Stock market anticipates ECG listing

The Ghana Stock Exchange is set for a major boost, given the intention of the government to eventually list the Electricity Company of Ghana on the local bourse.

The Minister for Finance, Mr. Ken Ofori-Atta announced during his presentation of the 2020 budget in Parliament, that government plans to democratize local equity participation in the power distribution company through an eventual listing on the Ghana Stock Exchange.

This would bring the total number of majority Ghanaian owned listed companies on the stock exchange, with a market capitalization above GHc 1 billion, to three, the others being ADB Bank and GCB Bank.

“While restoring private sector participation in the management, operation and financing of the required investments in ECG’s distribution assets, Government will make every effort to avoid the pitfalls that the PDS concession encountered and institute broad Ghanaian institutional participation, as well as democratize local equity participation, with an eventual listing on the Ghana Stock Exchange,” Ofori Atta said.

Currently, the assets of ECG are valued at somewhere between GHc 14.4 billion and about GHc 15.96 billion while (non-core capital) liabilities as at 2017 stood at GHc 7.6 billion.

In view of this, should ECG be listed on the bourse today, it would be ranked among the best-capitalized companies on the stock market with a market capitalization of about GHc 7 billion. If the market values the company significantly above its book value, this premium would make it's market capitalization even higher.

Following the failed PDS concession fiasco, public commentators have argued that the requisite Ghanaian 51 percent equity in the concession should have been raised through an Initial Public Offer. Apart from enabling the average Ghanaian to have the opportunity to own a part of the company, it would have ensured that Ghanaian participation was fully paid for, which in turn would have attracted credible foreign partners. They argue that no credible foreign investor was willing to own a minority 49 percent stake in the company while being expected to cough up most if not all of the US$500 million required of the private participants. This is why Ghana ended up with foreign investors that were not financially competent and who were looking to take short cuts to meet their financial obligations.

Aside from the listing of the power distributor on the local bourse, the managers of the stock market are taking steps toward the demutualization of the GSE. This would transform the legal structure of the GSE from a mutual form, to a business corporation form, owned by shareholders.

At the end of trading on Thursday, November 14, 2019, the GSE’s market capitalization stood at GHc 55,902.12, following a year-to-date fall in the composite index (GSE-CI) of -15.60 percent, after opening the year with a capitalization of GHc 61.51 billion.

Privatization of ECG

The Finance Minister stated that the government intends to initiate an accelerated tender process to select a new private partner for ECG in the coming months.

“It is indeed government’s intention to make relevant adjustments to enhance the existing bid documents and tailor the process to optimize the selection from companies having a track record of managing and operating a comparable utility, so as to achieve a fair, transparent and expeditious closure of the transaction,” He stated.

In this regard, heightened scrutiny will be brought to bear in the design and implementation of the financial and technical evaluation criteria to ensure that interested bidders not only have credibility and extensive experience in operating and managing a comparable electricity utility but also possess the financial wherewithal to make the requisite investments in ECG to achieve significant reductions in technical and commercial losses, as well as drive operational efficiency to deliver sustained service reliability for the benefit of all Ghanaians.