Western Region - Energy, HIV and Illegal Mining Top List of

UNCLAS ACCRA 002181

SIPDIS

SENSITIVE, SIPDIS

E.O. 12958: N/A
TAGS: ENRG ECON GH
SUBJECT: Western Region - Energy, HIV and Illegal Mining Top List of
Concerns

Reference: Accra 01634

1.(SBU) Summary: During a joint visit with the Ambassador to the
Takoradi Power Plant, Minister of Energy Joseph Adda was
forward-leaning about prospects for the long-stalled CMS Energy deal
to expand the Takoradi 2 power plant. He indicated that costs
remain a major concern but he was hopeful that negotiations could
produce agreement on the expansion by October. The Chief Executive
of the Volta River Authority (VRA) said VRA was looking at options
to meet immediate needs, primarily through rentals of generating
turbines. Nine companies, including GE, have been approached.

2.(U) Separately, the Ambassador paid a courtesy call on Western
Regional Minister, Anthony Evans Amoah, who raised his interest in
working with the United States to address challenges related to
illegal small-scale mining activity, HIV/AIDS and energy. The
Ambassador emphasized our partnership with the region in areas such
as immunization, military cooperation, maritime safety and private
sector development. Media outreach emphasized Post's interest in
expanding the American commercial presence in Western Region. End
Summary.

3.(U) Ambassador Bridgewater and chiefs of the Foreign Commercial
Service (FCS),Economic and Public Affairs sections visited Western
Region September 5-7. The Ambassador opened an FCS-sponsored
seminar for local businesses on how to do business with the United
States, toured the rainforest canopy walk at Kakum National Park,
met with local business leaders, visited several small businesses,
and conducted a live 15-minute interview with a leading independent
radio provider which aired simultaneously in the commercial hub
Kumasi. The Ambassador met with the Minister of Energy at the
Takoradi Power Plant and with the Western Regional Minister.

Energy: Takoradi Power Plant Visit
--------------

4.(SBU) The Minister of Energy, Joseph Adda, joined the Ambassador
on her previously scheduled visit and tour of the Takoradi Power
plant. The visit was covered extensively by print and TV press.
Also participating were the Chief Executive of the Volta River
Authority, Joshua Kofie Ofedie, CMS Energy Managing Director, John
Odom (CMS is a U.S. investor and operator of the Takoradi 2 power
plant),the acting plant director and numerous staff. Adda was
forward-leaning about prospects for the long-stalled CMS deal to
expand the Takoradi 2 power plant. He indicated that costs remain a
major concern but said he was hopeful that negotiations could
produce results by October. Separately, CMS informed us it expected
a letter from the Minister of Energy to the Chief Executive of the
Volta River Authority (the plant's joint venture partner and sole
customer) giving VRA a mandate to renew negotiations. The letter
will make no real commitment on the part of either the Government of
Ghana (GOG) or CMS beyond triggering expenditure of funds needed to
do preparatory work.

5.(SBU) VRA Chief Executive Ofedie said Ghana was currently relying
heavily on the two power plants at Takoradi (see reftel for
background on the Takoradi plants and Ghana's energy sector in
general). Both were performing at near-capacity, although one unit
at Takoradi 1 is being refurbished to improve efficiency.
Currently, the GoG is using about 450 thousand barrels of oil a
month to fuel the plants, at a cost of around $30 million, depending
on the cost per barrel. Once the unit at Takoradi 1 is back in
service, the plants will go through the 450 thousand barrels in
about 3 weeks. When the West Africa Gas Pipeline (WAGP) comes on
line (March 2007),fuel costs will decline by about 30 percent.
Takoradi 1 needs to be refitted to be able to use gas, a process
that should be completed in December. Takoradi 2 is already ready
to use gas. Other than the proposed CMS expansion, Ofedie indicated
that the GOG expected to have a 125 megawatt plant on a barge
commissioned to run on gas within 12 months. Ofedie said plans are
also well underway for a 125 megawatt plant in Tema, in addition to
a planned 330 megawatt plant there.

