Clear the energy sector debts
Ghana’s energy sector is in a financial crisis, considering the huge debts owed some of the operators.
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The cycle of debt has the national power producer, the Volta River Authority (VRA), at the top which is indebted to the Ghana National Gas Company and the West Africa Gas Pipeline Company which supplies gas to Ghana through Nigeria Gas (N-Gas).
VRA’s indebtedness to Ghana Gas, for instance, stood at US$227.78 million as at the end of December 2015, and this was in respect of gas supplied to the VRA for power generation in the year under review.
VRA, however, maintains that its failure to pay its debt is as a result of the inability of other utility companies to pay for the power that it uses.
The VRA’s indebtedness is attributed to the subsequent debts owed it by the Electricity Company of Ghana (ECG).Instructively, the government and its agencies are also indebted to the ECG, a situation which makes it difficult for the latter to also clear its debts with the VRA.
With Ghana’s power supply shifting largely to thermal, it has become necessary for the VRA to pay its debts to companies that supply it with gas to ensure a regular supply and to save those companies from any financial burden.
The 2015 Annual Report of the Public Interest and Accountability Committee (PIAC), the committee with oversight responsibility of the management of the country’s petroleum revenues, also recommended that the Ministries of Petroleum and Power must ensure that all outstanding receivables in respect of lean gas sold to the VRA are paid as a matter of urgency to prevent the GNGC from falling into the never-ending cycle of indebtedness prevalent in Ghana’s energy sector.
Thankfully, the government, through the Energy Sector Levy, intends to raise some money to defray some of the debts that the VRA owes the gas suppliers. It also intends to issue energy bonds as part of measures to reduce the growing debts in the sector.
While this is commendable in the short to medium term,energy think tank, the Africa Centre for Energy Policy (ACEP) believes the government can do better in its attempt to resolve the growing energy sector debts.
The Graphic Business subscribes to the ACEP’s suggestion that the government institutes a financial recovery plan to enable the utility companies which are caught in the web of debt to clear them and make them financially sound over time.
This is because clearing the inter-utility debts will mark a step in the right direction because with the anticipated influx of Independent Power Producers (IPPs) into the energy sector, the local companies need to be very efficient to be able to compete favourably.
We believe it is necessary to capitalise the utility companies and for the government to also pay for the power it consumes to ultimately strengthen the utilities to become independent financially.
The Graphic Business shares in the proposal of the ACEP and urges the government to consider it to ensure that the growing debts in the sector are cleared.