In a move to reduce the debt that the Volta River Authority (VRA) owes to Ghana National Gas Company, the government has settled US$ 230 million of the debt through a balance sheet restructuring.
This was revealed at a press meeting with the management of Ghana Gas on Monday in Accra, by the Head of Finance of Ghana Gas, Emmanuel Essel.
At the end of 2018, Ghana Gas was being owed a debt of US$ 735 million by VRA, even after the balance sheet restructuring had taken place.
Essel noted that the amount would have been higher but for the timely intervention of the Ministry of Finance.
Presently, VRA consumes 90 percent of the lean gas produced from Ghana Gas for the purposes of power production. In effect, VRA’s inability to pay for gas supplied to power its thermal plants is affecting the financial status of Ghana Gas and in turn, its ability to produce lean gas used for electricity generation..
“Sometime last year, we had an arrangement with them (VRA) where they were paying US$3 million every month from April. However that ceased in October,” said Essel. “All together last year, we received just about US$20 million from VRA as against the average of US$ 30 million we give them every month.”
This translated into a deficit of some US$340 million in 2018 alone.
Discussions are still on going at the board level and engagement continues with the government on how to further restructure some of the debt to ensure that VRA is able to pay going forward.
At the moment, the US$30 million worth of gas from Ghana Gas has been reduced due to the ENI gas that comes through the pipelines. Currently it hovers around between US$10 million to US$16 million per month.
Water fall mechanism
In July, 2017, Cabinet approved the implementation of the Cash Waterfall Mechanism (CWM) as a new revenue distribution system to address the increasing legacy debts in the energy sector.
CEO of Ghana Gas, Dr. Ben Asante expressed optimism about this new mechanism being adopted by government to resolve the debt within the energy sector.
This mechanism is part of a wider strategy to ensure an equitable distribution of energy sector revenues to all stakeholders in the value chain as the ministry plans to put an end to the practice where some power producers are given priority over others in terms of financing.
The legacy debts themselves in terms of the total portfolio include all the energy sector agencies such as Tema Oil Refinery (TOR), Volta River Authority (VRA) and Electricity Company of Ghana (ECG) among others.
Currently, a total of GHc4.78 billion out of over GHc6 billion of the legacy debt owed by VRA, representing 80 percent of the amount has been paid by government. However, this payment only reflects on the total debts accumulated by the VRA alone and not the total sector debts.