Immediate Energy Needs
--------------

6.(SBU) Prior to the Minister's arrival at the meeting, the
Ambassador, CMS and the VRA Chief Executive discussed Ghana's
immediate energy crisis. It has been triggered by record low water
levels at the Akosombo Dam, but a near-term crisis has been
predicted by energy experts for at least a year based on Ghana's
growing energy needs and the lack of new investment in the sector.
Even if the CMS deal moves forward in the next few months, the
expanded plant will not produce energy for more than two years after
the start of construction. Ofedie said that VRA was looking at
options to meet immediate needs, primarily through rentals of
generating turbines. Nine companies, including GE, Caterpillar,
Cummins and CMS Energy have been approached.

7.(SBU) The Ambassador indicated she had communicated Ghana's
request for assistance during this energy crisis to Washington and
requested that VRA keep us informed of their search so we can work
with them in support of their efforts to find a timely interim fix.


Comment
--------------
8.(SBU) The GOG still has no solid plans to meet the country's
energy needs in the short term. Load shedding (scheduled rolling
blackouts) is ongoing. The 125 megawatt barge that the GOG claims
will be operational in 12 months remains a question mark. It has
never been fired up. The plant was built by the Italians with
Japanese funding in the late nineties. It sat in Italy for two
years before being brought to Ghana. Since arriving in Ghana, its
intended berth at Efaso Port in the Western Region needed to be
dredged and once that was done, gas was not available. The
government has decided it will move the barge to Tema because gas is
expected to be available through the WAGP beginning in March 2007.
There has been considerable local concern about the move and the
loss of expected jobs. The Minister of Energy was in the region in
part to explain to local chiefs and community leaders the reason
behind the move. The planned 125 megawatt plant in Tema is far from
a done-deal (septel) and would not come on line until June 2007, at
best.

9.(SBU) Comment continued: If Ghana is to maximize benefits from the
WAGP over the medium and long-term, it needs to move quickly to put
in place the regulations and procedures for developing a secondary
gas network, primarily in Tema. If Ghana fails to move quickly to
lock into place favorable long-term supply contracts, additional
WAGP gas may be sold to customers elsewhere in the region, resulting
in permanently higher costs to VRA. USAID/West Africa is providing
technical assistance to the West Africa Gas Pipeline Authority, the
West Africa Power Pool and the Resource Center for Energy Economics
and Regulation (RCEER) in order to increase access to power in the
region. VRA is a cornerstone of the West Africa Power Pool. End
Comment.

Meeting with the Western Regional Minister
--------------

10.(U) The Ambassador met with the Western Regional Minister,
Anthony Evans Amoah, his deputy Kwesi Blay, and more than 20 staff
members in Takoradi September 6. The Ambassador outlined the major
areas of U.S. cooperation with the region, including cooperation on
polio, malaria, naval training, definition of sea lanes to improve
maritime security, as well as her participation in a seminar for
local businesses on how to do business with partners in the United
States.

11.(U) Minister Amoah noted that while the region will not be one of
the direct beneficiaries of the Millennium Challenge Account
Compact, he believes there will be collateral benefits from
investments being made in surrounding areas. He said that even
though poverty is not endemic, there are serious pockets of poverty
which fuel activities such as illegal mining. The Minister
recognizes that the activity causes considerable problems with the
mining companies who have valid concessions. The region is
committed to protecting the rights of business but needs help
addressing the underlying causes of the illegal activities.
Minister Amoah, who was appointed in April, said that his
predecessor had requested World Bank assistance. The Minister also
raised the need for assistance with energy generation, which is
needed to support income generating activities, including for those
currently involved in illegal mining.

12.(U) The Economic Planning Officer, Olivia Opoku-Adomah, provided
information about HIV/AIDS challenges. While the overall prevalence
rate remains relatively low, officials are concerned about a
potential acceleration in infections as significant numbers of
workers from neighboring countries such as Cote d'Ivoire, which has
much higher prevalence rates, come into Ghana for mining jobs.
Opoku-Adomah requested help to contain the spread of HIV and to
support those affected, especially orphans. The Ambassador noted
that the embassy was in the midst of developing a country plan for
HIV/AIDS programs in Ghana and she would ensure that the planning
team was aware of these local concerns.

13.(U) Discussion then focused on the limited programs to support
small business development. Officials believe there is potential in
areas such as rattan and bamboo but no companies have yet shown an
interest in investing. There is currently little agro-processing
and much of the agricultural production goes to waste. A program to
train 25 small businesses on skills such as accessing loans and
writing business plans will be underway soon.

BRIDGEWATER