ACEP warns of looming energy debt disaster in Ghana

Accra, Ghana - October 10, 2024 - Ghana's energy sector is facing a financial crisis, with a staggering $67 million in unpaid obligations accumulating every month. The Africa Centre for Energy Policy (ACEP) has raised concerns about the alarming rate of debt accumulation, attributing it to the Electricity Company of Ghana's (ECG) low revenue recovery rate of 57%.

This means that a significant 57% of revenue remains uncollected, exacerbating the debt situation and threatening the financial stability of Independent Power Producers (IPPs) already owed large sums as part of Ghana's legacy energy debt.

Kodzo Yaotse, ACEP's Policy Lead for Petroleum and Conventional Energy, emphasizes that improving ECG's revenue collection rate is crucial for both the government and the company.

“ECG is making 43 percent [revenue] collection rate. That means there is some 57 percent that is not collected that must be paid and that translates into some $67 million every month, which if not paid, would only go up to add to what is already owed to the IPPs in terms of legacy debt. So we have to find a way to be able to ensure that there is optimal revenue collection,'' Yaotse warned.

To put this into perspective, the ECG had previously recovered GH¢3.1 billion from debtors, with a target of GH¢5.7 billion.

However, about GH¢1.5 billion of the unretrieved debts were considered bad debt due to collapsed companies and postpaid users affected by demolition exercises or floods.

The government has established the Energy Sector Levies Act (ESLA) to address the energy sector's legacy debts, which had reached unsustainable levels by 2017.

Despite efforts to refinance debts and provide funding for power generation, road maintenance, and public lighting, the sector remains financially vulnerable.

Source: Florence Kyei/ Lead News Online