VZCZCXRO9347
RR RUEHMA RUEHPA
DE RUEHAR #1791/01 2361342
ZNR UUUUU ZZH
R 241342Z AUG 07
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 5154
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 03 ACCRA 001791 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ENRG GH
SUBJECT: GHANA'S ENERGY CRISIS: DAM AT CRITICAL LEVEL; EMERGENCY 
GENERATION UNDERWAY 
 
Ref: A) Accra 847; B) Accra 1012; C) Accra 282 
 
¶1. (U) SUMMARY: This is the third in a series of cables on Ghana's 
energy sector. The first, ref A, provided background on the crisis 
and near-term remedial measures. The second, ref B, focused 
primarily on the impact of the crisis on the mining sector.  This 
cable provides an update on the crisis and progress in putting in 
place new generation capacity.  Septel will address transmission and 
regulatory issues.  Ghana continues to face serious energy 
shortages.  The Akosombo Dam, which historically met 60%-70% of 
Ghana's energy needs, is operating at one-third of its capacity. 
Ghanaians continue to face frequent power outages, industry is 
suffering production losses, and investors are increasingly 
cautious.  Immediate plans for new generating capacity include the 
expansion of an existing thermal plant and refurbishing a never-used 
power barge.  The government's longer term plans include managing 
demand, constructing the 400 MW Bui Dam, and pursuing nuclear 
energy.  End Summary. 
 
------------------ 
CURRENT ASSESSMENT 
------------------ 
 
¶2. (U) The Akosombo Dam is functioning on only two of six turbines, 
and the water level in the lake remains below stated "minimum" 
levels and hovers around the "critical" operating level.  While 
there has been no serious discussion of abandoning the Dam, there is 
a growing realization that the current low water levels may be more 
chronic than acute and Ghana will need to look elsewhere to meet its 
power needs.   Even with a strong rainy season, water levels in Lake 
Volta are unlikely to recover to levels that would enable the Dam to 
contribute more power next year than it did this year.  On July 18, 
the Daily Graphic reported that a Meteorological Department 
spokesperson said: "...considering the time of the year, it [is] not 
probable for the country to get more rains in the catchment areas of 
the dam, a situation which makes dependence on the dam a hopeless 
situation." 
 
¶3. (U) Officially, load-shedding is scheduled for 12 hours every 
second or third day but the Minister of Energy, Joseph Kofi Adda, 
was pleased to report that some relief from the load-shedding 
schedule is already being felt.  He reiterated the GoG goal of 
ending load-shedding by the end of September, but many observers 
expect load-shedding to continue beyond 2007.  The relief being 
experienced, in the form of unannounced respite from scheduled 
outages, could be due to temporary reduced demand due to relatively 
cool weather.  Some relief is also due to resumption of a portion of 
power imports previously received from Cote d'Ivoire.  Ghana is 
currently regularly receiving 30MW.  Minister Adda said his largest 
current concern is the cost of fuel. 
 
----------------- 
EMERGENCY FUNDING 
----------------- 
 
¶4. (U) On July 30 Parliament approved an 8.2 trillion cedi (about 
$885 million) 2007 supplementary budget financed primarily by 
divestiture proceeds and a planned sovereign bond issuance.  Seven 
trillion cedi (about $756 million) will go to the Ministry of 
Energy.  This represents a 734.9% increase in the Ministry's 
resources for 2007.  Planned allocations from divestiture proceeds 
include: $40 million to the Volta River Authority (VRA), $29 million 
to the Electricity Company of Ghana (ECG), $112 million for a 
Reserve Fund for crude oil purchase for VRA, $150 million for crude 
oil for emergency plants, and $40-50 million for an escrow for 
purchase of gas from the West Africa Gas Pipeline (WAGP).  Planned 
allocations from the potential bond are: $202 million investment for 
VRA, $65 million investment for ECG, $60 million for an upfront 
payment on the Bui Dam, and $30 million to buy 40% of the shares in 
TAQA (the UAE-based energy investment company that purchased CMS 
Energy) to make the GoG a 50% owner in the joint-venture thermal 
plant in Takoradi. 
 
