IMANI, ACEP report on us is misleading, not factual – GNPC

The Ghana National Petroleum Corporation (GNPC) has responded to a joint report from IMANI Ghana and ACEP indicating that their decisions will have an adverse effect on Ghana’s battered economy. The GNPC says it has always been transparent in its dealings and is shocked that civil society organizations will go to the press without first recourse to them for explanations of their dealings as an organization. “While in general, civil society organizations promote development through nurturing discourse, it is appalling that ACEP and Imani perennially spew negative and unsubstantiated comments throughout the media, especially when they have not directly approached GNPC for its opinion.” A Statement from their outfit explained that “Regarding ACEP and Imani’s inaccurate claim of “Programmed Losses for 2022”, it is important to note that the two organizations make basic errors, in their inability to distinguish between Deficit Financing and Profit/Loss. What GNPC presents to parliament in its annual Work Program is what the Corporation intends to spend on its activities and the sources of funding for such projects, and the means of financing the forecasted deficit, if any. The figures quoted by ACEP and Imani to represent programmed losses are in fact budget deficits, for which the sources of finance are clearly stated in the Work Program”. Read GNPC’s Detailed Response Below Response to ACEP and Imani Report on GNPC ⦁ INTRODUCTION The attention of the Corporation has been drawn to a publication by the Africa Centre for Energy Policy (ACEP) and Imani Center for Policy & Education (“Imani”) with the title “How GNPCs Decisions Further Harm Ghana’s Battered Economy. While in general, civil society organizations promote development through nurturing discourse, it is appalling that ACEP and Imani perennially spew negative and unsubstantiated comments throughout the media, especially when they have not directly approached GNPC for its opinion. Nonetheless, GNPC is transparent and ready to provide any information to ACEP and Imani. Despite all of GNPC’s contributions to the development and well-being of the nation, the Corporation is yet to hear a single positive or uplifting statement from Imani and ACEP. Accordingly, we wish to react to their above-stated release and clarify other unsubstantiated statements they have made in the past. ⦁ GNPC’S FINANCIAL PERFORMANCE IN RECENT YEARS ⦁ Regarding ACEP and Imani’s inaccurate claim of “Programmed Losses for 2022”, it is important to note that the two organizations make basic errors, in their inability to distinguish between Deficit Financing and Profit/Loss. What GNPC presents to parliament in its annual Work Program is what the Corporation intends to spend on its activities and the sources of funding for such projects, and the means of financing the forecasted deficit, if any. The figures quoted by ACEP and Imani to represent programmed losses are in fact budget deficits, for which the sources of finance are clearly stated in the Work Program. ⦁ It is based on these misrepresented figures that ACEP and Imani draw their conclusion that GNPC’s operations raise significant debt concerns, and that cumulatively, the Corporation’s actions could cost Ghana between US$5 billion and US$6 billion. These conclusions cannot be any further from the truth. ⦁ Contrary to the assertions by ACEP and Imani that GNPC is a perennial loss-making organisation, our financial statements show that in the past 10 years GNPC has made a loss in only one year. Between 2017 and 2021 the only year GNPC made a loss was 2020, as shown in the table below. Profit and Loss Position of GNPC for the Period 2017-2021 Draft Audited Full Year 2021 US$’M 2020 US$’M 2019 US$’M 2018 US$’M 2017 US$’M Profit/(Loss) after Tax 9.641 (163.392) 34.576 108.36 86.891 Source: GNPC Financial Statements and Management Accounts The years 2020 and 2021 particularly were difficult years for GNPC, and most other companies, due to the Covid-19 pandemic. Ghana does not manage its price risk, unlike many other E&P companies. As such, we are particularly hit when extraneous circumstances like the Covid-19 pandemic affect both oil prices and production levels. ⦁ ACEP and Imani’s inaccurate assertions on GNPC’s Liquified Natural Gas (LNG) business are without the benefit of full information and context, which could have been obtained if they had contacted GNPC. GNPC had negotiated with Shell for significantly reduced volumes of LNG off-take obligation. This then necessitated GNPC agreeing