Ghana Power Compact

The Millennium Challenge Corporation will invest up to $498.2 million to transform Ghana’s power sector and stimulate private investment. The aim of the five-year Ghana Power Compact is to create a financially viable power sector to meet the current and future needs of households and businesses, and to help fight poverty across the country.

The compact will play a critical role in Power Africa, the U.S. Government’s initiative to double access to power on the African continent. The Ghana Power Compact is the largest U.S. Government transaction to date under Power Africa, and will serve as an anchor for increased American engagement in Ghana.

The Government of Ghana has committed to implementing the reforms needed to transform its power sector and put it on a path to profitability and sustainability, creating the financial environment to attract private investment. The government has pledged to invest at least $37.4 million of its own money. The compact is expected to catalyze at least $4.6 billion in private energy investment and activity from American firms in the coming years.

Financials

Compact Budget

Milestones

  • Signed:
    August 6, 2014
  • Entry Into Force:
    September 6, 2016

Compact Projects

Access Project

  • $10,000,000Project Total Amount

The $10 million project will test the most cost-effective approaches to address barriers small and medium businesses face in obtaining safe and legal access to electricity. This small project is designed to be innovative; it will test and provide evidence on several different interventions aimed at reducing critical barriers to legal connections or other supply constraints for these businesses in a sample of markets and economic enclaves, with the intent of facilitating scale up of those interventions in the future.

Electricity Company of Ghana Financial and Operational Turnaround Project

  • $149,311,750Project Total Amount

The aim of this project is to improve the management of this Ghanaian electricity distribution utility by bringing in a private sector operator and by making investments designed to reduce losses and improve service quality.

The project includes investments to attract private sector participation, support integrated power loss management, reduce distribution system vulnerability to theft and meter manipulation, lower thermal losses in the distribution systems, and reduce the frequency and duration of outages by introducing improved system protection and sectionalizing devices in the distribution system.

Energy Efficiency and Demand Side Management Project

  • $25,400,000Project Total Amount

The $25.4 million project will offset demand for electricity, which has exceeded supply in Ghana, and help consumers save money by improving energy efficiency, reducing peak demand, and increasing both local technical capacity for efficiency retrofits and awareness, and public understanding of energy efficiency in the country.  

The project will:

  • develop and enforce energy-efficient standards and labels for priority appliances and equipment;
  • build energy auditing capacity in Ghana;
  • finance demonstration retrofits of select facilities;
  • conduct a public-awareness campaign to promote energy efficiency; and 
  • convert streetlights in priority areas to highly efficient LED lighting.

Northern Electric Distribution Company Financial and Operational Turnaround Project

  • $54,191,650Project Total Amount

The project will initially provide $5 million in technical assistance to improve operations of the Northern Electric Distribution Company (NEDCo), a distribution utility that serves the northern regions of the country. MCC will evaluate economic rates of return for possible system and infrastructure investments no later than the conclusion of the first year of compact implementation. If resulting ERRs are acceptable, MCC will make additional investments up to $49.2 million.

Power Generation Sector Improvement Project

  • $15,501,500Project Total Amount

The $16.3 million project will address major constraints to private sector investment in generation. The project will leverage ongoing advisory support provided by USAID to operationalize Ghana’s “gas to power” plan and commercialize the country’s gas sector, support the implementation of an independent power producer framework, and potentially fund technical feasibility assessments.

Regulatory Strengthening and Capacity Building Project

  • $3,404,420Project Total Amount

The $5 million project aims to enhance economic growth opportunities by improving the regulatory monitoring and independent verification of power sector performance. The project will support studies that provide critical inputs in the review process and redesign of the tariff structure.