Debt to IPPs to escalate amid coronavirus – ACEP

The rate of debt accumulation resulting from gas and power supply could increase in 2020, energy think tank African Centre for Energy Policy (ACEP), has warned.

In 2019 and before the advent of the coronavirus crisis, the government’s debt to Independent Power Producers (IPPs) was over US$1 billion.

According to ACEP, the statement presented to Parliament by Finance Minister Ken Ofori-Atta about the impact of COVID-19 on the Ghanaian economy, was “surprisingly silent on the fiscal implications of the COVID-19 for gas supply and power generation”.

“Gas supply for power production has largely been dependent on supply from the OCTP partners. Average supply from Jubilee and TEN between 22 March and 2 April 2020, were 22.6mmscfd and 38.2mmscfd, respectively. The unending challenges with Jubilee’s gas production continue to affect export of gas to the Ghana National Gas Company.”

In recent times, the offshore pipeline has been experiencing throughput challenges, which require a pigging exercise to be conducted to remove blockages.

ACEP continued: “The challenges with Jubilee have required OCTP to ramp up production between 160.51mmscfd and 209.75mmscfd to meet critical demand by the power sector. The OCTP gas has therefore become the backbone of domestic gas supply.

“However, due to cashflow challenges in the power sector, OCTP gas has not been paid for in the last 4 months resulting in a debt accumulation of about US$192 million prior to Ghana’s first confirmed case of COVID-19.”

ACEP noted that if the power sector was unable to pay for gas utilisation before COVID-19, the critical question then is how the sector would meet its payment obligations for gas supply in the midst of the pandemic.

It added that the economic impact of the pandemic and the effect of the government’s measures such as lockdowns are likely to affect the disposable income of consumers, and this has implications for revenue collection in the power sector.

It called for definitive interventions from government to ensure that the debt situation is not worsened.