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‘We play a very dominant role in supplying electricity’

Interview - September 3, 2014
The PM Communications team interviewed Isaac Kirk Koffi, Chief Executive of the Volta River Authority, and asked him about growing energy needs in Ghana, and about the prospects for gas and renewable energy. Mr. Koffi spoke about the importance of Ghana as an energy supplier for the region, the future developments in the gas and renewable energy sector, and British investment.
Africa is developing rapidly. Last year, five of the 12 fastest growing economies in the world were in Africa and the continent is also home to the world’s fastest growing middle class, according to the African Development Bank. Yet many people in the West still hold an outdated view of the reality of life in Africa. What is your message about Africa’s prospects for growth and development in this century, which promises much socio-political change, and how do events such as TGAIS in London help to change perceptions?

As you said, the developing world is already developed. It is the undeveloped world where we are trying to emerge. This is the time for Africa to show up. With the leadership we have in African countries right now, we can unleash the potential for development. That is what I see happening. We need leadership to be able to develop. The countries and resources have been there all these years, so how come we are not developed? We need the people, the right leadership, the right fiscal regimes, and the right climate for development. I can see that happening across the continent.

Ghana is a member of ECOWAS, the regional organisation tasked with fostering greater economic integration. We recently held a discussion with Foreign Minister Hanna Tetteh and she lamented that some member countries did not have the same commitment to ECOWAS’ goals as Ghana. Given that VRA is a contributor to the West African Power Pool and you supply power to other parts of the region: in your opinion, where is greater integration and cooperation needed between ECOWAS members and what is the potential for the West African Power Pool to address the power supply deficiency in the region?

Ghana is not only a member but a very strong member. The West African Power Pool was set up years ago under ECOWAS. The purpose was to make sure that, since we are endowed with natural resources, we could supply power to less-endowed countries. We have been selling to Togo and Benin since the 1970s. We have been in collaboration with Cote D’Ivoire since the 1980s. We supply power to Burkina Faso and other neighboring countries. We play a very dominant role in supplying electricity to surrounding countries. It is our desire to have more than enough for ourselves in order to export to these countries. We are doing what we can, but I think we can do far more than that.

Of course, in a land-locked country like Burkina Faso, it is difficult to get electricity supply cheaper than we can. We have the sea, and big hydro. That makes it easier for us to make our costs attractive. Through the West African Power Pool, we made interconnection lines among ourselves: the one between Ghana and Togo-Benin, and we made another to interconnect with Nigeria; and there is a plan to build one all the way to Liberia, and one between Ghana, Burkina Faso, and Mali.

For the one between Ghana and Togo-Benin, the Ghana portion has been completed. The line between Volta up to the border of Togo has been completed. We are quite aggressive because we want our neighbooring countries to share what we have. We want to make sure we can supply them with power. I have been to Sierra Leone and Guinea many times to offer consulting services to their utilities, free of charge. We go there and offer services to them. We have been doing that, and we will continue to offer services.

Ghana – and by extension VRA – has relied heavily in the past on Nigerian gas from the West African Pipeline, which has proved to be somewhat unreliable, especially last year. We recently had discussions with Dr. Yankey from Ghana Gas and he was enthused about the impact of the Western Corridor gas project, which he expects to be commercially operational soon. Given VRA’s crucial importance to the country: what impact will this project have on VRA’s capacity and operations, and for the nation of Ghana as a whole in terms of energy independence?

Nigerian Gas had looked to be reliable. At the time we decided to embark on this big project, we thought we were going to get enough gas. If we had known, we wouldn’t have gone into that: we would have looked at something else. As we speak today, it is highly erratic. That makes planning very difficult. That is really challenging. Nigeria has a lot of gas deposits, so I don’t see why we should be in the troubled position where we find ourselves today.

That aside, we are looking at our own Ghana fields. Ghana Gas should be ready very soon, and that is a very big project. It is huge. It is a gas processing facility that is supposed to deliver over 100 million cubic feet of lean gas per day. We are expecting this gas, hopefully, in September, and it will reduce the cost of crude oil that we use. No matter what the price of gas is, it will definitely not be close to 50% of the cost of crude oil, so we will reduce the cost of electricity generation. There is a lot of exploration going on in our fields by Ghana Gas. We are quite hopeful we will get some gas from there.

That aside, the gas from Ghana will not be enough to fire the units we have today. We required about 200 megawatts growth in electricity last year. The average growth for electricity demand for Africa is about 3%. We recorded about 11%. The world’s highest growth was in Indonesia and it was 13%. The growth of electricity demand in Ghana is high. To me, that is good. The growth of electricity demand has something to do with economic development. As you grow in your consumption, that is a good indicator, but poses a challenge for us, the utilities, to make sure we can supply the needed electricity to meet this growing demand. That is what we have been trying to do.

