(Adds quotes, background on Ghana power sector)
By Valerie Volcovici
WASHINGTON, Aug 5 (Reuters) - The United States will invest nearly $500 million to modernize Ghana's power sector in a bid to help it attract private sector investment and double energy access on the African continent, the State Department announced on Tuesday.
Secretary of State John Kerry and Ghanian President John Dramani Mahama signed the Ghana Power Compact, the largest U.S. government-funded transaction of the Obama administration's Power Africa program.
Heads of state of most African countries are in Washington this week for the U.S.-Africa Leaders Summit, which aims to showcase U.S. interest in the continent through a series of government-private partnership deals to boost trade and investment.
The Millennium Challenge Corporation (MCC), the U.S. government's independent foreign aid agency, will provide the funding to create a "self-sustaining energy sector in Ghana by reforming laws and regulations needed to transform the country's power sector," according to the State Department.
"This new compact with the MCC demonstrates the growing cooperation between Ghana and the United States. It will benefit millions of our people and contribute immensely to the achievement of my 'Energy For All' objective," said Mahama, referring to Ghana's national energy plan.
According to the U.S. Agency for International Development, Ghana has 2,719 megawatts (MW) of installed generation capacity, an inadequate amount to serve a population of about 25 million and a major constraint to economic growth.
The new pact is expected to draw more than $4 billion in private energy investment from U.S. and global energy firms, improving management of Ghana's power system and making the power procurement process more competitive.
Ghana will invest $37.4 million of its own money into the initiative.
With compacts the United States is also developing with Liberia and Tanzania, the MCC will have invested $1 billion in support of the Power Africa initiative, which has committed $7 billion in investments until 2018.
(Reporting by Valerie Volcovici; Editing by Ros Krasny, Eric Walsh and Sandra Maler)