How Ghana’s Quest for Power Abundance Turns to Burden as Energy Debts Mount

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Ghana’s bid to end its chronic electricity shortage has gone awry as the country can no longer afford the deals it signed with investors, reports have said.

The deals’ terms require the government to pay for electricity generated even if there’s no demand for it.

Of course, this move helped Ghana end its power crisis by 2016, boosting its generation to about 4,600 megawatts, well above national peak demand of 2,700 megawatts.

The Chamber of Independent Power Producers, Distributors and Bulk Consumers disclosed that as at end of the June, Ghana’s indebtedness to the power companies grew to $1.4 billion more than doubling from $600 million in July last year. Adding that members of the chamber may be forced to shut their operations.

“Debt levels could rise even further,” Samantha Singh, a Johannesburg-based Africa strategist at Absa Bank Ltd., said.

“The potential increase in these liabilities could hurt government finances even further in a time it is already strained due to COVID-19.”

President Nana Akufo-Addo when he assumed power in 2017 started the sale of so-called energy bonds on the back of fuel levies to clear the outstanding liabilities.

This helped cut the debt by half by early 2018, but more bonds haven’t been sold because there isn’t enough revenue to support them.

The state-owned Electricity Co. of Ghana Ltd. is reported to have suffered an estimated annual revenue loss of $580 million due mainly to transmission leakages, illegal connections and unpaid bills.

 Plans to tackle the problem by introducing private investors under a U.S.-funded aid program failed to win approval.

The company’s managing director, Kwame Agyeman-Budu, have also refused to comment on the issue.

Much help isn’t coming either from the West African Power Pool project, under which member countries could sell their excess power to neighbors. While Ghana was a net exporter of 967 megawatts of electricity to other countries in 2019, further exchange is hindered until 2023, when current interconnection projects will be completed.

The coronavirus pandemic pushed Ghana further into financial straits. It responded with more than 3 billion cedis ($519 million) in unplanned spending that included providing free electricity and water to citizens, tax waivers and credit to small businesses, a situation that made it difficult to keep up with the debt repayments, according to Finance Minister Ken Ofori-Atta.

“When you have limited resources in a Covid environment you have to be specific about what you are paying and how much you pay. We have tried to keep the lights on for these four years,” Ofori-Atta said.

By Peace Obi with Agency Report


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