to pay for the unutilized capacity in the form of the Terminal Availability Fee. This amount was to be recouped when full contractual volumes were attained. As the terminal company has not declared availability, GNPC has not paid this fee. Currently, we are discussing with Shell to defer the regasified LNG off-take to a later date. As such, GNPC is no longer expected to make any payments in respect of the regasified LNG offtake. ⦁ Regarding ACEP and Imani’s baseless claim of “Weak Reporting”, it is a fact that in addition to the Work Programme, GNPC provides audited accounts or management accounts (when audited accounts are not yet available), which include actual revenue and expenditure analysis, to Parliament. GNPC also provides the Utilization Report to Parliament as required by the PRMA. GNPC also submits reports on our annual Financial Statements, Quarterly and Annual Performance Reports, etc. to other statutory bodies including the Ministries of Energy and Finance, Bank of Ghana, Ghana Revenue Authority, State Interest and Governance Authority, and the Public Interest and Accountability Committee. As a matter of fact, GNPC provides about nine (9) different reports related to oversight of its finances and operations. ⦁ Furthermore, ACEP and Imani should already know that GNPC has private counterparties and is involved in global commercial transactions outside the public domain. Thus, for due diligence procedures, GNPC also provides detailed international standard financial statements (scrutinized and approved by top global professional auditing companies such as Deloitte and Ernst & Young and consistent with international reporting standards) like any other global corporation would do. It is therefore erroneous and naive for anyone to suggest that the Corporation’s reporting is weak and lacks transparency. ⦁ Regarding ACEP and Imani’s fact-less accusation of “Fixation on Landed Property Acquisition,” it is instructive that there is no landed property that has been completed, and is in usable condition for office operations, that is being left to rot. The intent to construct the Operational Head Office building in Takoradi and the Corporate Head Office project in Accra have been on the Corporation’s property forecast for many years. Budgeted projects are only undertaken when the requisite financing becomes available. While the completion of the civil works of the Takoradi Operational Head Office is 73%, there is also a Research and Technology Centre with civil works that are 84% complete. GNPC is committed to ensuring that its staff work in a conducive and enabling environment. ⦁ The Voltaian Basin Project: In a frontier basin like the Voltaian, it is important to acquire adequate data for processing and interpretation before a decision to drill is made. For a basin that occupies about forty percent of Ghana’s landmass, it is very simplistic to think that a decision on drilling should be hurriedly made. Frontier basins such as the Voltaian sometimes require decades to understand the nature of a working petroleum system. GNPC is proceeding systematically to increase the probability of success by conducting the necessary geological preparatory works (such as seismic analysis, geochemistry studies, and enhanced full Tensor Gravity Gradiometry’ [eFTG] before a decision is made to drill. This is consistent with global industry practice. GNPC is working with third-party contractors on aspects of the project, and the costs involved are easily verifiable as the procurement of such services follows the laid down procedures under the Public Procurement Act, 2003 (Act 663) as amended. ⦁ GNPC’S ACQUISITION OF JOHL ACEP and Imani make unfounded and misleading claims about GNPC’s relation with Jubilee Oil Holding Limited (JOHL). It is important that we clarify issues relating to the acquisition process, the governance structure, revenue sources, the use of the revenue from JOHL, and the transfer of interest to Explorco. ⦁ JOHL is a wholly owned subsidiary of Ghana National Petroleum Corporation (GNPC). JOHL was not created by GNPC but was originally incorporated as an exempted company in the Cayman Islands by Anadarko Offshore Petroleum LLC on 23rd September 2021. GNPC acquired a hundred percent (100%) shareholding in JOHL on 13th October 2021, pursuant to a share purchase agreement between Anadarko Offshore Petroleum LLC (“Anadarko”) and GNPC, and the approval of the Minister for Energy. The JOHL participating interest was carved out of the participating interest held by Anadarko WCTP Company in the DWT and WCTP Petroleum