This forms part of government’s generation master plan to achieve the 10 per cent renewable energy target in the electricity generation mix.

The country currently generates about 30MW of power from renewable sources, representing about one per cent in the generation mix and this investment is expected to enable the country to exploit its renewable energy potentials in order to meet the generation target of 10 per cent renewable by 2020.

At the signing of the agreement, the Chief Executive Officer of VRA, Mr Kirk Coffie, said the VRA was grateful to the German government for the assistance.

He stated that “renewable is what everybody is trying to do other than the conventional generation. I can assure you that with this assistance we will make sure we embark and finish this project within time.”

He said the VRA was looking at even achieving more the 10 per cent target; it was looking at about 100 MW of solar in the long term.

Parliamentary committee report

The Parliamentary Select Committee on Finance in its report on the loan agreement said the project would strengthen the institutional and management capacity for the smooth development and operation of the renewable energy sub-sector and the power sector in general.

It said with the gradual increase of solar energy in the mix, equivalent power would be subsequently freed from conventional sources for industrial and other commercial uses.

The siting of the project in the Upper West Region is also expected to contribute to the reduction of transmission losses.

Terms of the loan

The project is expected to be undertaken at a cost of a cost of €25.9 million with a KFW credit facility of 22.8 million and equity support for the Volta River Authority (VRA).

The equity contribution of VRA represents the cost of land acquisition and engineering for the implementation of the project.

The €22.8 million loan from KFW comes with an interest rate of 0.75 per cent per annum, commitment fee of 0.25 per cent, grace period of 10 years, repayment period of 30 years, tenor of 40 years and a grant element of 54.45 per cent.

On-lending

In line with the government’s debt management strategy, the Ministry of Finance intends to on-lend the facility to the VRA.

To this end, the Ministry has entered into an on-lending agreement with the VRA.

The Deputy Minister of Finance, Mrs Mona Quartey, explained to the committee that power generation was a commercial venture for which electricity consumers always pay for.

She said it was, therefore, prudent for the utility service providers to generate income to service facilities taken for power generation.

The deputy minister noted that the project was self-financing and would generate enough revenue to repay the loan.

Mrs Quartey indicated that to minimise the risk of default, government intended to escrow the revenues to be generated from the operation of the facility into a special account for servicing of the loan.