The long winding road to produce 350MW; How the Cenpower dream came alive
When faced with scathing criticisms in his previous life as a leading football administrator and former president of the Ghana Football Association, Sam Nana Brew-Butler, resolved not to give up, but rather declared “I have a thick skin”.
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Many years down the lane, the resilience and tenacity of the man has yielded a worthy result; the construction of US$900 million Independent Power Project (IPP) – his brainchild – has just begun.
The Kpone Independent Power Plant (KIPP) designed to produce 350 megawatts of power from a Combined Cycle Gas Turbine, has taken 15 years to see the light of day, having survived unimaginable frustrations in the boardroom and in the hands of political authorities and technocrats.
“This IPP has taken over a decade and a half from inception to sod-cutting. This is a project that has received some attention from all administrations under the Fourth Republic to date,” the Chairman of Cenpower Generation Co. Ltd, Nana Brew-Butler, said on January 29 at Kpone, when he cut the sod to start the project which construction will cost US$423 million, executable in 32 months.
The Vice-President, Paa Kwesi Amissah-Arthur, cut the sod for construction works to start on the project which is remarkable in many respects.
First, it will contribute about 10 per cent of the country’s installed energy capacity, capable of powering the whole of the Ashanti and Brong Ahafo regions, as well as parts of the Central Region.
Second, it is the country’s largest independent power project with also the highest value among existing IPPs. It has the most complex financing arrangement which cuts across commercial banks and multilateral development financiers, and it is the only power project with substantial African involvement.
In spite of its big-ticket nature, the KIPP is the first Build, Own, Operate and Transfer (BOOT) power project in the country. After 20 years of operation, during which it will supply power to the Electricity Company of Ghana (ECG) under an agreement, promoters of KIPP will hand the facility to the state at no cost. By that time, the plant will still have about 15 years of life span.
Significantly, the project boasts a complex win-win financial arrangement which has already won an international award as the African Power Deal of 2014.
“We are encouraged and happy to note that this remarkable and extraordinary deal is largely African. The initiators and founder shareholders are Ghanaians; 62 per cent of equity is held by African entities; 83 per cent of the senior debt is issued by African lenders and the project construction is African, assisted by indigenous Ghanaian sub-contractor,” chairman Brew-Butler stated.
Although, the project is due for commissioning in 2017, it anchors a solid assurance for power generation sufficiency of the country going forward, as it contributes to the growing number of IPPs that would supplement the government's efforts at achieving energy security.
Already, the Ministry of Energy and Petroleum has signed 16 IPP agreements, which are at various stages of development.
KIPP's strategic design
Having suffered some challenges well over a decade, lessons have been learnt and sponsors have taken the pain to indemnify the project against all foreseeable risks.
Firstly, the combined cycle is an efficient generation technology which combines a gas-fired turbine with a steam turbine. The design enables the gas turbine to create electricity and then captures the resulting waste heat to create steam,which in turn drives a steam turbine, thus increasing the system’s power output without increasing the fuel consumption.
Related to that, the plant has tri-fuel configuration – it can run on light crude, distillate and natural gas. This fuel flexibility is a hedge against fuel supply risk, which is currently plaguing some active thermal generators in the country when there is no or insufficient supply of natural gas from Nigeria.
Secondly, KIPP is located on the Kpone Power Enclave near the bulk fuel storage farms of some bigwigs in the oil industry, including Vitol and Chase Petroleum. Besides, the project has a Fuel Supply Agreement with Vitol which will build storage facilities at its own cost and feed the plant with dedicated light crude oil.
To ensure a successful construction phase, the project has selected a world class South African contractor, Group Five, through an international competitive tendering process. The contractor has a backing of performance guarantee and liquidated damages as incentives.
The infamous political risk, which has stalled plethora of projects in this country as a result of change in government or political leadership, has also been mitigated under the Cenpower project. The government has a Consent and Support Agreement with project sponsors, in addition to a political risk insurance cover provided by the South African Export Credit Guarantee to cover commercial financing by South