Ghana clears $1.47bn energy debt and saves $500m through reforms

Ghana says it has cleared about $1.47bn in legacy energy-sector debt as part of reforms aimed at stabilising the country's power sector and reducing generation costs.

Energy and Green Transition Minister John Abdulai Jinapor said the government had also saved approximately $500m by shifting power generation from expensive liquid fuels to natural gas.

Speaking at a press briefing on Thursday, Dr Jinapor said changes to the cash waterfall mechanism had also significantly improved payments to Independent Power Producers (IPPs).

He said the government was now declaring close to GH¢15bn each month into the mechanism, compared with about GH¢6bn before it took office.

According to the minister, IPPs now receive almost 100% of their invoiced bills, compared with about 42% previously.

“So we are not billing arrears like it used to be,” he said.

Dr Jinapor said the government had also negotiated with IPPs and secured savings of about $250m.

“When we assumed office, the outstanding bill was about GH¢80bn. We have also negotiated with the IPPs, and we have saved about $250m again from them,” he said.

Cutting the cost of power generation

The minister said moving generation away from liquid fuels towards natural gas had produced one of the largest savings under the reforms, with the government estimating the saving at about $500m.

The move is part of broader efforts to reduce the cost of producing electricity and improve the financial position of Ghana's energy sector.

The government has been under pressure to address the financial challenges facing the sector, including debts owed across the electricity supply chain.

Dr Jinapor said the latest measures were helping to improve the flow of payments to power producers and prevent the accumulation of new arrears.

What happens next?

The government says it intends to continue with reforms aimed at making the energy sector financially sustainable and reducing the cost of electricity generation.

The figures presented by the minister are government claims. The source material does not provide independent verification of the $1.47bn debt clearance, the $500m fuel-switching savings or the $250m savings from IPP negotiations.

It also does not provide a detailed breakdown of the debts cleared or the methodology used to calculate the reported savings.