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Company News on Tuesday, July 30, 2019
Source: Myjoyonline.com
2019-07-30
Alex Mold, former CEO of GNPC
The former chief executive of Ghana's National Petroleum Corporation (GNPC) has criticized his government for renegotiating all take-or-pay agreements.
Alex Mold wrote Tuesday that, if approved by Parliament, this decision would mean that "the government should provide enhanced security systems to make it possible to finance the development of these Gas2Power gas fields".
The decision, he said, would scare potential investors.
"An badogy is one where a caterer agrees with a company to provide meals to 200 employees based on demand forecasts at the time; she then prepares and buys materials to provide 200 meals a day; to find out later that society decides unilaterally. For some reason, reduce meals to 150 people …
"… how does the caterer pay for excess capacity," he wrote.
Meanwhile, the minority in Parliament has asked the government to reconsider the new taxes announced during the budget review presented by Finance Minister Ken Ofori-Atta in Parliament on Monday.
Read the complete Mold statement below
Alex Mold writes: A management agreement could jeopardize future investments in the electricity sector
The Minister of Finance's misguided statement to renegotiate all take-versus-sell electricity deals will certainly have negative repercussions. This will scare potential investors not only in the electricity sector, but even more so in the development of any future field of gas exploration and production (E & P).
If investors agree to enter into take-over agreements, the government will have to provide even greater sets of security measures to fund the development of these gas fields for Gas2Power.
The Minister of Finance has gone astray and this shows his team's lack of experience in funding infrastructure projects.
An badogy is where a caterer agrees with a company to provide meals to 200 people based on demand forecasts at the time. She then prepares, incurs debt to buy equipment to provide 200 meals a day; to find out later that the company unilaterally decided or for another reason to reduce meals to 150 people. The consequences will be heavy for everyone involved – buyer, supplier, supplier's bank, etc. How does the caterer settle the debt with reduced revenues and margins?
It's a joke; they can not do it for new independent electricity producers (IPP) because no new project will reach the decision of financial investment (FID). Maybe that can be done for old IPP plants that have fully paid for their initial costs. The issue raised here is related to the Minister's statement that he would renegotiate "ALL" the PPI power purchase agreements to have them take and pay by taking or paying. It is possible to renegotiate old PPIs that have most likely paid all of their initial investments, but it is quite impossible to do so for relatively new PPIs that can not be done for new PPIs.
However, if this is done unilaterally or without agreement with the stakeholders of the IPP funding; this may result in a breach of financial covenants between the PPI and its financial institutions. This could actually lead to a default and potentially a judicial debt to the state.
The first thing to take into account is the fact that the World Bank has provided up to $ 700 million in guarantees, its largest financial guarantee to a project, to support the development of a field to take or payment for E & P Gas. They also financed 4 take-away plants in Ghana. Let's see if they can renegotiate with the World Bank – that's where they have to start so we can see how serious they are. Then, the financial institutions that financed these plants. They will probably not accept renegotiation unless the government provides more support or guarantees in the form, possibly, of standby letters of credit, to rebadure the electricity sector's failures already. bankrupt.
A take-home contract will have lower rates than a take-home contract!
We also must not confuse buyback option agreements with buyback options with firm purchase agreements. PCOA replaces government support and consent agreements, which essentially mitigate political and national risks in the event of default due to government interference. That is, country-specific – given that the government controls PURC and the entire energy value chain, government intervention represents a huge risk for investors and their financial institutions.
On the other hand, the "take-or-pay" principle is more concerned with the payment of debtors for the power received – guaranteeing the payment of the debt service of the capital expenditure financed by the financial institution of the investor. This is a project finance requirement in the energy sector (and for most infrastructure projects).
It should be noted that Bui and Sunon Asogli, which were signed by the government NPP, were firm purchase agreements.
If the IPP has repaid its initial investments, it is necessary to renegotiate. The PIP needed a firm purchase agreement to secure the initial financing of the investments.
If we send a message to the energy investor community informing us that we will no longer sign underwriting agreements, as the Minister of Finance has explicitly stated, it would be impossible for them to make a decision to financial investment and increase funding. from project finance banks.
Finally, the Minister of Finance has been hypocritical to deceive the public into providing a reliable (24/7) power generation capacity that is closer to 3,500 mW than 4,593 mW . But it's a different subject for another day!
Alex Mold
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