ECG and IPPs reach agreement on debt repayment plan

ECG and IPPs reach agreement on debt repayment plan

The Electricity Company of Ghana (ECG) and Chamber of Independent Power Producers (IPPs) have reached an agreement that will cover only 35% of the electricity generated by the producers, leaving the remaining 65% as surplus power. The deal was struck in response to the IPPs’ threat to halt the generation of an outstanding $1.7 billion debt.

Under the terms of the agreement, which was accepted by ECG, payment will be made for the energy actually used, including fuel and the capacity required for the necessary energy. The issue at hand for the IPPs is the accumulation of arrears rather than settling current bills. While the current “cash waterfall” system addresses the energy sold, it fails to account for capacity charges that continue to accrue.

Samuel Dubik Mahama, Managing Director of ECG, highlighted the challenge of finding the funds to pay for idle and excess capacity costs, which constitute 65% of the IPPs’ total debt. He emphasized the need to differentiate between the energy consumed and the surplus capacity that remains unused.

ECG has committed to increasing payments as its revenue improves, demonstrating a willingness to address the outstanding debt. In addition, the Chamber of Independent Power Producers has secured a letter of credit agreement with ECG, paving the way for payment to commence by the end of the week. The agreement includes a monthly amount to be provided to the IPPs, functioning as a revolving fund to support their ongoing operations.

This agreement marks a significant step toward resolving the financial challenges faced by Ghana’s electricity sector. By addressing the issue of excess capacity and establishing a structured payment plan, ECG and the IPPs aim to maintain operational stability while working towards a sustainable solution for all stakeholders involved.