AMERI CONTRACT SUM JUMPS TO $600M

Posted on: www.dailyguideghana.com

By William Yaw Owusu

Wednesday, December 16, 2015

It appears Ghana will pay more than the $510 million quoted as the contract sum for the provision of 10 gas turbines by Africa & Middle East Resources Investment Group (AMERI Energy).

According to the Africa Centre for Energy Policy (ACEP), AMERI will be smiling to the bank every year with the payment of $120 million, totalling $600 million for the five-year contract, with the Ghana government also picking the cost of fuelling.  

“AMERI will be paid $850,000 per turbine per month. This will amount to $8.5 million for the 10 turbines, with cumulative annual payments of $102 million. In addition, an amount of $16.6 million will be paid as variable costs. This brings the total payment due to AMERI and its partners to almost $120 million,” ACEP said in a statement issued yesterday.

The controversial deal between Ghana and AMERI has sparked a heated debate in the country since award-winning Norwegian newspaper Verdens Gang (VG) published that the power generating gas turbines are estimated to cost $220 million on the international market but the NDC government is contracting them for $510 million for Ghana, excluding service charges.

Power Minister Dr Kwabena Donkor, in his rebuttal on Monday, created the impression that all Ghana needed to do was to pay AMERI Energy a total of $510 million for five years for 250megawatts emergency power as part of efforts to solve the protracted power crisis (aka dumsor) which is wreaking havoc on the economy.

However, a careful reading of the contract showed that the $510 million is solely for renting the 10 new General Electric TM 2500 aeroderivative gas turbines and it means that Ghana is going to incur an additional cost of over $150 million in the deal.

Contract Details

At Annex G of the contract titled, “Pricing, Contract Price, Monthly Required Payments,” the document states that equipment payment will cost $850,000 per month per unit, while total payment per a year will be $102 million.

According to the document, variable charge per year is $16.6 million.

With a total capacity of 250MW, the contract further said the number of units to be deployed will be 10 and output of each unit is expected to be 23MW while guaranteed output is 230MW and guaranteed availability expected to be 90 percent.

Middleman Role

Already, it has been alleged that AMERI Energy signed the contract with the government, but behind-the-scenes, it appeared to be playing a middleman’s role since according to the Norwegian newspaper, AMERI has a contract with a Greek firm called METKA for the supply of the turbines.

METKA also got the equipment from GE in the United States.

AMERI Energy, according to the newspaper, is paying METKA $350 million for the turbines, compelling some experts to question where the rest of the $510 million, of which the $350 million is a part, will be going to.

Apart from the equipment price of $510 million, there is an additional annual payment of $16.6 million variable costs to AMERI for five years, translating into some $83 million within the five-year contract period.

Fuel For Turbines

Interestingly, fuelling of the turbines which are currently being installed in Takoradi is the responsibility of the government, per the agreement.

AMERI Energy’s responsibility in the deal is to mobilise, install, commission, operate, maintain and transfer “the relevant AMERI Energy Equipment, as more fully described in Annex E of this agreement.”

ACEP’s Statement

The Africa Centre for Energy Policy (ACEP), which has been critiquing the government’s energy contracts, has issued a release and said there is no value for money in the deal.

“Under normal circumstances, we would not have responded to the statement because it was not directed at us. However, given that we were the first to raise issues relating to the deal in March 2015, our interest is further strengthened by our quest to ensure an informed public discourse on it. Our response to the statement is therefore articulated as follows,” 

Mohammed Amin Anta, Executive Director of ACEP said in a statement.

“The key issue is whether the spreading of payments for a US$220 million project over five years end up as US$510 million, excluding O&M costs, given that the benchmark cost of capital (Libor) is less than 1%? Is this value for money?”

Erroneous Statement

ACEP said that it is ‘erroneous’ for the Power Minister to hold that government has not made any payments to AMERI Energy and will not be making any payments for the cost of the equipment.

ACEP said the explanation the minister offered could not be “a classical IPP arrangement,” saying, “VRA is paying for the equipment as well and will own it after five years.”

“Typical IPP arrangements will not be for five years when the equipment can have an operating life of 20 years. As stated earlier, the Government/VRA is supplying fuel so all payments to AMERI will be towards the cost of the turbines plus O&M, which is minor compared to the leasing (or Fixed cost) charges.”

It said the standby LC is to ensure that the monthly payments for the cost of the turbines are secured and in case of default, AMERI will fall on it to redeem any outstanding payment defaults.

Charity Organisation

The statement said the minister’s point that Ghana will own the turbines after five years “confirms our point that Ghana is paying for the equipment because it is not possible to take ownership without paying for them, assuming as the Ministry said, we are only paying for the power produced from the turbines. Indeed, AMERI is not a charity to ‘donate’ 250 MW to Ghana for ‘free’.

“Ministry of Power should confirm the other costs (auxiliaries, balance of plant, financing costs, etc) in the case of the AMERI plant. It will certainly not escalate the costs to $510 million over five years.”

METKA Connection

“Fortunately, METKA, which has a deal with AMERI to technically own, install and operate the turbines for almost five years before handing them over to VRA, stated in a statement that the entire project would cost $350 million over the period, including the cost of installation, civil works, etc. 

This sounds reasonable assuming that in addition to the cost of the turbines, about $130 million would be devoted to meeting the other costs (installation, civil works, etc). How did the payments due increase to $510 million?”

Auxiliary Works

The statement said the cost of all auxiliary works is being borne by AMERI Energy and will be recovered through the monthly payments to AMERI, adding, “so it should not be made to seem that AMERI is bearing those costs for free.

“The question is, if Government bought the turbines outright at $220 million, how much would it have spent to deliver them to Ghana and to install and operate them? Would that have cost $290 million?”

“We understand the reason given to Parliament for opting out of an outright purchase was on grounds of lack of money. Assuming this is true, where will Government get the money to pay an annual fee of almost $120 million to AMERI ($102 million plus $16.6 million)?”

ACEP demanded the release of the report the minister claimed was from GE Consortium to the VRA for similar equipment on rental basis which he said proved to be far more expensive and was therefore rejected by the authority.