Ghana’s Bui Hydroelectric Project encounters $168m investment shortfall

Construction site of the Bui Dam credit: Bui Power Authority

The Bui Hydroelectric Project (BHP) which is expected to generate about 400 mega watts of power for the country is in need of additional funds totalling about $168 million, an official document made available to has shown.

According to the document, the project has experienced a funding shortfall arising primarily from the unanticipated effects of global upheavals as well as unforeseen essential works.

The BHP, which was expected to cost about $622 million, was funded with a concessional loan of $263.5 million, a Buyer’s Credit of $298.5 million from the Chinese government and EXIM Bank respectively with a $60 million financing from the Ghana government.

“These global events resulted in the inadequacy of the budget provided for some line items in the Engineering Procurement and Construction (EPC) contract and therefore a shortfall totalling $168 million,” said the document.

The document summarises the additional cost under three main factors; Price Contingency, Physical Contingency and Other Items.

The following are the breakdown of the additional funding needed for the project which according to the Energy Minister Dr. Oteng Adjei will be completed by December 2012.

A.    Price Contingency

The turnkey price for the Bui Hydroelectric Project was agreed in 2007 based on cost estimates submitted by the contractor. As a result of the global financial upheavals, the escalation index has been higher than anticipated – hence the need to re-estimate the obligations in respect of price escalation to the value of $90.7 million.

In addition, there is the need for an initial working capital, supplementary insurance and other incremental costs. The total additional amount of Price Contingency is $106.7 million.

B.    Physical Contingency

Any complex construction project such as Bui Hydroelectric Project, which incorporates substantial levels of geological unknowns and other physical risks, needs to recognise the associated uncertainties and therefore make an appropriate budgetary provision for physical contingency.

The essential items that were not foreseen include:

·    Diversion of Banda-Bongase Road and 33kV Powerline. (The Bui Reservoir will extend to cover part of this road. This was not foreseen or budgeted)

·    Reservoir Clearing (This was not budgeted)

·    Turbinette (This was not foreseen and not budgeted)

·    Water Supply Plants (This was not foreseen and not budgeted)

·    Development of Fisheries in the Bui Reservoir (This was not budgeted)

It is therefore proposed that the provision be revised to $47. 7million.

C.    Other Items

·    Employer’s Engineering and Administration:

A lump sum allocation of $15 million was made in the contract budget for this item. The review has taken into consideration the negotiated costs of engineering consultancy services as well as detailed cost estimates for our other Engineering and Administration activities. The revised estimate is $25 million.

·    Employer’s Permanent Facilities – $5million in addition to original allocation of $5million.

·    Workshop and Equipment for maintenance of the Facilities- $4.5m

·    Facilities for Resettlement – $ 1.0 million extra in addition to the original allocation of $11 million.

“In view of all the above, additional funding totalling $168 million is required to complete the project on schedule,” said the document.

Energy Minister Dr. Oteng Adjei told the press October 6, 2011 “as part of our continuing efforts to expand generation capacity to 5,000 MW in the medium-term, additional capacity of 265 MW will be ready by the end of 2012 through the completion and commissioning of one unit of 133 MW out of the 400 MW Bui Hydroelectric Project by December 2012.”

The main components of the Bui Hydroelectric Power Project are: a Roller Compacted Concrete (RCC) gravity dam incorporating a 5-bay spillway, and 3 penstocks in the middle of the dam; a powerhouse at the toe of the dam on the left bank; two rockfill saddle dams on the right bank; a switchyard; 276 km of transmission lines; and, a permanent bridge downstream of the dam, according to the document.

The project, divided into two phases of implementation, begun August 2007. Chinese firm Sinohydro Corporation is the contractor with the Bui Power Authority playing a supervisory role.

By Ekow Quandzie

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