Agreements. JOHL holds seven percent (7%) commercial participating interests in each of the DWT and WCTP Petroleum Agreements. ⦁ The 7% JOA interest held includes JOHL’s proportionate share of GNPC’s Carried Interest. Consequently, the production equity interests of JOHL are 6.04514% and 5.95% in Jubilee and TEN respectively. It should be noted, however, that JOHL’s seven percent (7%) participating interests in the DWT Petroleum Agreement is likely to reduce because of PetroSA’s decision to exercise its right of pre-emption under the DWT Petroleum Agreement. The parties are currently in discussion on the way forward. ⦁ GNPC’s strategic acquisition of JOHL was to increase the State and GNPC’s commercial stake in the DWT and WCTP Petroleum Agreements through JOHL’s participating interests. ⦁ The headline purchase price (HPP) for Anadarko’s 100% interest in Anadarko WCTP Company (the Ghana entity) originally offered to Kosmos was US$750 million. According to Anadarko and Kosmos, Seller and Purchaser, the amount of US$750 million is a negotiated price not based on any standard investment evaluation model. ⦁ The determination of the respective share of the purchase price was transparently determined contrary to assertions by ACEP and Imani. To determine the respective share of the purchase price for Kosmos and GNPC, the proportion of hydrocarbon 2P reserves in DWT and WCTP, as determined by Ryder Scott, a global leader in work of this nature, was applied to arrive at the amount of US$317.6 million and US$432.4 million for DWT and WCTP, respectively. GNPC’s share of the headline purchase price of US$750 million was US$199.39 million and was derived as shown in the table below: 2P Reserve allocation in DWT and WCTP is as estimated by Ryder Scott. ⦁ Consistent with the terms of the purchase offer, the effective date of the purchase was 1st April 2021, and closed out on the 30th September 2021. To determine the purchase price at the close, therefore, the parties committed to adjusting the HPP for revenues and other credits received by Anadarko WCTP Company for the period under review, as well as payments made by Anadarko WCTP Company over the same period. Net deductions made to the HPP is US$129.31 million resulting in an adjusted HPP of US$620.68 million, of which GNPC’s share is One Hundred and Sixty-Four Million, Seven Hundred and Ninety-Eight Thousand, Six Hundred and Ninety-One US Dollars (US$164,798,691), as of 24th September 2021. The stake acquired by GNPC was funded by MoF and repayable at an interest ⦁ JOHL has currently been registered as an external company in Ghana under the Companies Act, 2019 (Act 992). The registration was concluded on 15th August 2022. The current governance and management structure is transparent and comprises GNPC board members as directors, and GNPC employees as management staff. JOHL is an oil and gas company and as a contracting party to the Deep Water Tano (DWT) and West Cape Three Points (WCTP) Petroleum Agreements, it is engaged in the exploration and production of petroleum in Ghana. ⦁ GNPC is in the process of transferring the participating interests of JOHL to GNPC’s exploration subsidiary, Explorco, as already approved by the Minister for Energy. ⦁ We want to clarify that GNPC has never made any attempt to hide the revenues accruing from its acquisition of JOHL from scrutiny as being peddled by ACEP and Imani. All state institutions that request such information have been provided such details as we outline below for the benefit of the general public. JOHL has received a total of One Hundred and Fifty-Three Million, One Hundred and Eighty-Eight Thousand, Six Hundred and Fifty-Six United States dollars and Eighty-Eight cents (USD153,188,656.88) from inception to 30th September 2022, as shown below: ⦁ JOHL revenue is used primarily to pay for JOHL Cash Call obligations in DWT and WCTP, as well as Explorco Cash Call obligations in ENI Block 4, Springfield, and the other blocks in which Explorco has commercial interests. Out of the US$153.19 million received an amount of US$146.08 million has been utilized as per the table below: S/N Description Amount (US ‘Million) Amount (US Million) 1. Cash Call for Jubilee & TEN operations 64.22 2. Repayment of the amount advanced by MoF 60.00 3. JOHL share of 2021 Qtr.3 Tax paid GRA by Anadarko 16.44 4. Explorco Cash Calls in ENI Block 4 & Springfield 4.68 5. Operational Expenditure; of which: 0.74 Insurance 0.714 Legal Fees 0.025 Financial Charges 0.001 Total 146.08 ⦁ It should be noted that JOHL is a contractual party under the DWT and WCTP petroleum