NDC Chokes On ‘Take-Or-Pay’ Agreements

Former Finance Minister Seth Terkper has claimed that the National Democratic Congress (NDC) administration started the renegotiation of the take-or-pay agreements that are crippling the energy sector.

He, however, said they could not succeed in converting the take-or-pay agreements to take-and-pay because of what he called the usual delays in getting the renegotiations done.

Interestingly, Mr. Terkper, speaking on Citi FM, after Finance Minister Ken Ofori-Atta had read the 2019 Mid-Year Budget Review on Monday, could not point to a single renegotiation agreement but was able to demand that the New Patriotic Party (NPP) administration should not take credit for the take-and-pay efforts.

Controversial Agreement

The take-or-pay agreement was designed such that whether the IPP’s are producing power or not the country pays them hefty sums as fees.

It was during the era of the Mahama NDC administration that most of these controversial agreements were signed but immediately the NPP assumed office then Minister Boakye Agyarko started calling the power producers to come back to the negotiation table because the country could no longer bear the obnoxious agreements.

The Finance Minister affirmed in Parliament that the government had resolved “to convert all take-or-pay contracts to take-and-pay contracts.”

“Accordingly, starting 1st August, 2019, government is to pay for energy and gas that we actually consume. All take-or-pay contracts will be renegotiated to convert to take-and-pay for both PPAs and Gas Supply Agreements (GSAs). Government will seek parliamentary ratification where appropriate,” adding that the NPP administration was suspending “indefinitely or terminate all PPAs currently under negotiation.”

He also said they had resolved “to immediately place a complete moratorium on signing new PPAs and Put-Call Option Agreements (PCOAs),” and also “to subject all future PPAs competitive and transparent procurement procedures. Government will, therefore, no longer entertain any unsolicited proposals.

He further said, among other measures, that they had resolved “to implement the economic merit order dispatch which means that the most efficient power plants will be dispatched first,” and also “to improving the performance of the distribution utility and has agreed with the concessionaire a plan to reduce electricity losses and increase collections based on an agreed investment plan.”

Mr. Terkper was adamant, saying “this (take-or-pay arrangement) is not something unique to the Mahama administration. It is not unique to the Mills administration. Bui Dam, Sonon Asogli and others that were signed under the NPP era are on take-or-pay.”

“It was the Mahama administration that rather attempted to change this from take-or-pay to PCOA (Put/Call Option Agreement), which means you pay for what you take. As usual, there was a delay in the implementation. We had already started the process of changing to the Put Call Option. It is verifiable,” he said.

He added that “…We were in a process in collaboration with the World Bank to organize a meeting on this conditions including whether we should use gas and LNG and talk to the IPPs and start the process of negotiations. All new agreements were to be on the PCOA, the old ones to be negotiated and that is exactly what the minister is announcing as if it is new,” he added.