Accra — Ghana has too much power and gas, and that’s a bad thing for government finances.

With capacity that’s almost double the country’s peak demand needs, Ghana’s electricity utility has to pay independent producers about $450m every year for energy that it doesn’t need or use. This adds to the sector’s liabilities, which are the biggest debt threat to a nation that seven months ago completed its 16th bailout programme with the International Monetary Fund.

Finance minister Ken Ofori-Atta, who will present the 2020 budget next week, has warned that the sector’s “unsustainable” liabilities may amount to $12.5bn — about a fifth of GDP — by 2023 from about $2.5bn in January.

“Financing of the energy sector is going to be a key risk going forward in terms of debt sustainability,” Cobus de Hart, chief economist for west, central and North Africa at NKC African Economics in SA said by phone. While Ghana is doing well to keep expenses under control, “debts keep rising at a much faster pace”.

Debt origin

Ghana’s energy losses stem from a combination of the liabilities for excess supplies, slow customer payments, under-recovery of costs and even government ministries and agencies’ unpaid lighting bills, said David Vilar Ferrenbach, an Accra-based energy-sector specialist at the World Bank.

From 2020, excess gas supplies could add as much as $850m per year to the liabilities, Ofori-Atta said in July. That’s as delivery deals from additional supplies are due to start even though producers including Tullow Oil and a venture between Eni and Vitol already deliver sufficient volumes from local fields.

Ghana’s current state of overcapacity “arose out of an uncoordinated approach, plunging the energy sector into a financial crisis,” he said.

At stake

The energy sector’s shortfall for 2019 is expected to be $1.3bn, according to Ofori-Atta. While the government is not directly responsible for shouldering all of this, it often needs to help the power utility to cover these losses.

The IMF forecasts the debt stock will reach 63% of GDP at the end of December, from 51% in January. Not all of that is due to the energy contracts. A bailout of the banking sector has also added to the debt as investors fear a repeat of excessive spending in the run-up to elections, of which the next is scheduled for December 2020.

“The risk of additional contingent liabilities and continued revenue underperformance represents some of the sovereign’s main credit challenges,” Elisa Parisi-Capone, a vice-president at Moody’s Investors Service, said in e-mailed response to questions. The company assesses Ghana’s debt at six steps below investment grade. Total debt was $39.1bn at the end of July, according to the Bank of Ghana.

Government’s steps

The power losses contributed to the 5.2-billion cedis (R13.95bn) that Afori-Atta added to Ghana’s debt stock in July to prevent the government from breaching its budget-deficit ceiling. A month later, he started talks with independent power producers to restructure their agreements, a move that the industry fiercely resists. While initially saying the talks would take three months, there has been little progress and Ofori-Atta now says he’s unsure when they will conclude. That raises the risk that the payment obligations will continue in 2020.

“There’s always room to negotiate if there’s a good solution for both parties,” Vilar Ferrenbach said. “They have to negotiate case by case. A blanket solution” won’t work, he said.

The government must also restart a process to find a private operator for the power-distribution network after it terminated an earlier agreement.

Ghana’s dollar bonds have returned 1.7% since Ofori-Atta’s announcement in July that he will renegotiate deals with private producers, lagging African peers that have returned an average of 2%.

“There’s additional risk to the budget,” said Yvonne Mhango, head of research for sub-Sahara Africa at Renaissance Capital in Johannesburg. “It’s going to be a challenging time for them given that it’s going to be the year of the election, and there are constraints in terms of what they’ll like to achieve while at the same time trying to meet debt obligations.”

Bloomberg

Ghana’s energy losses stem from a combination of the liabilities for excess supplies, slow customer payments, under-recovery of costs and even government ministries and agencies’ unpaid lighting bills

SalamRushdie:
Such a shame on Buharis Nigeria

SalamRushdie:
Such a shame on Buharis Nigeria

sarrki:


Your uncle gej

Your Grandpa obj

N your family heritage Pdp

Destroyed everything

Don’t blame Pmb

I thought you said Pmb won’t win ?

SalamRushdie:


Sarrki Did he win ? Be sincere

Yes he did!!! With thugs, (m³) militants, military, minors and vote buying!!!

Man of integrity

Na him dey there now, abi no be him

Wiseandtrue:

Yes he did!!! With thugs, m³ militants, military, minors and vote buying!!!

Na him dey there now, abi no be him

Wiseandtrue:
Later una go dey abuse Ghana. Dey compare them to a city in Nigeria but when it comes to achievements, you guys are missing

Which area are we doing it right Which area can be boast of

Giants of Africa una see una life

Giants for mouth. Mtcheeeeeeew

EVarn:
Ghana should look towards exporting more of the excess power generated to west African neighbors; Liberia, Sierra Leone, Ivory Coast, and Togo.

SalamRushdie:
Such a shame on Buharis Nigeria

SalamRushdie:


Sarrki Did he win ? Be sincere

SalamRushdie:


My point exactly , he subverted the democratic process to enthrone himself

Blue3k2:


They already export to Burkina Faso, Benin and Togo. Their Vice president announced plans to export to Niger and Mali. The ghanaians i thr comment section dont like that idea.

It's interesting to see they're skipping Nigeria.

Finance minister Ken Ofori-Atta, who will present the 2020 budget next week, has warned that the sector’s “unsustainable” liabilities may amount to $12.5bn — about a fifth of GDP — by 2023 from about $2.5bn in January.

vaxx2:
Ghana also export to ivory coast as well..... Ghana new industry will soon take it over as more industry are springing up under the initiative of 1 district 1 factory. program. There is plan underway to construct bauxite refinery which Ghana has in abundance . that alone can consume over 2000 megawatt. if goverment plans work , the overcapacity will not be a problem.

sarrki:


You are a comedian wallahi

sarrki:


You are very very funny dude

sarrki:


Your uncle gej

Your Grandpa obj

N your family heritage Pdp

Destroyed everything

Don’t blame Pmb

I thought you said Pmb won’t win ?

sarrki:


You don show again

sarrki:
When it comes to analysis and propaganda give it to Afrikan leaders

Blue3k2:


They already export to Burkina Faso, Benin and Togo. Their Vice president announced plans to export to Niger and Mali. The ghanaians i thr comment section dont like that idea.

It's interesting to see they're skipping Nigeria.

Blue3k2:

Im surprised nobody is talking about the debt projections by the finance minister. That's pretty crazy considering the debt to gdp is already high. They better get these deals worked out

I wasnt sure about the ivory coast since I only saw one article state it. Anyway these factories better start up asap then. Has the Bauxite refinery been finalized? Can you clarify if their making aluminum oxide or aluminum

Blue3k2:


They already export to Burkina Faso, Benin and Togo. Their Vice president announced plans to export to Niger and Mali. The ghanaians i thr comment section dont like that idea.

It[b]'s interesting to see they're skipping Nigeria. [/b]

vaxx2:
The current goverment is highly power drunk . she will not allow it. there is the mind of ego among Nigeria politicians . fashola had once paint Ghana success in electricity in a very childish manner.


The only president Nigeria will ever celebrate till death is obasonjo and that will be when he is dead . he is the only person with such positive mind among Nigeria leaders