IPPs threaten to cut power supply to national grid by June 30
Ghana’s energy sector faces an escalating crisis as the country’s Independent Power Producers (IPPs), Distributors, and Bulk Consumers issue a stark warning to cut power supply to the national grid by the end of June 2023. This move comes in response to the Ghanaian government’s failure to settle its mounting debt with the IPPs, which currently stands at $1.630 billion as of April 2023.
The IPPs control over 65% of the available thermal generation capacity in the country, making their threat of power shortfall a significant concern. The government’s ability to resolve this debt dispute becomes crucial, as Ghana aims to reduce $10.5 billion in interest payments on its external debt within three years.
IPPs’ Ultimatum
According to reliable sources, the IPPs, Distributors, and Bulk Consumers plan to send a formal letter to the Finance Minister, Ken Ofori-Atta, on May 29, 2023, outlining their intention to cut power supply to the national grid if the government fails to settle its debt. This development adds further urgency to the situation and raises concerns about a potential power shortage in the country. With the IPPs controlling a significant portion of Ghana’s thermal generation capacity, a disruption in power supply could have far-reaching consequences for various sectors of the economy.
Government Debt and Restructuring
The Ghanaian government’s outstanding debt to the IPPs has reached a substantial $1.630 billion, further straining the financial stability of the energy sector. The government’s objective to reduce interest payments on external debt by $10.5 billion over three years as part of the IMF loan agreement underscores the need to address the outstanding debt owed to the IPPs. However, the IPPs’ Chief Executive Officer, Elikplim Kwabla Apetorgbor, stated that the proposed debt restructuring plan had been rejected both corporately and individually. Apetorgbor cited the producers’ unwillingness to make concessions and warned that power plant shutdowns were imminent if the debt remained unresolved.
Government’s Response and IMF Recommendations
Dr. Mohammed Amin Adam, the Minister of State at the Finance Ministry, expressed his commitment to engaging with the IPPs in a transparent and pragmatic manner. However, he dismissed the threat of shutdown during negotiations, emphasizing that such actions were unacceptable at this stage. The government vows to make every effort to restructure the country’s energy debt and find a mutually beneficial solution.
The IMF’s recent report on Ghana highlighted the need for a more rapid reduction in the sector’s financial shortfall under the Energy Sector Recovery Program (ESRP) to create fiscal space for priority spending. The report suggested that renegotiating contracts with the IPPs could help reduce costs. Additionally, the IMF recommended additional ad-hoc tariff increases while safeguarding vulnerable households as a means to achieve a faster reduction in the sector’s shortfall.
IPPs Involved and Implications
The Independent Power Producers involved in the debt dispute include Twin City Energy, AKSA, Karpowership, Sunon Asogli, CenPower, and Cenit. These major players in Ghana’s energy sector collectively play a vital role in the country’s power generation capabilities. The potential disruption caused by a power supply cut would have significant ramifications for industries, businesses, and households, affecting productivity, economic growth, and everyday life.
Ghana’s energy sector is at a critical juncture as the Independent Power Producers, Distributors, and Bulk Consumers threaten to cut power supply to the national grid in response to the government’s mounting debt. The urgency to resolve this dispute intensifies as Ghana strives to reduce its interest payments on external debt and secure the IMF loan deal. Transparent negotiations, compromises from both parties, and swift action to address the outstanding debt are imperative to avoid a debilitating power shortfall and foster stability in Ghana’s energy sector. The resolution of this dispute will be crucial in determining Ghana’s ability to navigate its economic crisis and pave the way for sustainable growth and development.
