Private sector engagement will enhance ECG’s operational efficiency

Efforts to engage the private sector in Electricity Company of Ghana (ECG) operations are being ramped up by the government.

The move is part of a broader strategy aimed at enhancing operational efficiency and ensuring long-term sustainability in response to the energy sector’s ongoing financial challenges.

Dr. Mohammed Amin Adam reaffirmed the government’s commitment to reforming the energy sector during the October 2024 IMF/World Bank meetings held last week. He highlighted a substantial annual shortfall of US$1.2billion (approximately GH¢18billion) in the energy sector.

To support ECG’s financial restructuring, the government is implementing the cash waterfall mechanism to ensure that all revenue collected by ECG is fairly redistributed among stakeholders in the energy value chain.

Also, government is actively renegotiating power purchase agreements with Independent Power Producers (IPPs) to address its growing debt.

This Paper learns that negotiations with several IPPs are progressing despite setbacks, including the recent shutdown of Sunon Asogli’s 560MW power plant due to a payment dispute with ECG. Sunon Asogli cited an outstanding debt of US$ 259 million, excluding fuel costs, as the reason for halting operations.

The minister outlined various reforms aimed at improving ECG’s efficiency – including investments in prepaid metering and enhancements of commercial management to boost revenue collection.

Government has already signed new agreements with Cenit and AKSA, two of the six IPPs involved in restructuring talks. We understand that these agreements do not need parliamentary approval, allowing Cenit and AKSA to continue operations under the revised terms.

Initially, the government agreed to a one-time payment of US$30 million to Sunon Asogli; but this is proving challenging. Dr. Adam however noted that Sunon Asogli later demanded another US$30million, which was not part of the settlement terms.

Government insists that no funds will be released until the agreement is signed, labelling Sunon Asogli’s demand for upfront payment as “an action in bad faith”.

This notwithstanding, Sunon Asogli has recently shown a willingness to sign the settlement; prompting optimism for a resolution. Meanwhile, restructuring agreements with Cenpower and Amandi Energy, two additional IPPs, are still pending parliamentary approval.