government’s duty to make sure that electricity prices are reasonable. Ghana has a history of hydroelectricity production, in which the cost of production is significantly lower than with thermal power. Ghana’s energy mix has changed, and current tariffs do not reflect the costs of production. The government has taken the right steps to raise electricity tariffs incrementally but further increases will be needed. As you can see by the flow of foreign direct investment now, the market has confidence in the Ghanaian leadership to adjust tariffs accordingly.

How can fuel shortages be safeguarded against?

BREW-BUTLER: Ghana has been grappling with the drop in supply from the West African Gas Pipeline and the high cost of heavy fuels used to power generation plants. Earlier IPPs faced challenges due to their dependence on the government to provide fuel, so KIPP chose to supply its own fuel. The Cenpower consortium also saw dependence on one form of fuel reduce capacity generation and ability in other power projects. KIPP will be fully functional, using diesel, light crude oil or natural gas. By learning from the challenges faced by recently developed thermal plants in Ghana, CenPower has been able to address concerns before the start of production. By mitigating foreseeable risks, KIPP can be a reliable power producer in Ghana as energy consumption increases.