Dr Elikplim Kwabla Apetorgbor, CEO of Independent Power Generators, Ghana (IPPG), has emphasized the need for Ghana to respect multinational and international agreements, especially in the power sector, following a significant judgment debt awarded against the country.
The judgment, amounting to $111,493,828.82, was awarded by a District of Columbia Court in the United States in favour of the Ghana Power Generation Company (GPGC).
This decision follows the failure of the Government of Ghana to fully comply with an earlier tribunal ruling from the United Kingdom.
In 2021, a UK court had awarded a $140 million arbitral award against Ghana for terminating a power deal with GPGC.
The government was ordered to pay the Early Termination Payment of $134,348,661 and additional costs related to Mobilization, Demobilization, preservation, and maintenance.
This ruling also included accrued interest, arbitration costs, and legal fees totalling over $3 million.
Dr Apetorgbor highlighted that the Trafigura judgment debt underscores the importance of adhering to contractual obligations and the sanctity of international agreements.
He stressed that Ghana must adopt a strategic and disciplined approach to its contractual engagements to prevent similar situations in the future.
“To prevent such scenarios in the future, Ghana must adopt a more strategic and disciplined approach to its contractual engagements,” Dr. Apetorgbor stated.
He recommended conducting thorough legal reviews of existing Independent Power Producers (IPPs) agreements and ensuring that amendments or terminations are handled with caution and respect for the agreements.
Dr. Apetorgbor also suggested including dispute resolution mechanisms, such as arbitration clauses, in future contracts to provide structured, less adversarial means of resolving disagreements.
He also proposed setting up a contingency fund for managing judgment debts and other unexpected liabilities.
This fund would act as a financial buffer, allowing the government to meet its obligations without affecting payments to critical sectors like energy.
The case has highlighted the critical need for Ghana to manage its international obligations carefully and adopt practices that safeguard against costly legal disputes.
Read his full statement…
The Judgment Debt Against Ghana is avoidable
Ghana is now faced with a significant financial burden, following the award of a USD $134 million judgment debt in favor of Trafigura’s Power Generation Company. This debt stems from the early termination of a Power Purchase Agreement (PPA) between Trafigura and the Government of Ghana, a decision that now has far-reaching consequences. The situation serves as a stark reminder of the importance of respecting the sanctity of multinational and international agreements, especially within the project finance realm of the power sector.
The recent judgment debt highlights the critical need for Ghana to adhere to its contractual obligations. International agreements, such as Power Purchase Agreements, are not mere formalities but essential components that drive investment, ensure energy security, and support economic stability. Failure to honor these agreements not only leads to financial liabilities but also damages Ghana’s reputation as a reliable partner in the global market.
In 2018, the government’s decision to unilaterally convert all ‘take or pay’ PPAs to ‘take and pay’ agreements was widely criticized as a rash move that could have led to similar or even worse consequences. Such actions undermine investor confidence and can lead to costly legal disputes, as evidenced by the current situation with Trafigura. These are not mere administrative decisions; they carry the weight of legal obligations that, if ignored, result in significant financial and reputational damage.
The immediate financial impact of the judgment debt is severe, particularly as it comes at a time when the government is already grappling with overdue arrears to independent power generators (IPGs). The requirement to pay USD $134 million to Trafigura strains the government’s resources and may further delay payments to IPGs, which are vital for maintaining the stability of Ghana’s power supply.
This delay not only risks power shortages but could also result in additional financial penalties, compounding the economic challenges facing the country. The sustainability of Ghana’s power sector hinges on the timely and consistent payment to IPGs, which cannot be compromised if the country aims to maintain a reliable and efficient power supply.
To prevent such scenarios in the future, Ghana must adopt a more strategic and disciplined approach to its contractual engagements. This includes a thorough legal review of all existing IPGs, ensuring that any amendments or terminations are handled with the utmost caution and respect for the agreements in place. The inclusion of dispute resolution mechanisms, such as arbitration clauses, in future contracts can also provide a more structured and less adversarial means of addressing disagreements.
Furthermore, Ghana should consider setting up a contingency fund specifically for managing judgment debts and other unexpected liabilities. This fund would provide a buffer, allowing the government to meet its financial obligations without jeopardizing payments to critical sectors such as energy.
Dr. Elikplim Kwabla Apetorgbor
CEO, Independent Power Generators, Ghana
August 23, 2024
The post Trafigura judgment debt should serve as a reminder of the need to respect sanctity of multinational & int’l pacts -IPPG Ghana CEO first appeared on 3News.
