$75m Aboadze Plant Expansion Cost “Inflated”

The decision of the government to seek Parliamentary approval last Friday, at its last sitting, for additional funding of US$75.8million to finance additional works for the Aboadze Thermal Power Plant generated charges of corruption from the Minority in Parliament, when it came to light that part of the cost of the project had been inflated, incredibly, by some 2,000%.

The apparent inflation of an agreement that was first prepared under the NPP in 2008 and repackaged after 3 years at an inflated cost was met with loud resistance from the Minority. This appears to only confirm the allegation from a sacked CEO of the majority shareholder of the plant, TAQA, that the cost has been inflated to pay off Ghanaian officials.

For example, the cost of relocation of services, construction of storm drains and de-watering has been hiked up from US$568,640 to over US$20 million dollars. Minority MPs found it strange that the initial costing of works at just over half a million dollars could suffer such an astronomical leap within such a short time of acclaimed low inflation shooting to US$20 million.

The other sore point of controversy was the contingency amount of US$15.9 million, which is unprecedented, given the total cost and variations of the project.

It is recalled that the Government of Ghana, represented by the Ministry of Energy executed a commercial contract on 17th December, 2008 with the Canadian Commercial Corporation (CCC), a Canadian government agency, for the Engineering, Procurement and Construction (EPC) of a 132MW combined-cycle power plant at the site at Aboadze over a period of 18 months on a turn-key basis.

The cost of the project, initially a credit facility of US$194.3 million, is to be increased by an additional US$75.8 million dollars to be borrowed from Societe Generale, Canada and insured by MIGA, the agency which the minority advised should insure the STX housing project, an advice that was scornfully ignored.

The Ministry of Energy is justifying the additional US$75.8 million dollars claiming it has reviewed the scope of works and the cost to include relocation of services, de-watering, etc, which will cost the country US$20 million in addition to US$6.5 million for "enhanced corrosion protection" as well as additional sums including contingency figure of US$15.9 million, representing 7% of total revised contract sum.

Regrettably, after a heated debate, the majority had their way and approved additional loan.Parliament last Friday approved loans worth US$431 million before going on recess for nine weeks. The loans passed included US$337 million facility for the construction of a 59-bed hospital with equipment for the University of Ghana; 13 million Euros (US$18.7 million) loan agreement between the Government of Ghana and ABN AMRO Bank NV of the Netherlands to finance the additional works on the Barekese Water Supply Expansion Project; and a $75.8 million loan agreement to finance additional works on the on-going 132-megawatt Combined-Cycle Thermal Plant at Aboadze (Takoradi-3 Thermal Power Project).

It is recalled that the New Statesman on 27th May 2009 broke a story about the functionaries of the ruling NDC allegedly receiving at least US$1 million dollars in bribery payments from TAQA, the United Arab Emirates based majority shareholder of the Aboadze thermal plant.

According to confessions of TAQA’s former Chief Executive Officer, in its bid to triple the current 110 MW output of its Takoradi Power Station, TAQA paid multimillion dollar bribes to Ghanaian politicians in the energy sector in 2009, the year that TAQA sought approval for its expansion.

“The authorization to triple its output was obtained by inflating the official price of the expansion works” and then paying part of the surplus to Government officials, according to Peter Barker-Homek, the CEO of TAQA at the time.

In a detailed letter sent to the Securities & Exchange Commission earlier this year, and revealed by the Maghreb Confidential on May 12 2011, Mr Barker-Homek detailed how TAQA made standard corrupt payments of US$1 million a year to Ghana government officials.

In 2010, TAQA formally signed a Memorandum of Understanding with the Government of Ghana and the Volta River Authority in relation to the proposed 110 MW expansion of the Takoradi plant. It is the contract sum that the former CEO claims was inflated to take care of Government officials.

Source: The New Statesman