agreements. Therefore, it is bound by all the agreements entered by the contractor parties governing the Jubilee and TEN Fields including the Joint Operating Agreements (JOAs) and Unitization and Unit Operating Agreement (UUOA)). Unlike GNPC, JOHL is required to fully fund its cash calls in advance of any petroleum activity including, where applicable, its portion of GNPC’s carried interest. Payment of cash calls is monthly and there are severe penalties for delayed payments. ⦁ Contrary to ACEP and Imani’s assertion that there is no evidence of repayment of an amount of US$60 million to the Ministry of Finance in any official documentation, GNPC has all the documents to support GNPC’s position. It would have been more prudent for these CSOs to have requested GNPC for evidence before publishing such ridiculous claims. The US$60million is the first installment repayment for the US$164.80 million advanced by the Ministry of Finance for the acquisition of JOHL, plus interest. ⦁ It is not true that nobody knows what happens to the money accruing from the liftings and in what account the monies are lodged. The proceeds from JOHL liftings are paid into a GNPC dedicated account with Ghana International Bank pending the opening of dedicated JOHL accounts. As an external company registered in Ghana, the Board of JOHL is expected to prepare its first financial account by 31st December 2022, consistent with International Financial Reporting Standards (IFRS). ⦁ A lot of misconceptions have been generated in the minds of Ghanaians that non-payment of proceeds from each lifting into the Petroleum Holding Fund (PHF) is a breach of the Petroleum Revenue Management Act (PRMA). JOHL does not pay proceeds from each lifting into the PHF based on the grounds discussed below: ⦁ JOHL, as an external company under the Companies Act, 2019 (Act 992), is a separate legal entity distinct from GNPC and has its commercial operations regulated by Act 992 and not by the Ghana National Petroleum Corporations Act, 1983 (the GNPC Act). Section 29 of the GNPC Act requires subsidiaries of GNPC to be “… established under the Companies Code, 1963 (Act 179)” (now Companies Act, 2019 (Act 992)). Therefore, Act 992, and not the GNPC Act, governs JOHL’s governance and operational structure. ⦁ Under section 7(1) of the PRMA, revenue due from the Republic of Ghana’s direct and indirect participation in petroleum operations is payable to the PHF. The activities of GNPC and its subsidiaries fall within the scope of indirect participation of the Republic. However, the “revenue due” to be paid into the PHF as required by section 7(1) of the PRMA from GNPC’s subsidiaries must be determined according to Act 992. In accordance with Act 992, the only revenue payable by JOHL to GNPC in its capacity as the sole shareholder of JOHL is dividends. GNPC is not entitled to the direct revenue or proceeds from each JOHL lifting and its operations. Thus, by extension, revenue payable into the PHF by JOHL through GNPC is a dividend declared by JOHL and not proceeds from each JOHL lifting. ⦁ Payment of dividends from JOHL by GNPC into the PHF is consistent with the PRMA. Section 6 recognizes that GNPC may pay dividends from its subsidiaries into the PHF. The PRMA, therefore, does not affect the application of Act 992 and the company law of the Cayman Islands to the operations of JOHL as a limited liability company incorporated in the Cayman Islands and registered as an external company in Ghana. GNPC must however ensure that it complies with the requirements under the PRMA, Act 992, and the company law of the Cayman Islands in respect of the payment of monies by JOHL to GNPC. ⦁ Prior to executing the transaction, GNPC sought and received an opinion from the Attorney-General to the effect that proceeds from JOHL may be used to finance its acquisition, provide security for transactions and satisfy related costs consistent with its oil and gas operations. GNPC has acted accordingly and as noted above, has used a portion of the revenue received as part payment for the cost of the acquisition, to pay off its cash calls and other expenditure. Considering JOHL’s current costs and liabilities, no dividends are due for payment to GNPC currently for payment into the PHF. As a matter of fact, JOHL still owes GNPC for services given on its behalf. Such dividends will be paid as soon as JOHL begins to make a profit and declares dividends. 