FUTURE OF POWER GENERATION IN GHANA At the 2019 GhIE Annual Conference www.vra.com FUTURE OF POWER GENERATION IN GHANA by VRA At the 2019 GhIE Annual Conference March 27-28, 2019

Presentation Outline Overview of power sector of Ghana Current Power Generation Situation in Ghana Power demand outlook Future power generation options to meet projected demand

Overview of Power Sector of Ghana

Institutional Framework of Power Sector of Ghana Ministry of Energy Energy Commission Public Utility Regulatory Commission NEDCo ENCLAVE POWER CO. IPP’s – SAPP, CENIT, TICO, KARPOWER, AKSA. Etc.

Ghana Power Supply Market Regulated Market (Tariff Determined by Regulator) Distribution Companies ECG NEDCO Enclave Power Company De-regulated Market (Tariff determined independent of Regulator) Some Mining Companies Some Industries VALCO Exports Burkina Faso Togo/Benin Power exchange with Cote d’Ivoire

Current Power Generation Situation in Ghana

Installed Generation Capacity in Ghana (MW) Plants Installed Capacity Dependable Capacity Fuel Type (MW) Akosombo GS 1020 900 Hydro Kpong GS 160 105 TAPCO (T1) 330 300 LCO/Gas TICO (T2) 340 320 TT1PP 110 100 TT2PP 80 70 Gas KTPP 220 200 Gas/ Diesel VRA Solar Plant 2.5 Solar TOTAL VRA 2,263 1,995   Bui GS 404 360 CENIT AMERI 250 230 SAPP 161 180 SAPP 330 KAR Power 470 450 HFO AKSA 370 350 BXC Solar 20 Meinergy Solar Trojan 44 39.6 Diesel/Gas Genser 22 18 TOTAL IPP 2,270 2,067.6 TOTAL (VRA, Bui & IPPs) 4,533 4,063.6

2019 Demand/Supply Situation Currently, there is adequate capacity to meet the full electricity demand on the Interconnected Transmission Network At the beginning of this year, it was forecasted that the system peak demand would be approximately 2,700 MW, made up as follows: Domestic Demand – 2,400 MW VALCO – 150 MW Export – 150 MW The installed capacity is over 4,500 MW and the dependable capacity is about 4,000 MW We have about 1,300 MW (48%) more than what we currently need

2019 Demand/Supply Situation Additionally a number of thermal generation projects are currently under construction and expected to come online between 2019 and 2020. Cenpower – 360 MW Amandi – 190 MW Early Power – 390 MW CPGC – 100 MW TOTAL – 1,040 MW

Some major challenges confronting power supply are: 2019 Demand/Supply Situation Some major challenges confronting power supply are: Reliability of gas supply Inadequate gas volumes in the Eastern enclave of the power sector Cedi/Dollar exposure Financial Challenges Electricity Tariff Structure Self RE generation

Reliability of Gas Supply

Reliability of Gas Supply

Inadequate Gas Volumes There is a total of about 1080 MW (LCO/gas fired) installed capacity in the Eastern Enclave Another 360 MW is under commissioning There is enough gas to operate just about 280 MW of generation capacity 800 MW capacity cannot be dispatched because of inadequate natural gas volumes Puts pressure on hydropower plants and other thermal plants Efforts being made to enable gas transfer from the West to the East

Cedi to Dollar Exposure – Timing of Tariff Adjustments Not Keeping up with Cedi Depreciation

Cash Flow Issues VRA indebtedness to Ghana Gas is about US$ 750 Million This is simply because what ECG pays VRA for power consumed by the AMERI power plant is sufficient to cater for AMERI capacity charges only (fuel consumed is not paid) VRA not being paid and hence they are also not in a position to pay Ghana Gas, hence the build up of the indebtedness to Ghana Gas VRA can only pay when paid by ECG ECG also has issues with non-payment by GoG institutions and also below 100% collection of electricity used by non-GoG institutions Inter-Utility debt Matrix handled by GoG is expected to address it ECG struggles to pay in full, IPPs currently in Operation because of Forex Exposure and below cost tariff (some of the expectations on fuel use for Tariff could not be met, e.g. Karpower was expected to operate on Gas-still operating on HFO)

Electricity Tariff Structure The current tariff structure is purely energy based and that poses a challenge for covering full cost of services that is charged based on both Fixed and Variable charges Existing contracts have both fixed (plant capacity being available) and variable (energy supplied) An IPP gets paid (capacity payments) once the plant is available, even if the plant is not dispatched. To address this requires tariff to have a fixed and variable component For reliability there is the need to have charges for reserve plants as well So tariff requires fundamental shift. PURC is currently undertaking a study on the tariff and hopefully it will address this challenge

Self RE Generation Following the recent ‘Dumsor’ a number of people have solar systems that they use for their house Such consumers use grid power as back-up Good concept, but metering and commercial arrangements have not been fully concluded Using grid as back-up requires that some payment should be made to the grid (Distribution Network) Need the right Net Metering systems and agreement on policies to govern same

Future Power Demand/Supply Outlook

Future Demand Outlook Over the medium – long term demand for electricity is projected to grow at an average of about 7% from 2,500 MW in 2018 to about 5,800 MW in 2030 Major growth drivers are ECG/PBS NEDCO VALCO Electricity consumption is projected to grow at a similar rate from approx. 16,700 GWh in 2018 to about 40,000 GWh in 2030

Future Demand Outlook

Demand/Supply Outlook (2018 – 2030)

Demand/Supply Outlook Considering only projects currently under construction Cenpower – 360 MW Amandi – 190 MW Early Power – 390 MW CPGC – 100 MW TOTAL – 1,040 MW Over the medium term (at least next 5 years) there is adequate generation capacity to meet projected demand + 20% reserve margin requirement For the High demand case, there will be adequate generation capacity for the next 3 years

Demand/Supply Outlook There are still a number of other generation projects that are to come online over the medium – long term VRA Generation Initiatives to make existing assets more efficient VRA and other IPPs Renewable Energy Initiatives Other IPP Projects that have already signed agreements Other future generation options under consideration Nuclear Coal

Projected Fuel Requirement

Projected Fuel Requirement There are a number of gas supply initiatives to address projected gas demand Indigenous gas – up to about 350 mmscf/day Nigeria Gas – about 60 mmscf/day LNG Initiatives – up to about 430 mmscf/day being discussed Adequate gas provisions in place to meet projected gas demand Need to properly coordinate initiatives and get the timings and terms right This is to help avoid payment for gas not needed Need to address gas infrastructure requirements of the Eastern power generation enclave

Key Issues Wholesale Electricity Market Financing New Projects Market documents still being developed. It’s important to get it right Success depends seriously on liquidity of the power sector to address all commercial settlement issues and enforcing settlement rules With forex risk, we may end up paying more for electricity Financing New Projects High dependence on government Utilities need to have a strong balance sheet to enable them raise the needed capital to execute projects in a timely manner Preventing a panic procurement situation in future Major investments in the power sector always take place after a power crises We end up with expensive projects because we purchase in a position of weakness

Key Issues Fuel Supply Security Need to improve fuel supply reliability Get timing of LNG augmentation right More efficient Procurement of New Generation Procure additional generation through competitive tenders with enough lead time to get them operating at the right time

Conclusion Power sector of Ghana has evolved over the years There is currently enough generation capacity to meet demand There is the need to take steps to ensure timely procurement of additional capacity Power sector of Ghana has some challenges and issues that will require that some key decisions are made regarding the power sector

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