Finance Minister Dr. Mohammed Amin Adam has announced that government has successfully reached debt restructuring agreements with five Independent Power Producers (IPPs).
This follows the recent agreements reached on debt restructuring with both official creditors and Eurobond holders last month
The breakthrough, revealed during a recent media briefing on the economy and second review of the IMF-supported programme, marks a crucial step in addressing the country’s energy sector financial challenges.
“We’re pleased to report that commercial agreements have been reached on headline debt restructuring terms and renegotiated Power Purchase Agreement terms with Amandi, Cenpower, Early Power, CENIT and AKSA. This represents substantial progress in our efforts to stabilise the energy sector,” Dr. Adam stated.
The agreements are part of the broader Energy Sector Recovery Programme (ESRP), aimed at restructuring over US$1billion in legacy debt owed to IPPs and reforming Power Purchase Agreements (PPAs). The initiative seeks to halt accumulation of arrears and implement critical reforms for enhanced financial sustainability in the sector.
“To date, government has made payments of US$400million to IPPs as a demonstration of our commitment to resolving this longstanding issue,” Dr. Adam revealed.
This payment is seen as a goodwill gesture and a step towars rebuilding trust with the power producers.
The restructuring process, led by a Government Negotiating Team (GNT), focused on seven major IPPs: AKSA, Amandi, CENIT, Cenpower, Karpowership, Early Power and Sunon Asogli. The team was tasked with restructuring the legacy debt and finalising outstanding matters related to PPA restructuring with the Electricity Company of Ghana (ECG).
Dr. Adam outlined the next steps: “The amended documentation for Amandi, Cenpower and Early Power will require parliamentary approval. We’re working on an aggressive timeline to secure various regulatory, ministerial and other approvals before presenting these to parliament by end of July 2024”.
Work is also progressing on finalising the restructuring package for Sunon Asogli, while negotiations with Karpowership are ongoing. “We’re committed to closing out the Karpowership restructuring as soon as possible,” the minister assured.
A key component of the restructuring involves new gas supply arrangements. Dr. Adam explained: “ECG and GNPC have agreed on all commercial terms under master gas supply arrangements. This will see GNPC selling fuel in bulk to ECG for onward supply to the IPPs, as part of the conversion to a tolling arrangement”.
The agreements are expected to have significant implications for Ghana’s energy landscape. By addressing the legacy debt and reforming PPAs, government aims to create a more sustainable and efficient energy ecosystem – crucial for the country’s economic growth.
However, challenges remain. Government must secure parliamentary approval for some agreements and finalise negotiations with the remaining IPPs.
Dr. Adam acknowledged this, stating: “While we’ve made significant progress, there’s still work to be done. We’re confident these measures will contribute to the financial health of our energy sector and overall economy”.
The restructuring effort is seen as a key component of Ghana’s economic recovery plan under the IMF-supported programme. It addresses one of the major financial hurdles facing the country and could potentially improve investor confidence in the energy sector.
The country has reached an agreement with OCC on the restructuring of US$5.1billion, which will lead to debt service relief of US$2.8billion between 2023-2026. Additionally, an agreement with Eurobond holders on restructuring US$13.1billion is expected to result in a debt cancellation of US$4.7billion and provide debt service relief of US$4.4billion over the same period.
As Ghana moves forward with these agreements, the coming months will be crucial. Government’s ability to secure necessary approvals and successfully implement the restructured agreements will be closely watched by both domestic and international observers.
Dr. Adam concluded on an optimistic note: “This restructuring is not just about clearing debt; it’s about creating a sustainable framework for our energy sector. We believe these agreements will pave the way for a more robust and efficient power industry in Ghana”.
B&FT