4 GNPC/GENSER GAS SALES AGREEMENTS ⦁ Contrary to the negative impression created by ACEP and Imani that the Gas Sales Agreements (GSAs) signed between GNPC and Genser potentially would cost the country over US$1.5 billion over the life of the agreements, the landmark deal represents a bold and innovative effort by GNPC to facilitate the provision of the infrastructure necessary to unlock the huge potential in gas production, gathering, transportation and utilization in Ghana. ⦁ It is important to state at this stage that the objective of GNPC, just like those of any other organization, either state or private, is to maximize the returns on its investments for its shareholders. ⦁ The responsibility to ensure that GNPC’s role and activities in the energy sector are in line with the overall developmental plan for the industry is reserved for the Ministry of Energy. How these activities impugn the short- or long-term survival of other state institutions in the energy sector is also regulated by other state institutions such as the Petroleum Commission, Public Utilities Regulatory Commission (PURC), and Energy Commission. That is why GNPC ensures that it receives all statutory approvals for the agreements it signs with third parties which have an implication for the overall performance of the sector, from the sector Ministry and the other relevant state agencies. GAS INFRASTRUCTURE FINANCING ⦁ Natural Gas (NG) is the most important fuel for power generation in Ghana – NG makes up approximately 65 percent of fuel for power generation in Ghana. It also has significant potential in non-power industrial use e.g. replacement of liquid fuel for heating, fertilizer production, petrochemicals, etc. ⦁ In addition to its equity stake in petroleum agreements, GNPC is currently the buyer of all domestic gas and seller of downstream off-takers. As such, it acts as an enabler for the development of midstream infrastructure to ensure the efficient evacuation of gas from the upstream. This is essential to ensure GNPC s able to sell its gas downstream. ⦁ Key to the performance of its role as the gas seller is the availability of infrastructure such as pipelines for gathering, transportation, and distribution of gas, as well as gas processing plants. Raising long-term financing for these kinds of infrastructural projects can be challenging. It requires the consideration of several economic factors. ⦁ In financing such critical infrastructure, the country was faced with the following options: ⦁ Government of Ghana or its agencies fund and construct the infrastructure. ⦁ Use private sector financing and construction; or ⦁ A combination of the two. MINISTERIAL DIRECTIVE ⦁ It may be recalled that, as part of Government policy that made GNPC the National Gas Aggregator, Government approved the takeover of GNGC by GNPC in 2014 – to make the former a subsidiary. Despite the announcement, GNPC could not take full control of GNGC. In 2017, Government decided to take back control of GNGC and allow it to develop as a stand-alone company. GNGC petitioned the Ministry of Energy, and subsequently, the Presidency that it should be made the National Gas Aggregator. ⦁ This stalled the negotiation and execution of key agreements between GNPC and GNGC, such as the Gas Processing Agreement and Gas Transportation Agreement, and undermined the integrity of the commercial structure of the gas value chain. ⦁ The matters were referred to the Economic Management Team (EMT), which sought submissions from GNPC and GNGC as well as PURC and Energy Commission. The EMT eventually took a decision, which was communicated to various parties by the Ministry of Energy on 14th February 2020. The decision affirmed: ⦁ GNPC is the National Gas Aggregator and the seller of gas to power producers; and ⦁ GNGC as the Natural Gas Transmission Utility and seller of gas to non-power users. ⦁ Upon this directive, GNPC entered into a Gas Sales Agreement (GSA) with GENSER. THE GAS SALES AGREEMENTS ⦁ For clarity, the GSA that is currently generating immense public interest is the original GSA signed on 24th February 2020 (Initial GSA) as amended and restated on 30th July 2021 (Amended and Restated GSA) ⦁ Initial GSA: This was for the sale and purchase of natural gas with GNPC as the seller and GENSER as the Buyer. In addition to selling gas to Genser, GNPC reserved capacity on the GENSER pipelines from Prestea to Dawosaso to be utilized by GNPC to transport gas to potential customers. ⦁ Amended and Re-Stated GSA: this was for the sale and purchase of gas with GNPC as the seller and GENSER as the buyer. In addition to the terms of the Initial GSA, it requires the extension of the pipeline from Dawosaso to Kumasi and provides GNPC with the option to purchase