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Mining firms' debts to GRIDCo affecting work of the power producer - IES

Mon, 3 Aug 2020 Source: Laud Business

The Institute of Energy Security (IES) has noted that aside the Electricity Company of Ghana (ECG), the indebtedness of the Northern Electricity Distribution Company (NEDCo), the Volta Aluminum Company (VALCO) and some mining companies to the Ghana Grid Company Limited (GRIDCo), coupled with the depreciation of the Ghana cedi, contributes to the financial woes of the GRIDCo.

The debts owed by these companies to the GRIDCo is rising to unprecedented levels, and may likely render GRIDCo incapable of executing its critical projects that would make the national transmission system robust and improve reliability of power supply, the IES said . Adding that it could negatively influence the day-to-day operations of the company, and could lead to the stalling of the many key projects undertaken by the company to improve on operations and efficiency, if not checked.

The increased debts that translate into financial constraints may also make it difficult for the transmitter to meet its financial obligations to financiers, contractors, suppliers and service providers among others. The bad financial state of the company induced by increased receivables could result in increased payables and deterioration of its working revenue, and by extension produce financial losses.

The IES said it fears that the toughest leadership test is approaching, where the government and its allied institutions in the power sector would have to show how they intend to bring back power utilities into cost-effective and profit ways. The most appropriate module could be for the Government to reimagine its approach in dealing with debts in the sector, should it be willing to return power sector institutions to profit ways. Most critically, the Government must proffer new ways in which to recover revenues owed to the GRIDCo from institutions, whether private or state, and from the Energy Sector Levy Act (ESLA) Fund.

The ECG must deal with the high commercial and technical losses in its system, and must commit to clearing all the debt owed to GRIDCo, to guarantee reliable power supply to its distribution network.

While the GRIDCo waits to receive payment from the ECG, or better still receive revival from the sharing of the ESLA Fund to help boost the finance of the company, Management of the company must focus on pursuing the debts owed by the ECG and other defaulting customers. GRIDCo must also consider cutting back on some of expenses (including CAPEX), focusing on those that are necessary to produce a robust transmission system, to manage the current challenges.

Source: Laud Business

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