Government on Thursday said Sahara Energy Resources Limited of Nigeria's was justified in making claims for penalty from the Volta River Authority (VRA) saying it was in line with the provisions of the supply contract.

The penalty payments, however, were in excess of 139,689,000 dollars due to wrong calculations of the exchange rate.

Nana Akomea, Minister of Information, said this in Accra on Thursday at the weekly press briefing where he reacted to allegations made against the Government by Professor Atta Mills, former Vice-President and the NDC Flag bearer.

He explained that the allegation by Prof Mills that the VRA fraudulently paid 14 billion cedis as penalty for not lifting crude oil was brought before the Board of VRA by no less a person than the NPP appointed Chairman of the Board himself - Mr Jones Ofori-Atta.

He said the excess payment would be refunded with interest to the VRA.

Nana Akomea said the Ministry of Energy had reacted on the allegation of possible fraud, corruption and causing financial loss associated with the VRA's Strategic Reserve Project given that the plant had not produced any power and incurred total rent payments of 10 million dollars and monthly payments of 1.38 million dollars.

"The Ministry of Energy maintains that the VRA was correct in making contingency plans for emergency power given the alarming level of the water in the Akosombo Dam and the war in Ivory Coast."

Nana Akomea said the SRP had been commissioned and could work noting that, the current situation according to the Energy Ministry was that emergency conditions did not exist and, therefore, there was no need to use the plant at this time.

"Emergency conditions in power supply have not been acute because the Ivorian situation did not lead to significant cuts in supply from Ivory Coast, and the VALCO shutdown proved cheaper than operating the SRP and Aboadze Plants."

On the rental cost due so far, the Government as per the contract, was negotiating to convert this into credit for final purchase of the plant.

Nana Akomea said the Government had indicated that it was unhappy with the delay in its implementation of the SRP, hence the punishment imposed on the official concerned.

"To assign corruption, fraud and causing financial loss to the State as a result of the delay is not borne out by the facts currently available", the Minister said.