Ghana takes 'a bitter pill' to attract investment for energy sector sustainability - Finance Minister

The government has assured both local and foreign investors that Ghana has taken ‘a bitter pill’ to put the country’s energy sector in a state that will make them earn more profitable returns on their investments.

Dr Mohammed Amin Adam, Finance Minister, gave this assurance to investors as the government seeks improved public partnerships to close the US$1.9 billion energy sector financing gap.

“We assure investors that while there are challenges, we’re bold as a government to take the necessary bullet for us to put the sector in a more sustainable manner so as to address the challenges that investors are usually worried about,” he said.

He said this at a fireside chat event at the ongoing International Monetary Fund (IMF)/World Bank Group (WBG) 2024 Spring Meetings being held at Washington, USA.

The World Bank event on the theme: “Energising Africa: What will it take to accelerate access and improve lives,” was monitored by the Ghana News Agency.

Ghana is currently experiencing some intermittent power outages across the country, but the Minister, who is also an Energy Economist, said the government remained steadfast in solving the electricity challenges.

He allayed the fears of investors while indicating that the government had taken steps to close the US$1.9 billion energy sector financing deficit, which represented some two per cent of the country’s Gross Domestic Product (GDP).

He explained that the deficit could not be financed by relying on the national budget due to the commercial nature of the sector, hence, the need to shore up financing through private sector investment.

The Minister outlined some reforms being implemented to ensure financial sustainability and make investors earn decent profit on their investments in Ghana’s energy sector.

The reforms included the implementation of the Energy Sector Recovery Programme, which started in 2019, and the renegotiation of Independent Power Producers (IPPs) agreements to reduce the cost of generation.

There is also the implementation of a quarterly tariff adjustment review, which accounts for inflation, exchange rate depreciation, and changes in the generation mix, as well as a cash waterfall mechanism.

“The cash waterfall mechanism is helping collect revenue and disburse to players along the value chain and ensure that players in the value chain have some cash flow to meet operational cost,” the Finance Minister said.

He also indicated that in the past Ghana had procured energy through unsolicited projects, but that had changed to the country using competitive procurement to acquire more capacity at a lower cost.

“We’re more intentional about acquiring capacity and planning for a long-term building of infrastructure for transmission and distribution to ensure that every part of the country gets electricity,” he said.

Dr Amin Adam disclosed that Ghana had achieved 88.85 per cent of universal electricity access [compared with the 90 per cent industry standard], and was working to reach 90 per cent by the end of 2024.

He added that the yet-to-reach were mainly off-grid and Island communities, which the government was connecting through mini-grids and other smaller systems, as well as procuring more standardised metres for distribution.

One of the measures the government had taken in that regard, he said was through a partnership with the World Bank under a Programme-for-Result scheme to soon procure about one million metres into the country.

The Minister stated that the standardised metres would help harmonise existing metering systems and help to improve revenue collection to support effective operation along the energy sector value chain.