Ghana: IPPs reject $1.3bn government debt restructuring proposal

The Chamber of Independent Power Producers (IPPs) has rejected any idea of restructuring arrears of its members as part of the ongoing or any future debt restructuring programme.

In a letter to the Finance Minister, Ken Ofori-Atta, it said its members are rather 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.

The government is said to owe the IPPs more than $1.4 billion dollars as of February 2023.

The IPPs advised the government to prioritize and make payments of the arrears in the next three weeks to enable its members meet their debt obligations and sustain the production of electricity.

“We emphasise that our members reject any notion of restructuring their arrears/claims as part of the ongoing or any future debt restructuring program. Our members are prepared to engage with government on payment schedules with regard to the arrears and other claims under the respective PAs, in order to promote predictability of payment flows, while the energy sector reforms take hold to eliminate any accumulation of arrears going forward. We would like to advise that you prioritise and make payments of the arrears in the next three weeks to enable our members meet their debt obligations and sustain our production of electricity”.

According to them, the outstanding and overdue receivables from the Electricity Company of Ghana have reached a critical point, for which they cannot guarantee continuous generation in the coming months.

“As indicated in your letter, our outstanding and overdue receivables from the Electricity Company of Ghana (ECG) have reached a critical point, for which we cannot guarantee continuous generation in the coming months. As of January 31, 2023, our members’ total receivables accrued is over the cedi equivalent of $1.3 billion. Nonetheless, our members in good faith have continued to honor their contractual obligations to ECG, which is not sustainable”.

It added “we herein bring to your attention that some of our members are in default of their debt service obligations with some quarterly debt service obligations due from March 2023. Kindly note that our members cannot continue defaulting on their respective debt service obligations and sustain operations. Additionally, we wish to highlight that our members have accrued huge arrears with their suppliers for which they are already in default and accruing associated penalties”.

It also described the Cash Waterfall Mechanism (CWM) which was meant to bring transparency and fairness in the disbursement of the power sector revenue as a failure, saying, most of the committee members are from the State Owned Enterprises.

“The CWM committee is dominated by the representatives of the State-Owned Enterprises (SOEs), VRA, ECG, and GRIDCo, rejecting our proposal for IPs to be represented on the committee. The only information members receive are the bank credit alerts even though they are key stakeholders controlling over 50% of the market share. While we welcome the indication in your letter that review of the CWM will be part of the critical energy sector reforms, we emphasise that 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”.