Government owes power producers and the Electricity Company of Ghana (ECG) over GHC3 billion.
The amount comprises GHC2.2 billion owed by Volta River Authority (VRA) to its lenders and a ‘legacy debt’ of GHC728 million owed ECG by government.
The total debt excludes other monies owed Independent Power Producers (IPPs).
The situation led to the cut in gas supply from Nigeria Gas (N-Gas) to Ghana which resulted in the return of the ‘dumsor’ recently.
Finance Minister Seth Terkper, who disclosed these at a press conference Monday in Accra, said the debts would be repaid over the next five years.
According to Mr Terkper, government had reached an agreement with local banks to restructure the debts of the State Owned Enterprises (SOEs).
VRA’s repayment plan
Key features of the agreement include upfront payment of approximately GH¢250 million which will be funded by new collections from the energy sector levies. It also includes a reduction of interest rate on the cedi component of the VRA debt from an average of 30 percent to 22 percent and reduction of interest rate on the foreign currency component of the VRA debt from average of 11 percent 8.50 percent, Mr Terkper mentioned.
He said the repayments will be funded from a debt service account which will receive cash flows from the energy debt recovery levy, debt service reserve and a proportion of VRA’s receivables.
Mr Terkper also said proceeds of the energy debt recovery levy which are applied to VRA debts will be converted into equity on VRA’s balance sheet or could be subject to an on-lending arrangement with government.
Requirement of SOEs
To help meet the country’s power demand of 12 percent annually, the ECG has indicated it would need GHC200 million and this would particularly go into ongoing and new projects.
The Ministry of Finance recently announced that it had prepared a cheque for GHC200 million to be given to the ECG as part payment of its debt to the power distributor.
This is believed to have reduced the government’s debt to ECG from GHC950 million to the current GHC728 million.
In the case of the VRA, its total debt to the Ghana Gas stood at $350 million as at July 5, this year, while $181 million was owed WAPCo as at October 2015.
Mr Terkper has in recent times been advocating the introduction of the right policies to prevent SOEs from increasing debts.
Most of these debts have become an albatross around the necks of citizens, especially power consumers, with a typical example being the Tema Oil Refinery (TOR) debt, which ACEP claims have been overpaid.