John Mahama’s Reckless PPAs Decision Cost Ghana $ 134m Judgement Debt.

John Mahama’s Reckless PPAs Decision Cost Ghana $ 134m Judgement Debt

A sincere examination of the circumstances of the execution of the GPGC agreement, as well as factors accounting for the success of the company in securing an arbitral award of the a substantial sum of US$134million against the Government of Ghana, will point to recklessness of officers in the erstwhile Mahama administration.

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The thoughtless decision of the Mahama administration to bind the Government in obligations under PPAs unnecessarily executed, without regard to the nation’s demand and supply electricity situation, clearly represented a risk of saddling the nation with undue financial burden through a discharge of those obligations, or, consequences resulting from a termination of those obligations.

By 2016, the scheduled capacity additions from various executed PPAs far outweighed the required capacity addition for the nation inclusive of 20% reserve margin from 2018 to 2030. As the PPA Committee report showed, this meant that if the PPAs were left to proceed and projects completed (business as usual), there would be excess or surplus capacity. The result was that average annual excess capacity of 1463 MW and costs were going to be in excess of US$586 million per annum or a cumulative cost of US$7.619 billion between 2018 and 2030.

Public officers in charge of the nation’s effort to boost electricity generation owed a duty to ensure the provision of affordable and adequate power whilst avoiding unwanted charges from excessive capacity development.

Secondly, the provisions of the GPGC EPA, particularly, the termination provisions as well as other relevant clauses clearly rendered the Government liable for the payment of the full expenses incurred by the company, expected profits as well as the costs of demobilising its equipment from Ghana even when the agreement had not reached effectiveness.

To illustrate, Clause 1 of the GPGC EPA defined “Effective Date” as “the date on which all Conditions Precedent have been fulfilled or waived and will be thirty (30) days from the Signature Date except that by mutual agreement in writing the Parties may extend the period for the fulfilment of any Condition Precedent.”

However, Clause 2(a) stipulated that the “Term” of the Agreement was to “commence on the Signature Date and continuing until forty-eight months after the Full Commercial Operation Date”.

Clause 2(b) further stipulated that the Term “shall be a guaranteed period and in the event that this EPA is terminated prior to its scheduled expiration date as a result of the default of any of the Parties, the Party not responsible for the default would be entitled to proceed in accordance with Clause 25 of this Agreement”.

This implied that even if the agreement was terminated before the satisfaction of a Condition Precedent, the party not responsible for the non-satisfaction of the Condition Precedent in question, would be entitled to claim under Clause 25. Clause 25 is the provision that made GPGC entitled to the “Recovery Fee”, i.e. full compensation even when the agreement was not effective.

As the tribunal held at page 143 of the award, it was not a consequence of the agreement with GPGC that a failure to satisfy Conditions Precedent meant that the agreement had never taken effect. This is because Clause 3(d) vested the party not responsible for the Condition Precedent in question with full rights under Clause 25, as explained above.

Where were the supposed big brains in Mahama’s administration to have dug deep into understanding the strings of consequences of their reckless decision? Or they didn’t care about ‘the tomorrow’ of Ghana?

 

 

 

 

 

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