Government seeks $1billion private capital injection for power distribution substation

To end the country’s erratic power distribution and billing system, government says it needs over US$1billion capital, which it seeks to realise from the private sector.

The Minister of Energy and Petroleum, Boakye Agyarko, speaking at day-two of the maiden National Policy Summit in Accra, noted that there is the need for critical investment in power distribution and billing infrastructure, especially in the area of substations in the capital and Kumasi.

“To put up one substation in Greater Accra alone costs $25million and Greater Accra alone needs three of such. We also need two substations in Kumasi to be able to stabilise power distribution. The opportunities therefore are in the investment in distribution networks, the billing and collection of electricity bills, and more importantly where we privatise the last mile,” he said.

“Looking at the investment requirements, we require not less than a US$ billion in total,” he added.

Mr. Agyarko explained that the inability of the distribution companies to retrieve debts owed them, has negatively affected the development of the sector. This has led to the Electricity Company of Ghana (ECG) ---the major distributor of power, inability to also pay power producers like the Volta River Authority (VRA), and the Ghana Grid Company Limited (GRIDCo).

As at last year, the amount owed the power producers, stood in excess of US$2.4 billion. This came as a result of the ECG’s inability to effectively mobilise revenues from consumers to pay power producers.

Also, the borrowings of four firms- VRA, ECG, GRIDCo and TOR, all put together---hit GH¢19 billion at the end of 2015, triggering concerns of systemic crisis in the face of the debt linkages between the state-owned companies and banks.

As a result, the ECG is also said to be working with a negative capital to the tune of GH2 billion.

The last time I checked, the Minister said, “ECG for example, had a negative working capital of GH2 billion; it tells you that your receivables are more than your payables.”

“We need to shift the balance sheets of the distribution agencies, and we seek to do so by inviting private sector participation in the distribution sector and to improve the technical and commercial aspects,” Mr. Agyarko added.

Among other things, he disclosed that the Ministry is in the process of developing a power sector master plan that will make sure that all the issues of the power sector are properly aligned.

The policy goal of the plan will be to attain and maintain adequate generation reserves and margins, while bringing about efficiency in the sector.

Worryingly, the minister lamented that the country would lose US$6800 annually, if it sticks to the over 43 power purchase agreements signed with power producers.

This amount, according to the minister, will accrue from the surplus unused power that the nation will have.

Currently, all the country’s power agreements have a combined capacity of about 10800 megawatts of power, with actual energy requirement standing at 5000 megawatts, meaning that were will be surplus of 5800, if optimum production capacity is realised.

“This means that the remaining 5800 megawatts is surplus that the nation doesn’t need,” he stated.