Home / News / Government Owes ECG GH¢728 Million; Repayment To Be Spread Over 5 Years

Government Owes ECG GH¢728 Million; Repayment To Be Spread Over 5 Years

The government has acknowledged owing the Electricity Company of Ghana (ECG) a ‘legacy debt’ of GH¢728 million and plans to spread the payment over the next five years.

The Minister of Finance, Mr Seth Terkper, told journalists at a press briefing in Accra that the figures were arrived at after the government had conducted an assessment of the arrears between the government and state-owned enterprises (SoEs) and cross-SOEs arrears and prepared an action plan and timeline for their elimination.

How much debt?

Over the years, there have been inconsistencies in the exact figure of the debt from the government and the ECG.

In May this year, officials of the ECG told the Public Accounts Committee of Parliament that the government owed the company GH¢950 million as a result of subsidies and non-payment of electricity bills, while private institutions and individuals owed GH¢610 million.

Owing to the difficulty by the government to pay for the power consumed by institutions, including ministries, departments, agencies (MDAs), schools, hospitals and some SOEs, the ECG, which is the interface between power generators and consumers, as it is the sole distributor of power in the country, is highly indebted to GRIDCo, the country’s only power transmission operator, which also owes the VRA, the main power generator, and other independent power producers.

The quantum of outstanding arrears to the ECG is reported to have resulted in under-investment in energy distribution facilities, aggravating the challenge of system losses, currently around 25 per cent.

The  ECG projects  $200 million every year as the amount  it will require in sustained investment to address its investment gap in order to meet the annual power demand growth rate of about 12 per cent.

Restructuring VRA’s debt

On VRA’s debt, Mr Terkper said although a formal agreement was yet to be entered into with lenders of the authority, the lenders had agreed to a framework for the restructuring and repayment of about GH¢2.2 billion over three to five years.

Key features of the agreement in principle include an upfront payment of approximately GH¢250 million, which will be funded by new collections from the energy sector levies.

It also includes the reduction of interest rate on the cedi component of the debt from an average of 30 per cent to 22 per cent and reduction of interest rate on the foreign currency component of the VRA’s debt from 11 per cent to 8.50 per cent.

Additionally, the government intends to place a limit on the ability of the VRA to incur new debts without its express approval.

VRA’s problems 

The VRA is a 100 per cent state-owned power generation utility. Its indebtedness makes it difficult for it to pay the millions of dollars owed Ghana Gas, the West African Gas Pipeline Company (WAPCo) and the several independent power producers in the country.

As of July 5, 2016, the VRA owed Ghana Gas $350 million, while it owed WAPCo $181 million as of October last year.

TOR debt 

Meanwhile, there is no end in sight to the payment of the TOR debt.

Mr Terkper could not provide the exact quantum of the debt, but said the figures were available.

Asked when the payment of the TOR debt would end, he said: “It is a tricky question. What contributed to the TOR debt, like the VRA debt, was subsidy and our ability to pay subsidy. Before the advent of the bulk distribution companies (BDCs) in the supply chain, the major supplier of petroleum products was TOR. It also bore the brunt of the utility side of subsidy. It is not a debt that is standing in isolation.”

He said the solution was to get the right policies that helped SoEs not to fall into debt, compelling the state to  fall on the taxpayer to pay the debt.

“In essence, we are now paying the subsidy we thought we were not paying, after years of accumulation in the form of taxes, tax revenue that is used to support promissory notes or levies. It is also about getting policies that make subsidies sustainable,” he said.

Overpaid debt? 

But the  Africa Centre for Energy Policy (ACEP) has a contrary view.

Dr Mohammed Amin Adam, the Executive Director of the centre, was reported as saying in January this year that  consumers had overpaid the TOR debt, adding that at the time the levy was instituted, the total debt stood at GH¢450 million.

The B&FT reported Dr Adam as saying that by 2009, the total debt had grown to GH¢900 million due to the non-application of the revenue to service the debt, as well as interest accumulation.

“Our analysis shows that from 2009 to  2015, the total collection from the levy is in excess of GH¢1.9 billion, which effectively amortises the debt, assuming an interest rate of 10 per cent, and ACEP, therefore, finds it difficult to comprehend why consumers should continue to pay this debt,” he added.

The TOR debt recovery levy was instituted in 2004 to pay off the debt that threatened the collapse of the refinery and some local banks that financed its operations.

 

Source: Graphiconline

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