Siemens wind project runs into unexpected roadblock

Germany’s Siemens AG (ETR:SIE) has started looking for financing to build a 100-150 MW wind power project in Ghana but new government policy may shelve the investment plans for long.

According to African media reports, the project, located in the western part of the country, has already passed the feasibility studies stage and construction may start once financing is secured.

Sabine Dall’ Omo who manages Siemens operations in Southern and Eastern Africa told reporters that the capacity of the project will to a large extent depend on the financing agreement.

However, Siemens has stumbled upon a serious roadblock on the way to project bankability.

Until recently, the government of Ghana was issuing sovereign guarantees to power projects developed under the independent power producers (IPP) scheme. However, since utility companies in Ghana are often not able to pay for the power generated, developers often default on loan payments and the banks resort to the sovereign guarantees. Thus, the practice has contributed to increasing national debt which reached 72% of the country's annual gross domestic product (GDP) at the end of 2015.

In an effort to cut debt, the government is no longer guaranteeing IPP schemes, at least for a period of three years, which puts Siemens in a tight spot with banks very reluctant to finance such projects.

Nevertheless, the Germans will continue to look for funding, Dall’ Omo said.

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