Independent Power Producers reject $1.4bn debt restructuring proposal by Gov’t
The Chamber of Independent Power Producers (IPPs) in Ghana has firmly rejected the idea of restructuring the arrears of its members as part of the ongoing or any future debt restructuring programme. The IPPs have instead advised the Ghanaian government to prioritise and make payments of the arrears in the next three weeks in order to enable its members to meet their debt obligations and sustain the production of electricity. The government is said to owe the IPPs over $1.4 billion dollars as of February 2023.
In a letter to the Finance Minister, Ken Ofori-Atta, the IPPs emphasised that they reject any notion of restructuring their arrears/claims as part of the ongoing or any future debt restructuring programme. The members of the chamber are, however, prepared to engage with the government on payment schedules with regard to the arrears and other claims under the respective Power Agreements (PAs), in order to promote predictability of payment flows. This, they believe, will help to eliminate any accumulation of arrears going forward as the energy sector reforms take hold.
According to the IPPs, the outstanding and overdue receivables from the Electricity Company of Ghana (ECG) have reached a critical point, for which they cannot guarantee continuous generation in the coming months. The total receivables accrued by the members of the chamber as of January 31, 2023, is over the cedi equivalent of $1.3 billion. Despite this, the members have continued to honour their contractual obligations to ECG in good faith. However, they say that this is not sustainable.
The IPPs have called on the government to prioritise payments of the arrears in the next three weeks in order to enable them to meet their debt obligations and sustain the production of electricity. Failure to do so, they warn, could result in power cuts and an interruption in the supply of electricity to consumers.
The IPPs have also highlighted that some of their members are in default of their debt service obligations, with some quarterly debt service obligations due from March 2023. The members have accrued huge arrears with their suppliers for which they are already in default and accruing associated penalties. They warn that the members cannot continue defaulting on their respective debt service obligations and sustain operations.
The Cash Waterfall Mechanism (CWM), which was meant to bring transparency and fairness in the disbursement of the power sector revenue, has been described as a failure by the IPPs. Most of the committee members are from the State Owned Enterprises (SOEs), VRA, ECG, and GRIDCo, rejecting the IPPs’ proposal for them to be represented on the committee. The IPPs have emphasised that the above-stated issues of transparency and governance of the CWM must be part of the agreed reforms and the Chamber duly represented on the CWM committee. While the IPPs welcome the indication in the Finance Minister’s letter that the review of the CWM will be part of the critical energy sector reforms, they emphasise that the transparency and governance issues of the CWM must be addressed.
The IPPs’ rejection of the debt restructuring proposal highlights the need for the Ghanaian government to take immediate steps to address the arrears owed to them. Failure to do so could lead to power cuts and an interruption in the supply of electricity to consumers. The Cash Waterfall Mechanism has been a subject of controversy, and the IPPs’ call for transparency and governance in its disbursement is justified. The government must take the necessary steps to address these issues and ensure that the power sector operates efficiently and effectively.
