The monthly debt obligation on the Electricity Company of Ghana (ECG) is set to be reduced as the Ministry of Energy has revealed plans of renegotiating the energy sector legacy debts to benefit the national power distributor.
The energy sector legacy debts are debts owed by the government in the country’s energy sector, especially to the Independent Power Producers (IPPs) that have been accumulated under successive governments.
Former Finance Minister, Ken Ofori Atta revealed last year that as of the end of May 2023, the debts had accumulated to the tune of US$ 2 billion.
The debts are currently being serviced by the Ministry of Finance and the ECG.
However, the debt overhang on the national power distributor is stifling its operations hence affecting its efficiency due to the huge monthly obligations.
In order to give some breathing to ECG, current Minister of Energy, Herbert Krapa has revealed that the government has renegotiated the terms of the debts with IPPs. The renegotiated terms of the debts, the Minister reveals have been approved by Cabinet subject to the ratification of parliament.
“We continue to service, together with the Ministry of Finance these debts. Renegotiated terms have gone to cabinet, they will go to parliament and then once they are ratified, they can become effective. As things stand now, the legacy debt is being tackled by the Ministry of Finance and ECG is tackling the current debt out of which 60% is current and 40% is deferred. We have also done a tariff levelization, we have levelized so that tariffs so that those who have front-loaded their tariffs will spread it evenly across so that the debt overhang can be reduced,” Herbert Krapa told the media after paying a working visit to the ECG office at Avenor in Accra.
He expressed optimism that these renegotiated terms when implemented will bring relief.
“These renegotiated terms will help us to reduce the pressure on ECG, and reduce ECG’s monthly commitments that they have to make to the IPPs,” the Minister added.
The renegotiation enabled the government to successfully restructure an estimated $1 billion of the legacy debts owed to Independent Power Producers (IPPs) marking a significant milestone in the country’s energy sector reform efforts.
