Going by the decision of ESLA Plc, the state owned special purpose vehicle, to buy back at least GHc200 million worth of the bonds it has issued so far, it would appear that the long-festering problem of energy sector legacy debts is at last being resolved. For the banks that put up the debt financing in the first place, this is a great relief; they were persuaded to buy up the bonds when they were issued, just in order to take their financing out of their respective non-performing loan portfolios – which required substantial loan loss provisioning – and put it into their respective investment portfolios where the amounts concerned can be treated as good investments.
However, the latest report from the Public Interest and Accountability Committee warns of potentially even bigger problems just waiting to explode. This is the problem of long standing and still growing indebtedness between the various state owned corporations that make up the power generation, transmission and distribution supply chain.
PIAC’s latest report reveals that Volta River Authority is owed by the hitherto Electricity Company of Ghana (now Power Distribution Services) and Ghana Grid Company for the power it supplies them; which consequently owes Ghana National Gas Corporation for the gas that company supplies it for power generation; which consequently owes Ghana National Petroleum Corporation which supplies the latter with that gas from the gas fields themselves.
This makes for an extremely fragile supply chain – indeed the only reason why it has not been broken is that all the companies are wholly state owned and government is willing to pick up any bills that need to be paid to keep the lights on.
However the fragility of the supply chain is worrying. We wonder what would happen if one of the indebted companies decided that it could no longer fulfil its role and responsibilities if it is not paid what is being owed it.
This is why we are calling on government as the owner of all the supply chain operators to unravel the messy situation and get each one to pay its debts so that the next operator along the chain can do the same.
Ultimately, it is the transmission and distribution companies that have the ultimate responsibility because they are at the start of the circle of indebtedness. It is instructive in this regard that it is ECG that has been handed over to private interests to be run on commercial basis under a two decade long concession agreement. We are not aware of how the concession handles the issue of its indebtedness to VRA, but we expect that some sort of arrangement has been devised to resolve the problem.
Whatever that plan is, we hold the view that it needs to be implemented urgently, and the monies are passed along the entire energy supply chain.
The alternative – a breakdown of the supply chain somewhere along it is to worrying to contemplate.