The man in the street doesn’t care where power comes from. We have to make sure we provide reliable and affordable power to our customers, and we are working on that. We try to do some on our own, our balance sheets are strong enough to add on 250 megawatts every year, and we try to partner with interested parties. There is quite reliable and efficient power generation. Some are interested in partnering with us, and others want to come as IPPs (independent power producers). To make life easier for IPPs we are trying to get land, and prepare them so they can come. Otherwise, it would be difficult for them to get the land and get into the sector. We are trying to assist them.

Foreign supply is a challenge, but that will be overcome very soon because gas will come, LNG is also another option. Crude oil is not an option, it is expensive and difficult. The more alternatives we have from crude oil, the better for us. The framework of tariffs is being looked at. We put in place an automatic tariff adjustment formula. The international community who want to come here, as IPPs, are looking at all these things as indicators to take a decision. I can see things being well structured. It is OK for IPPs to come. IPPs operate elsewhere. Their rush to come to Ghana is an indication that we are doing something right.

You are the keynote speaker at TGAIS on the subject of ‘bankable projects in power’. This is a subject you are known to be passionate and knowledgeable about, and you are working hard to help attract the right IPPs and partners to boost Ghana’s energy supply. For a project to be bankable it needs all the right factors in place for a high chance of success. What makes Ghana standout as a destination for investment in ‘bankable power projects’ and why investors should see Volta River Authority as a trusted and reliable partner in such projects?

VRA has been in this industry for over 50 years. Our power plants are world-class and well-managed. We are always rated among the top utilities in the world. For investors to come to Ghana, it means the political climate, economy, and fiscal regime are very attractive.

It is very important to attract financial investment, but that is a long-term commitment to the country; to bring money, technology, knowledge, and create jobs. What is going to be your message to attract investors to the power sector? Do you think British investors meet that profile?

Today, the landscape is changing. We have oil, we are moving towards a lower-middle-income status, the middle-income category is increasing. The landscape of Accra gives you an indication that something is changing in Ghana. In the developed world, the growth of anything is very small. In Ghana, you can invest and get a very good return. I strongly believe any investor who comes here will definitely be making the right decision. In the sub-region, we are one of the most stable economies.
PM Communications: According to the results of Ernst & Young’s (EY’s) 2014 Africa Attractiveness Survey, the UK has become the largest foreign direct investor in Africa, taking over from the US in 2013. UK companies invested a total of US$4.6bn in Africa-based projects in 2013, overtaking total US investment worth US$2.6bn. Why do you think Africa is so attractive to British investors?
Ing. Kirk Koffi: I am not surprised about increasing British investment in the country. We had a colonial link with the British. We look at the British as one of ourselves. That said, they are attracted by good governance. There is stability of the government. That is utterly important. No one wants to invest where they are not sure about the security of their investment. Good governance is something that motivates investors. Besides, Ghanaians are very nice people. Ghanaians are good people by nature.

VRA – and by extension Ghana – have traditionally depended primarily on hydro energy. That changed in the 1990s with the proliferation of thermal plants, and now there is greater emphasis on renewables, particularly in the wake of the 2011 Renewable Energy Act. Part of the Better Ghana agenda is to have renewable energy form 10% of the energy mix by 2020. What progress is being made towards this admirable goal and, in your opinion, why is it important for Ghana to put greater emphasis on renewable energies?

The whole world is doing that, and we are also part of the world. If the developed world is doing that, why shouldn’t we? The future is more to do with renewables than with something you don’t control. That is why renewables are a good option for us. We have a 2.5 megawatt solar farm in Navrongo; and we are doing a 10 megawatt solar farm with German funding. Construction starts early this year to be finished at the end of the year. Our government’s policy is 10% renewables, and we, as an institution, have taken that as a target. 10% of our own energy will be renewable. We are doing solar, and we are going to start with wind. We went to a number of places, and we are dealing with two Spanish companies to do wind. We want to do around 150 megawatts. We are currently doing wind measurements and then we will proceed with the design. With renewables, we want to add as much as possible. We also want IPPs to come into that sector. I don’t want to do that all by myself. We are trying to partner with as many people as possible.

I know you are a big Roger Federer fan so I’d like to give you a quote. Federer once said: “What I have been able to do well over the years is play with pain, play with problems, and play in all sorts of conditions.” VRA has been around since 1961 and you have been with the authority since 1982. Is this resilience and appetite for success shown by Federer, something you can relate to personally at VRA?

Yes. Personally, I think I just want to leave a legacy wherever I go. Anywhere I work, there is always a legacy. We are in this world for just a short time. You have to make an impact so future generations know that you passed through this place. By the time I leave office, I want to make sure electricity is available, reliable, and affordable in Ghana and in neighbouring countries. That is something I am seriously working on.

Have you ever considered becoming a politician?

Interesting question. Depending on the level, I guess we all engage in some form of politics at every point in time. My major focus for now, however, is on moving the VRA forward in terms of capacity addition to ensure we overcome our perennial generation shortfall challenges.

Thank you very much.

Isaac Kirk Koffi will be leading a roundtable discussion on bankable projects in power in Ghana at The Global African Investment Summit in London on October 20.