the pipeline on agreed terms. The new gas price only kicks in after the completion of the pipeline and the capacity becomes available to GNPC. GAS PRICE DETERMINATION: WACOG VS DIDT ⦁ In Ghana, PURC determines the Weighted Average Commodity Cost of Gas for the regulated market. This cost, together with other allowable charges such as Gathering Charge, Processing Charge, Transmission Charge (GNGC), Transmission (WAPCo), Regulatory Levy, and Gas Management/GNPC Financing Charge make up the Weighted Average Cost of Gas (WACOG). ⦁ The WACOG represents the highest price gas sellers can sell gas to power producers in the regulated market. It must be noted that all the power producers who sell power to ECG are operating in the regulated market. Other power producers, such as GENSER, who purchase gas for power generation to users other than ECG operate in the unregulated market. The use of WACOG in contracts with producers such as GENSER is only a reference point. Table 1: WACOG BUILD-UP Description Tariff (US$/MMBtu) Rate Weighted Weighted Average Commodity Cost of Gas 4.4499 Gathering Charge 0.1054 0.0366 Processing Charge 0.3356 0.1165 Transmission (GNGC) 0.7271 0.6450 Transmission (WAPCo) 2.4248 0.3758 Regulatory Levy 0.2000 0.1774 Gas Mgt. & GNPC Financing Charge 0.1343/0.0932 0.1049 Weighted Average Cost of Gas (WACOG) 5.9060 ⦁ At its most recent determination in 2022 (effective September 1, 2022) for example, PURC pegged the WACOG at $5.9060/MMBtu. The historical figures for WACOG are $7.29 in 2018, $6.08 in 2019, and the current $5.91 (see Table 1). The WACOG is not static but a dynamic figure (see Table 2). Table 2: WACOG Vs DIDT WACOG DIDT YEAR 7.29 6.5 2018 6.08 4.2 2019 5.91 ??? 2022 ⦁ Therefore, irrespective of whether GNPC buys the gas at $9.06/MMBtu or $1/MMBtu, it cannot sell it to any power producer in the regulated market above the PURC-determined WACOG. PURC, through this price determination mechanism, allows for uniform pricing across the country. ⦁ The Discounted Industrial Development Tariff (DIDT) is determined by the Ministry of Energy and results from a discount offered to companies classified as supporting ‘strategic’ industrial development initiatives, that purchase natural gas as an input in their operations. The classification is not done by GNPC. The Corporation did not classify GENSER as a company qualified to enjoy the DIDT. It is the Ministry of Energy that does the classification depending on the strategic objectives of the policymaker at any given time. ⦁ Historically, the DIDT is always lower than the WACOG (see Table 2). When WACOG was $7.29/MMBtu in 2018, the DIDT was $6.5/MMBtu. When PURC reduced WACOG to $6.08/MMBtu in 2019 the Ministry of Energy brought the DIDT down to $4.2/MMBtu. The DIDT, just like the WACOG, is not static but variable based on policy and regulatory direction. GNPC has no control over either. ⦁ In fact, as at the time GNPC began negotiating the Initial GSA, GENSER was already classified as a company qualified to benefit from DIDT. The prevailing DIDT was $4.20/MMBtu and as such any discussions with GENSER to sell gas to the power producer necessarily began with a reference figure of $4.20/MMBtu. The WACOG of $6.08/MMBtu was no longer the relevant reference point. ⦁ As a forward-looking organization planning for a future with gas as a transition fuel (making gas production, gathering, transmission, and distribution critical), GNPC had to plan for the transmission and distribution of future increased gas production from the Jubilee/TEN fields. Therefore, GNPC decided to reserve capacity on the GENSER pipeline for future use. This reserved capacity must be paid for (the reserve capacity charge). ⦁ It must be noted that before GNPC took over the supply of gas to Genser, in line with Government policy, Genser had been instructed by GNGC to increase the size of the pipeline it was going to build, from 12-inches to 20-inches in diameter. This significantly increased the cost that needed to be amortized. ⦁ The pipelines referenced under the initial GSA were completed even before GNPC signed the GSA. Table 3 below shows the breakdown of the annual GENSER contract price of $2.79 in 2020, $2.80 in 2021, and $2.87 in 2022 based on the DIDT of $4.20/MMBtu. Table 4 also shows the breakdown of the price as of 2020, per the GSA. GENSER in addition pays the service charge to Ghana Gas. Table 3: Pricing Analysis – DIDT Description 2020 2021 2022 DIDT 4.20 4.20 4.20 Other Charges & Levies (1.17) (1.17) (1.27) SAF (0.13) (0.13) (0.13) Capacity Charge (0.25) (0.25) (0.25) DIDT Commodity 