------------------------------ 
IMMEDIATE GENERATING CAPACITY 
------------------------------ 
 
¶5. (SBU) GoG has outlined the following emergency measures to meet - 
and surpass - the estimated 384MW deficit for 2007. [NOTE: The 
deficit estimate is based on the shortfall compared to power 
provided last year, which may still be well short of meeting actual 
demand. END NOTE.]  The Technical Director at the Ministry of 
Energy, Michael Opam, estimated that 90MW of emergency power is 
already consistently available.  Unless otherwise specified, all 
measures will operate on diesel in the immediate-term. 
 
--136MW/Emergency plants: The GoG purchased 127 emergency high-speed 
diesel generators (for a total of 126MW) from U.S. companies (ref 
C).  As of August 10, 106 MW located in Tema were in operation, but 
not always in use.  The GoG is currently working on commissioning 
 
ACCRA 00001791  002 OF 003 
 
 
the remaining 20MW located in Kumasi before September. The GoG 
provides the remaining 10MW by running rehabilitated diesel plants 
at peak times at the Burma Camp military base in Accra.  [NOTE: A 
VRA employee on site in Tema said that such containerized generation 
units are difficult to acquire in the face of growing global demand. 
 He said it is rumored that China has laid claim to the next five 
years' worth of net new production. END NOTE.] 
 
--80MW/Mining firms' plant at Tema:  Paid for collectively by the 
big four mining companies, this plant is currently not generating 
any electricity, but 40MW is expected by the end of August and 80MW 
by mid-September. 
 
--50MW/Wood Group plant at Tema: 25MW of this diesel-powered thermal 
plant is operational.  It was supplied by Wood Group, a U.S. 
affiliate to a Dubai-based company.  The remaining 25MW should be 
online by the end of September. 
 
--126MW/Tema 1 Thermal Plant: Originally slated to be operational in 
August, VRA now projects the plant will be operational, using oil, 
by the end of 2007.  The GoG also plans to expand this plant to 
330MW through the addition of a combined cycle.  The plant is 
expected to run on natural gas beginning in 2008. 
 
--125MW/Osagyefo Barge near Effasu, Western Region: Under a lease 
agreement supported by a Power Purchase Agreement (PPA) with 
U.S.-owned Balkan Energy Company (BEC), the never-used barge will be 
refurbished and operational by the end of 2007 at a cost of $40 
million.   Nine months later it is slated to be converted to a 
combined cycle power plant, adding 60MW at an additional cost of 
$100 million.  The deal is part of a 20-year contract that includes 
BEC's commitment to invest half a billion dollars to develop new 
fuel sources (most likely offshore gas reserves).  [COMMENT: There 
is skepticism about whether the GoG can sustain its end of the deal, 
including the high cost of diesel and payment under the PPA.  END 
COMMENT.] 
 
-------------------------------- 
MEDIUM-TERM GENERATING CAPACITY 
-------------------------------- 
 
¶6. (SBU) The Minister of Energy announced recently that Ghana's 
energy supply will cross the 2000MW mark by mid-2008.  Among the 
measures expected to help reach this goal are the following: 
 
--84MW/Ranhill Engineering plant in Tema: The GoG is currently 
finalizing an agreement with Malaysian-owned Ranhill Engineers and 
Contractor SDNBHD to pay 20% of the $55 million contract price 
upfront for a plant which will be comprised of two gas turbines, two 
generators, and accessories. 
 
--110MW/Expansion of existing Takoradi 220MW plant (T2): The GoG 
continues to keep plans to add a combined cycle turbine to increase 
the plant's capacity to 330MW.  T2 was formerly 90% owned by CMS 
Energy but the parent company of CMS Energy was sold to TAQA, and 
the CMS interest in the plant went with the deal.  The GoG voiced 
displeasure at not being consulted about the sale and is exercising 
its option to purchase additional shares in the plant to become a 
50% owner.  [NOTE: The expansion of T2 has been part of the GoG's 
plans for six years and was most recently stalled over inability to 
reach agreement on terms with the IFC.  According to the Minister of 
Energy, the GoG is working out a plan to move ahead with the project 
with TAQA.  Estimated completion for the project is two years from 
signing. END NOTE.] 
 
