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Ghana’s energy minister: ‘We must move from can’t-do to can-do’

By Nana Yaa Mensah in Accra
Posted on Monday, 26 February 2018 12:19

“As far back as 2009, the alarm was raised that the system would grind to a halt by 2020 if nothing was done to address shrinking capacity,” he says. “Yet the NDC government sat idle and did nothing.”

He continues: “There was no money […]. The government hadn’t settled its insurance credits, so the power plants couldn’t run beyond narrow operating hours. These restrictions meant that the plants couldn’t do scheduled maintenance, which led to repeated breakdowns.” He says that created a negative spiral: “So began the wholesale rush to commission emergency plants. It took them two years to draw up ruinous plans to increase capacity. They made 40 power purchase agreements, contracting the country to buy in 11,000MW […] when we needed 4,800MW.”

He says the current government has been making progress in maximising utilisation of installed capacity: “Through the NPP government’s efforts, we have managed to raise the available capacity from under 1,900MW to 2,620MW, using the same equipment.”

Agyarko, an economist with a quirky taste for bow ties, says the administration has improved supply partly by “infusing the sector with a new dynamism. Independent suppliers of crude oil had given up on working with the government. Yet these are the very groups that understand every aspect of the problem we face.” He says: “We engaged with them. It brought about a total change of psychology, from can’t-do to can-do. Then we moved to return to the markets and restore trust.”

In late 2017, the financial community was highly critical of the NPP government’s attempts to clear debts owed to state-owned companies in the energy sector. The former Bank of New York man offers a counterintuitive response to press claims that the 2017 bond offer through an Energy Sector Levy Act (ESLA) special-purpose vehicle failed to raise the target ¢6bn ($1.4bn) because it did not carry a government guarantee. “Although Ghana’s energy debt wasn’t the prettiest thing on the market, we had a sense of room for manoeuvre. We made allowance for up to 20%, and the ¢4.86bn we achieved at 19.5% was enough to cover our immediate requirements.”

Agyarko recommends an incrementalist approach for the government’s goal of raising ¢10bn to pay off those debts : “We’ve carved the debt problem into segments, for each of which we will seek specific funding and will come back to the market, possibly at a lower rate,” the minister says.

“The critics want plain vanilla,” Agyarko continues. “The presence of a sovereign guarantee for a bond is the surest indicator of debt of the riskiest sort. ESLA is a parliament-backed debt, which guarantees flows. And its put-and-call option agreements in fact allow for a higher rate of investment interest. The investors of yesteryear may see Africa as a basket case. The investors of tomorrow, on the other hand, are prepared to back the basket and understand that it is good business.”

This article first appeared in the February 2018 print edition of The Africa Report Magazine

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