2.65 2.65 2.55 GENSER Commodity Component 2.66 2.67 2.74 GENSER Contract Price 2.79 2.80 2.87 Table 4: GNPC-Genser Contract Price for 2020 Price (US$/MMBtu) Gas Commodity Charge (GCC) 2.660 Seller Aggregator’s Fee 0.130 Contract Price 2.790 AMENDMENT AND RE-STATEMENT OF GSA ⦁ The Government of Ghana (GOG) had plans to resolve a major power supply bottleneck in the middle belt of the country. As part of this plan, the Ministry decided to locate certain power plants to the middle belt. For example, the 250MW Ameri Thermal Power Plant is to relocate to GRIDCO’s Bulk Supply Point in Kumasi. This intervention, which has been in the Integrated Power Sector Master Plan (IPSMP) for years, has been affirmed by Gridco as critical for grid stability and stabilizing power supply in the middle belt of Ghana. ⦁ To leverage existing private sector investment in this venture, the Ministry of Energy by a letter dated 10th March 2021 directed GNPC to negotiate with GENSER to extend the pipeline from Dawosaso to Kumasi. The route allows for future eastward expansion to connect to Tema. The GSA, therefore, had to be amended on the back of this request. ⦁ The Amended and Restated GSA recognizes GENSER’s investment of an additional US$165-170m to extend the pipeline to Kumasi to feed thermal plants and other potential customers. GNPC has the right to transport its gas without additional charge, on the new pipeline, for up to 2045. All buyers of gas transported through the GENSER pipeline will pay the WACOG for the gas to GNPC, and GNPC will recover the transmission service charge. ⦁ Table 5 below shows the pricing analysis utilized in the Amended and Restated GSA which only comes into effect when the pipeline to Kumasi is built, and the capacity is made available to GNPC. While the pipelines referenced in the Initial GSA have already been built, the extension to Kumasi has not been built. The $1.20/MMBtu difference between the Delivered Price and the Genser Contract Price in the Amended and Restated GSA when it kicks in is for the amortization of the additional pipeline financing cost. Imani and ACEP’s assertion that GENSER is currently paying $1.114, or $1.4/MMBtu is a complete fabrication. GNPC does not charge GENSER any of these rates, as shown below. Table 5: Pricing Analysis – DIDT – Post PP02 Description 2023 DIDT 4.20 Other Charges & Levies (1.27) SAF (0.13) Capacity Charge (0.25) DIDT Commodity 2.55 Commodity Price 2.79 Delivered Price 2.92 GENSER Contract Price 1.72 Difference 1.20 NB: Difference is pipeline financing cost ⦁ Conclusions have been drawn to suggest that the GSA will cost the country $1.5 billion over its term. We presume that the figure of $1.5 billion was derived from the difference between the WACOG of $6.08/MMBtu and the Contract Price of $2.79/MMBtu (2020) multiplied by the volumes over the 16-year period. This is a simplistic methodology for evaluating investment decisions. Assuming this approach were correct, it ignores the volume of gas GNPC will sell to its customers using the pipeline over a 25-year period, to be charged at WACOG. This price includes a transmission charge that will be paid to GNPC to offset the amortization cost of the pipeline. Due to the different tenors of the different considerations in the GSA, the best approach would have been to discount the various cash flows and find the net position. ⦁ CONCLUSION ⦁ GNPC would like to place on record our appreciation for the interest shown by civil society organizations (CSO) and the public in issues of keen national concern. This ensures that organizations put in positions of trust do not abuse the privilege at the expense of the state. Public discourse that enriches the governance of state institutions should be welcome by all well-meaning Ghanaians. ⦁ However, it is important that all actors in such public discourse are guided solely by an interest in pursuing the public good. Any attempt to focus on running down state institutions and personalities entrusted with running these organizations only dilutes and devalues the arguments. Over-simplification of technical and financial arrangements and name-calling only disadvantage the organization in its future dealings with third parties. ⦁ The issuance of the ACEP and Imani report, and the unnecessary controversy it has generated, could have been avoided if the two organizations had taken pains to cross-check their information with GNPC before publication. GNPC remains available to share relevant information with anyone, so long as it does not jeopardize the commercial interests of the Corporation.