Former Ghana national oil company head links World Bank’s Sankofa guarantee to gas power plant deals

22 September 2021

Further details have emerged of the World Bank’s role in the agreement of onerous ‘take or pay’ gas power contracts with independent power producers (IPPs) in Ghana, which have contributed to the country’s deteriorating public finances.

In a March interview with Ghanaian radio station Okay FM, the former CEO of the Ghana National Petroleum Corporation (GNPC), Alex Mould, stated that the Bank’s 2015 guarantee for the Sankofa offshore gas mega-project (see Observer Spring 2020) included a commitment that the government would agree power purchase agreements (PPAs) with four IPPs for gas-fired power stations.

The Bank helped facilitate the Sankofa offshore gas project via two guarantees (see Observer Spring 2020). This included a $500 million payment guarantee from the International Development Association (IDA), the World Bank’s concessional lending arm, covering the risks of GNPC not fulfilling its payment obligations to Eni and Vitol, the two private oil firms involved in the project. Mould indicated that the Bank’s guarantee for the Sankofa project was instrumental in four gas power IPPs subsequently raising commercial loans to construct new gas plants, and that the Bank helped devise selection criteria for the IPPs.

The PPAs included ‘take or pay’ clauses, which require the country to purchase a minimum amount of electricity over the duration of the long-term contracts, whether it uses it or not. ‘Take or pay’ clauses – including for the four IPPs in question – have resulted in the country facing a $500 million-a-year bill for unused electricity. The contracts have become a bone of contention in Ghana, with the current administration repeatedly citing them as adding to the country’s debt burden. Ghana has signed 32 PPAs, overall, in recent years, according to its latest IMF’s Article IV report.