December 25, 2016

Parliament has granted a request tabled before it by the Finance Ministry to waive import duties and other taxes amounting to US$255,081,814.00. on project materials and equipment to be procured for use in relation to the power purchase agreements between Karpower Ghana Company Limited and the Electricity Company of Ghana Limited for the supply of the two 225MW powerships in Tema and Sekondi.

This follows a heated argument that ensued between the Minority and the Majority sides of the House.

Discussions which started on Thursday, December 22, 2016, saw both sides put up strong arguments to advance their course as to whether the request for the tax waivers should be granted or not.

Chairman of the Finance Committee, James Klutse Avedzi in presenting his committee’s report told Members that due to the power crisis that bedeviled the country for about three and half years as a result of the drought that adversely affected water inflow in the Akosombo Dam, there was the need for policy shift that focuses on increasing the installed capacity of Ghana’s electricity generation from 2000MW to about 5000MW.

This, he noted, is to serve domestic market, provide appropriate reserve margin, and position the country to export power and develop a non-congested transmission system for the country.

In view of this, he said there is the need for accelerated effort to add and reinforce more thermal generation and diversify the country’s portfolio of power plants as well as expand the electric transmission and distribution grid in order to ensure reliable and secured evacuation of all power that will be generated to meet the ever increasing demands of customers.

To meet this goal, the government, according to Mr. Avedzi, entered into a 10-year power purchase agreement negotiation with Karpowership for the provision of 450MW of electric power into the country’s national grid.

The powership project is expected to provide medium to long term reliable and low cost supply of electricity over a period of ten years to the Republic of Ghana whilst new power plants constructed and existing ones rehabilitated.

This, he said, has necessitated the granting of waiver of relevant taxes to Karpower.
The waivers, he said, falls in line with the government’s investment promotion program to give tax incentives to investors.

But the Minority led by Osei Kyei-Mensah-Bonsu, demanded for the entire agreement covering the deal to enable them make informed decision over the tax waivers.

Besides since there was court ruling over the Karpower deal, it would be appropriate for the House to appraise itself with the ruling before going ahead to grant the tax waivers.

Majority Leader, Hon. Alban Sumana Kingsford Bagbin, in response told the House that the tax waivers are in connection to the project implementation agreement which is different from the commercial agreement.

After back and forth argument over the issue, the First Deputy Speaker, Ebo Barton-Odro, who presided over the sitting, deferred the discussions to Friday, December 22, 2016 to enable the House appraise itself with the court ruling before going ahead to grant the tax waivers.

Members after appraising themselves with the court ruling at Friday’s sitting had no difficulty in granting the Finance Ministry’s request for the tax waivers.

The 225MW power ship has since its arrival in the country last year, consistently and reliably produced 225MW to the national grid despite unfulfilled key conditions in the Power Purchasing Agreement (PPA).

One of the biggest advantage of the Karpowership is that it sells power to ECG and not plant availability, thus, fuel supply is the obligation of Karpower Ghana Limited at its own cost, failure of which will attract penalties.

The PPA was signed with ECG and negotiated over 18months as with other IPPs  like Asogli and CenPower among others.

Under the PPA tax exemptions and guarantees were required but have remained outstanding until now.

The tax exemptions being granted under a Project implementation  Agreement were negotiated by Ministry of Finance, GRA and Ministry of Power in October 2016
in line with Provisions of the PPA.

It covers a ten-year period. Others have exemptions for much longer period.

The Turkish powership saves Ghana approximately US$120million per year over other fuel.