Obama Doubletalk Muddies Ghana Energy Investment

On his trip to Africa last July President Obama passed on visiting his ancestral home of Kenya in favor of Ghana--a bastion of democracy and stability in a volatile region. In a speech, Obama told Ghanians that America can do more to promote trade and investment and urged "public-private partnerships that invest in better roads and electricity."

With that endorsement, you can excuse John Filla, vice president of Houston's HPI Technologies, for thinking that the U.S. government might want to give just a little bit of support to his $185 million project to build a 130-megawatt natural-gas-fired power plant in Aboadze, Ghana.

HPI, working with Canada's publicly traded Magellan Aerospace, got the Canadian government to loan nearly $50 million and provide political risk insurance.

They wanted to get the U.S. government on board, too. So Filla asked for help from the Overseas Private Investment Corp., a federally subsidized entity that insures U.S. investors against political risks. The idea is that U.S. corporations will send more capital to the Third World if they don't have to worry about losses to riots and expropriations.

There was a little hitch at Opic, though. Late last year Obama signed into law a bill ordering the insurer to reduce the greenhouse gas emissions associated with projects in its $13.3 billion portfolio by 30% over 10 years and 50% over 15. Even if Opic were to insure just a portion of the project, it would have to count the plant's entire carbon emissions against its cap.

The companies went ahead with the project, and groundbreaking was in mid-January. But Filla says that without Opic insurance, financing for the Ghana project will likely cost ten percentage points more, closer to 20%. Société Générale arranged some $140 million in loans. The developers are seeking political insurance from the World Bank.

In his speech Obama pushed Ghana to try to exploit its plentiful wind and sun for power. Clean but a lot more expensive than the electricity to be generated from Ghana's bounty of offshore natural gas fields.