Gov’t insists on private participation in ECG
On October 31, 2024, 8:10 AM
Government is ramping up efforts to engage the private sector in Electricity Company of Ghana (ECG) operations.
The move is part of a broader strategy aimed at enhancing operational efficiency and ensuring long-term sustainability in response to ongoing financial challenges in the energy sector.
Finance Minister Dr. Mohammed Amin Adam reaffirmed government’s commitment to reform the energy sector during the October 2024 IMF/World Bank meetings held last week.
He highlighted a substantial annual shortfall of US$1.2billion (approximately GH¢18billion) in the energy sector, stating: “This is not acceptable. Funds that should be allocated to essential services like healthcare and education are being diverted to cover losses in a sector that should ideally attract market-based solutions”.
To support ECG’s financial restructuring, government is implementing the cash waterfall mechanism to ensure that all revenue collected by ECG is fairly redistributed among stakeholders in the energy value chain.
“This is very important for us, because people have lost confidence in our ability to manage the energy sector due to financial issues,” Dr. Adam explained, emphasising the necessity of restoring trust among partners and investors.
As part of the Energy Sector Recovery Programme (ESRP), government is actively renegotiating power purchase agreements with Independent Power Producers (IPPs) to address its growing debt.
Dr. Adam noted that negotiations with several IPPs are progressing despite setbacks, including the recent shutdown of Sunon Asogli’s 560MW power plant due to a payment dispute with ECG. Sunon Asogli cited an outstanding debt of US$259million, excluding fuel costs, as the reason for halting operations.
However, Dr. Adam reassured the public that this shutdown has not disrupted power supply, explaining: “If one plant shuts down and the others continue to operate, it simply means that we have enough to supply our people”.
During the media briefing, the minister outlined various reforms aimed at improving ECG’s efficiency – including investments in prepaid metering and enhancements of commercial management to boost revenue collection.
“Our objective is to not only stabilise the energy sector but also improve the quality of life for our citizens,” he asserted.
Government has already signed new agreements with Cenit and AKSA, two of the six IPPs involved in restructuring talks. These agreements do not need parliamentary approval, allowing Cenit and AKSA to continue operations under the revised terms. However, negotiations with Sunon Asogli have proven more challenging.
Government initially agreed to a one-time payment of US$30million to Sunon Asogli – but the power producer later requested an additional US$30million, which the finance minister noted was declined.
He stated: “While we initially agreed to a US$30million one-off payment, Sunon Asogli later demanded another US$30million. This was not part of our settlement terms”.
Government insists that no funds will be released until the agreement is signed, labelling Sunon Asogli’s demand for upfront payment as “an action in bad faith”.
Despite the deadlock Sunon Asogli has recently shown a willingness to sign the settlement, prompting optimism for a resolution.
Addressing negotiations with Karpowership, Dr. Adam reported that Karpowership recently sought an additional US$70million outside the agreed terms. He firmly rejected this request, reiterating government’s commitment to fiscal responsibility.
“We have to negotiate and sign before I make any payment. Ghana is not just a street-country,” he said.
The restructuring agreements with Cenpower and Amandi Energy, two additional IPPs, are still pending parliamentary approval. Dr. Adam urged parliament, currently in recess, to reconvene and ratify these agreements – underscoring the reforms’ urgency.
“This is one of the effects the suspension has on government business, because we were expecting parliament to approve these renegotiated agreements,” he noted.
