AfDB approves USD 60 million loan for expansion of Takoradi II thermal power plant in Ghana

The Board of Directors of the African Development Bank (AfDB) Group, through its private sector window, approved on Wednesday, 11 July 2012 in Tunis, a senior loan of USD 60 million for the expansion of the Takoradi II thermal power plant expansion. This expansion aims at improving electricity supply and energy security in Ghana.

Ghana’s economy has experienced tremendous growth in the last decade, increasing the aggregate demand for electricity and creating an energy challenge that has been primarily addressed by further electricity imports. The country’s installed power capacity will soon be insufficient if additional capacity is not added to meet the expected increase in demand (6.5 percent per year).

The project consists of the expansion of the existing 220 MW single cycle gas/fuel oil power plant to a 330 MW combined cycle by adding a 110 MW steam turbine to the exhaust vent of the existing plant which has been in operation since September 2000.

As mentioned by Ms. Tas Anvaripour, the AfDB’s Head of Infrastructure Finance and PPP, “this project is a model example of a “Green Growth” PPP project featuring a national utility investing alongside private sponsor. The project has a strong economic rationale behind it, which is able to deliver highly competitive base-load energy and help the power system in Ghana to diversify from hydro and oil dependency. Moreover the project will reduce Ghana’s over-reliance on climate-vulnerable hydropower and as a conversion from simple to combined cycle will increase the power plant output capacity by 50% at no additional fuel and no additional carbon emission impact”

The plant expansion is a landmark project for Ghana’s economy as it will allow the country to continue its economic transformation to a middle-income country and improve the living standards of its population. In addition, this added capacity is an opportunity for Ghana to diversify its energy mix. Ghana’s domestic power supply currently comes mostly from hydropower (about 61 percent) with the rest from imports and thermal sources.

This high reliance on hydropower has exposed the country to the risk of inadequate supply resulting from frequent and increasing droughts during the dry season.  Furthermore, the plant has recently been converted from primarily using heavy fuel oil to one in which the primary fuel is natural gas, to be sourced from the West African Gas Pipeline.

The plant is owned and operated by Takoradi International Company LLC which is 90 percent owned by the Abu Dhabi National Energy Company (TAQA) and 10 percent by the Ghanaian state utility, the Volta River Authority (VRA). In 2010, TAQA signed a Memorandum of Understanding with the Ghanaian governmentand the VRA in relation to the 110 MW expansion of the Takoradi plant.  Both TAQA and the VRA have broad experience in the power sector and in developing power generation in Ghana.

The Takoradi II expansion project holds a strong economic rationale and will be able to deliver base-load power at a highly competitive tariff,  help the power system in Ghana to diversify from hydro and oil dependency, and support the country’s growth and sustainable development.