Deal swiftly with legacy debts - former VRA boss urges govt
A former Chief Executive of the Volta River Authority, Mr Kweku Awotwi, has called for swift measures to address the debt issues in the country’s power sector.
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Addressing the legacy debts, he explained, would help push the country to create the much desired efficient power sector
Mr Awotwi, who is the current Board Chairman of Stanbic Bank Ghana, told the GRAPHIC BUSINESS in an interview that the sector faced a lot of challenges in the past, one of which was the mounting debt.
“What has happened over the last couple of years is that we have built up a stock of problems; we have a lot of debt in the electricity sector and those have to be addressed. They call for one-off solutions to address the legacy issues even as you look forward to the future, and say, ‘Okay, how do we create a sustainable sector?’” he explained.
Most players along the energy sector value chain continue to face financial challenges which affect their viability.
The companies caught along this web of debt include the national power producer VRA, which is indebted to the Ghana Gas Company and Nigeria Gas (N-Gas) that supplies gas for power generation through the West Africa Gas Pipeline Company. The Electricity Company of Ghana (ECG) is also indebted to the Ghana Grid Company (GRIDCo) and VRA.
Attempts to clear legacy debts
Government subsequently introduced initiatives such as the special energy levies, automatic tariff adjustments and elimination of subsidies aimed at restructuring the companies, paying off their debts and making them viable.
The Energy Sector Levies Act (ESLA) introduced new levies to, among others, address the legacy
debt of the Tema Oil Refinery (TOR) and support the payment of power utility debts.
These levies, particularly the off budget Energy Debt Recovery Levy (EDRL) of GH¢0.41 per litre on petrol and diesel, serve as collateral and funding for debt restructuring with banks.
Government also reached an agreement with domestic banks to restructure what amounts to roughly half of all VRA and TOR debts.
The restructured debts will be removed from the two companies’ balance sheets and will be serviced from a debt recovery account at the Bank of Ghana, funded primarily by proceeds from the EDRL.