--230MW/Alstom Turbine Units in Tema:  The GoG has purchased 
turbines from Switzerland to produce 230MW by September 2008.  A 
contract is expected to be finalized this week that will outline the 
eventual conversion to a 330MW combined cycle. 
 
--200MW/Chinese IPP at Tema: An agreement was signed three months 
ago for this natural-gas powered plant, scheduled for 2008 
completion.  Its future capacity is 500-600MW. 
 
--400MW/Bui Dam: Parliament approved a $562 million mixed commercial 
and concessionary loan facility between Ghana and the Export-Import 
Bank of China for the construction of a hydroelectric dam at Bui. 
The supplementary budget includes using $60 million of the proceeds 
from the sovereign bond offering for an upfront payment on the Dam. 
The Dam, located on the Black Volta River near the border with Ivory 
Coast, is expected to be operational by 2012.  A sod-cutting 
ceremony is scheduled for August 24.  [COMMENT: The Bui Dam will be 
fed by the same watershed that cannot fully accommodate the Akosombo 
Dam.  Power demand is growing throughout West Africa, which is 
putting additional strains on hydro resources in the watershed.  END 
COMMENT] 
 
--Independent Power Producers (IPP):  At least four private sector 
groups are discussing IPP deals of 200-330MW each with the GoG. 
Among the companies submitting proposals, at least one is U.S.-based 
 
ACCRA 00001791  003 OF 003 
 
 
and there is potential U.S. interest in a second.  A UK firm is 
interested in placing a 200MW barge near the Osagyefo Barge. 
 
--Additional projects in Effasu:  The GoG has set aside 239 acres of 
land to accommodate the needs of the offshore barges as well as two 
potential coal-powered onshore projects (one under consideration by 
BEC, the other by the Chinese). 
 
----------------- 
DEMAND MANAGEMENT 
----------------- 
 
¶7. (U) In the regular 2007 budget the GoG created an 
energy-conservation program that focuses on reducing consumption, 
first in industry then with the general population through 
initiatives such as promotion of energy-saving light bulbs.  Six 
million compact fluorescent lamps (CFLs) will be distributed free 
throughout Ghana.  The Ministry of Energy's Technical Director 
estimated that as a result, peak time energy demand will be reduced 
by 200-240MW.  Since November 2006, Legislative Initiative 1815 has 
limited the manufacturing, importing, selling, and distributing of 
light bulbs, air-conditioners, and refrigerators and freezers that 
do not meet specified energy efficiency standards. 
 
--------------------------- 
LONG-TERM: NUCLEAR POWER 
--------------------------- 
 
¶8. (U) Ghana owns a Chinese-supplied 30kw research reactor that has 
been operational since 1994.  A Presidential Task Force on Nuclear 
Energy is expected to complete its report by the end of the year on 
the feasibility of developing nuclear power in Ghana.  The nuclear 
option is appealing to the GoG as a means to meet its own energy 
shortfalls and as a potential source of revenue for Ghana within 
West Africa.  While nuclear power would take at least 10 years to 
develop, the Ghana Atomic Energy Commission is already working with 
the International Atomic Energy Agency to develop a support plan to 
protect civilians and the environment from a radiological accident. 
 
------- 
COMMENT 
------- 
 
¶9. (SBU) COMMENT: With a presidential election looming in December 
2008, the ruling NPP is under intense pressure to show progress in 
addressing the energy crisis.  As outlined above, the GoG is taking 
action but much of it is in the form of short-term expensive 
emergency plants.  This may quell the immediate crisis but must be 
accompanied by a long-term vision that addresses generation, demand 
management, transmission, and tariff reform if Ghana is to attract 
private sector investment in energy (or other sectors) that is 
crucial to long-term growth. 
 
¶10.  (U) The ongoing uncertainty about reliable energy supply will 
undermine Ghana's ability to attract and keep investors.  For 
example, the mining sector is falling short of predicted earnings 
and a long-time investor in Ghana told EconOff that expansion of his 
business, including a new joint venture investment with an American 
partner, depends on resolution of the energy crisis.  End Comment. 
 
BRIDGEWATER