Government working to conclude negotiations with IPPs on energy sector debt clearance - Amin Adam

The Finance Minister, Dr Mohammed Amin Adam, has said the government is in talks with Independent Power Producers (IPPs) on the clearance of energy sector arrears.

According to him, government has started showing good faith and working on an agreement to spread the payment of debts in five years.

Speaking at a press conference to provide updates on the Ghanaian economy, Dr Adam said the energy sector has been a “bother” for government because of the huge payment backlog government has to clear.

He, however, noted that “we’ve seen significant progress in addressing not just the arrears but also in preventing the accumulation of arrears going forward.”

He reiterated an updated Energy Sector Recovery Programme which is intended to achieve just that.

“Most of you may know that we have a re-modelled or revised Cash Waterfall Mechanism that guarantees payment to IPPs and also to our state-owned enterprises and the Ministry of Finance is also supporting where there are shortfalls.”

“Therefore, we are very confident that the effective implementation of the cash waterfall mechanism will help in preventing accumulation of new arrears. But coming to the existing arrears, we are almost through with our negotiations with the IPPs to restructure the arrears over several years. As I speak to you, I believe in the next two to three weeks we’ll be signing those agreements with the IPPs we’ve concluded negotiation with.”

Independent Power Producers (IPPs) in Ghana have demanded that the government settle their [in billion dollars] debt owed by the Electricity Company of Ghana. They threatened that failure by the government to pay at least half of the overdue debt would lead to a shutdown of their operations.

But the finance minister said government has shown good faith by making some payments to the IPPs, avoiding threats of shutdown.

He was also confident that signing agreements that will spread payment of arrears over several years, will not only be a relief but will ensure the energy sector does not incur significant debts in the future.

“We have even started showing good faith to the IPPs by making some payments that we had agreed to do with them. And this is why you do not hear the threats that you used to hear and read about from IPPs; threatening to shut down.”

“And so we are very confident that the signing of these agreements will pave way for spreading arrears over several years. An average of five years to provide some relief to us to put our house in order to ensure that we do not go back to the days of huge arrears in the energy sector,” the finance minister noted.