Rip-Off in Teshie-Nungua desalinated water deal

An agreement between Government of Ghana and Messrs Befesa Ghana Limited under which desalinated water produced by Befesa is sold to Ghana Water Company Limited (GWCL) for distribution to Teshie-Nungua and surrounding communities is said to be a rip-off and huge financial drain on the finances of the country.
Even though government is trumpeting that it has provided portable water to the people of Teshie Nungua through the desalinated plant, industry players insist that the cost of the project is financially imprudent and could collapse the operations of the GWCL as it incurred a deficit/arrears of about GH¢43 million in just seven months through the agreement.
Public Utility Workers’ Union (PUWU) of Ghana TUC has therefore petitioned President John Dramani Mahama for a review of the deal to save GWCL from financial haemorrhage and possible collapse.
Government signed a Build, Own, Operate and Transfer (BOOT) agreement with Messrs Befesa on February 12, 2011 for it to build the water desalinated plant at Teshie-Nungua.
Under the agreement, the water produced was to be sold to GWCL for distribution to Teshie-Nungua and surrounding communities.
It also provided that Messrs Befesa would operate the plant for 25 years and transfer to GWCL thereafter.
However, in a petition to President Mahama, dated September 28, 2015 and signed by K. Bondzi Quaye, General Secretary of PUWU, a copy of which is in the possession of THE CUSTODIAN, the utility sector workers’ union has called on the chief executive of the land to initiate due diligence into the circumstances surrounding the agreement, and officials who did not act fairly to protect the interest of GWCL and by extension the state, should be dealt with accordingly.
The paper has learnt that the Board of Directors of GWCL is in favour of the petition with the Ministry of Finance also said to be against the deal because it is a drain on the national purse.
Information gathered, further indicated that renegotiation of the agreement started in December last year following the petition and talks are expected to continue this year.
The petition chronicled what it described as money-sapping details and compelling reasons why the agreement should be reviewed.

Income & Expenditure
The petition indicated that the desalination plant was commissioned early last year and from February to August 2015, the GWCL received an income of GH¢5.72 million from the sale of water from the plant as against an expenditure of GH¢48.68 million.
“What this means is that the GWCL’s revenues from its water production plants are used to pay Messrs Befesa,” the petition explained.

Tariff Component
As stated in the petition, Messrs Befesa sold water produced from its plant to GWCL at GH¢6.75 (US$1.50) per cubic metre while Public Utility Regulatory Commission (PURC) approved GH¢1.47 per cubic metre for GWCL to consumers.
“The huge tariff differential of GH¢5.28 per cubic metre constitutes an unconscionable drain on the revenues of GWCL. Even if the GWCL tariffs are increased by 100 percent, the company will still be buying the bulk water from Messrs Befesa and selling it at a loss,” the petition pointed out.
The PURC recently approved water tariff by 67 percent for GWCL and by PUWU’s assertion, Ghana Water Company will still be operating at financial loss with regards to the water it purchases from the Messrs Befesa.

Electricity to desalination plant
The petition explained that Messrs Befesa is a private entrepreneur which has invested in Ghana for profit.
It said a major component in the desalination plant’s production and distribution of water is electricity and its average electricity consumption of GH¢1.4 million per month is paid for by GWCL.
“The plant has so far been producing 900,000 cubic metres of water per month. Compare this with the Weija Treatment Plant, which produces 6,750,000 cubic metres of water a month. This is clear indication that the desalination technology is not cost effective,” the petition stated.

A section of the desalinated water plant

A section of the desalinated plant

Shutdowns & payments of capacity charge
According to the Public Utility Workers’ Union, the desalination plant had shutdowns in April and May 2015, leading to speculation that the plant will not last the projected 25 years for it to be transferred to Ghana.
“At the same time, it is worth noting that during the two months’ period when the plant was not in production, GWCL had to pay the capacity charge of GH¢11.6 million to Messrs Befesa as provided for in the agreement,” the workers union decried.
Other terms of the agreement are that the plant will produce a maximum of 60,000 cubic metres of water per day at full capacity and the water produced by Messrs Befesa will be sold in bulk to GWCL at the rate of US$1.50 (GH¢6.75) per cubic metre.
Furthermore, a provision of 25 percent was made for non-revenue water and the GWCL will pay a monthly capacity charge of GH¢5,824,665.00 to Messrs Befesa, even during periods when the plant is not in production.

Infrastructure
The petition described as sad that the project did not take into account the infrastructure including the pipeline network that will transmit water to consumers.
“The fact of the matter is that, all the cost of distribution infrastructure, as well as the staff (labour) required to ensure that the water gets to the final consumer is being borne by GWCL.
“Also, since the existing weak infrastructure has not been revamped, pipe burst is very rampant, giving rise to high non-revenue water,” the petition noted.

Asutsuare water project
According to the Public Utility Workers’ Union, even though Public Private Partnership (PPP) is laudable, its implementation in the water sector must be critically examined since the provision of water in a developing country like Ghana should not be seen as an economic venture but social as well, having ramifications and impinging on other sectors of life such as health and education.
“Your Excellency, information available to the Union is that Denys N.V has submitted a proposal under the Asutsuare Water Project for consideration.
“We are also aware that the powers that be are pushing for the implementation of this project. It is our belief that Build, Own, Operate and Transfer (BOOT) agreements are not economically viable in the water sector because of the profit motive.
“Besides, it is rather a drain on the company as its scarce resources, which could be used to improve our systems and operations to make the company efficient and more viable, are paid to private entrepreneurs,” the petition reminded President Mahama.

The way forward
The public utility workers’ union indicated that from the reasons adduced, there cannot be any shred of doubt that the agreement between the Government of Ghana/GWCL and Messrs Befesa is a bad deal, to say the least and that it is not in the interest of the country as it undermines the capacity of GWCL to deliver.
“We, therefore, appeal to Your Excellency to order the immediate review of the agreement.
“Government should take over the seven month deficit/arrears of GH¢43,000.000.00 incurred by GWCL from the transaction between Befesa and Government of Ghana.
“Government should support the GWCL to link Teshie-Nungua to the Kpong Gezhouba plant which has excess capacity.
“Government should initiate due diligence into the circumstances surrounding the agreement, and officials who did not act fairly to protect the interest of GWCL and by extension the state, should be dealt with accordingly.
“Government should put in place a mechanism to ensure that similar projects with huge financial encumbrance are not implemented in the future to destroy the GWCL,” the petition appealed to President Mahama.
It urged President Mahama to consider the issues as coming from a key stakeholder in the water sector and act in the best interest of the country.
“Foreign investment should advance the cause of Ghana’s economic development not to her detriment,” the petition reiterated.
It was copied to the Minister for Water Resources, Works and Housing, the Board Chairman of GWCL, Managing Director of GWCL and the Secretary General of the Trades Union Congress (TUC).

Source: THE Custodian

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