Ghana’s Parliament has approved an On-lending Agreement (loan) between Ghana and the Electricity Company of Ghana (ECG), for an amount in the sum of 60 million US Dollars, for the Ghana Energy Development and Access Project (GEDAP).
The Loan will enable ECG to upgrade its distribution network and commercial and technical capacity, with focus on improving revenues and reducing commercial losses across the country.
The project is planned to be implemented over a period of 24 months and is expected to scale up the ongoing activities under the first component through an improvement in revenue collection, and enhancing the management and planning processes of the ECG. This phase will focus on the systematic recording and monitoring of consumption by ECG’s largest users, to protect revenues from sales to large and medium sized customers.
Some of the specific activities to be undertaken by the Company include the installation and relocation of Advanced Metering Infrastructure (AMI) at the premises of at least 80,000 customers, with monthly consumption exceeding 600 kWh, establishing metering control centres and incorporating a meter data management software for systematic monitoring of electricity consumption.
ECG will also deploy an advanced metering infrastructure for bulk metering in all regional medium voltage distribution networks.
It will further train operators of metering control centres on the systematic monitoring of electricity consumption.
The Company is also expected to support a programme of activities for the incorporation of an incident management system, including the acquisition of software to support the management of outages.
ECG is also tasked to use part of the loan to strengthen its technical capacity.
Earlier, the House approved an Additional Financing Agreement between Ghana and the International Development Association (IDA), for an amount in the sum of 42.7 SDR (Forty-Two Million, Seven Hundred Thousand Special Drawing Rights), which is equivalent to 60 million US dollars for the Ghana Energy Development and Access Project (GEDAP).
The repayment period of the loan is 25 years while the grace period is 5 years.
The Government of Ghana secured the loan to on-lend to the ECG.
The repayment and the grace periods of the loan are 17 and 5 years, respectively.
It is worth noting that the ECG shall bear all the exchange rate risk associated with the loan.
As regards the Terms and Conditions of the Facility, the Additional Credit is a concessional facility with standard IDA terms.
The 60 million US dollars loan has an Interest Rate of 1.25% per annum, a Service Charge of 0.75% per annum on withdrawn balance, a Commitment Charge of 0.5% per annum on the unwithdrawn balance and Grace and Repayment Periods of 5 and 25 years, respectively.
With regard to On-lending Terms, the Ministry of Finance intends to on-lend the entire facility to ECG, in line with the Government’s debt management strategy.
The 60 million US dollars on-lend loan has an Interest Rate of 5.3% per annum, a Service Charge of 0.75% per annum on withdrawn balance, a Commitment Charge of 0.5% per annum on the unwithdrawn balance and Grace and Repayment Periods of 5 and 17 years, respectively.
The ECG shall bear all the exchange rate risk associated with the loan.
Relating to the capability of ECG to re-pay the loan, Officials of the Ministry of Finance informed the Joint Committee on Finance and Mines and Energy of Parliament, that an assessment on the financial capability of the ECG has been undertaken by a Joint Technical Team, comprising officials of the World Bank and the Ministry of Finance and the result was positive.
They also said that adequate repayment security measures have been instituted to ensure ECG does not default.
Under the on-lending Agreement, an Escrow Receivable Account will be opened for the purpose of depositing receivables from the Project solely for the repayment of the loan.
The officials of the Ministry further stated that the current cash waterfall payment schedule for the power sector being implemented by the Public Utilities Regulatory Commission (PURC), provides an additional security measure to ensure that the Escrow Account receives proceeds from the Project on time for the repayment of the Loan.
However, the Minority in parliament, were not enthused with the loan repayment terms with the ECG, stating that the Company is broke, hence cannot repay the loan.
In respect of the Social and Economic Impact of the Project, ‘the Committee was informed that the Second Additional Financing as an Investment in the electricity distribution system would enable ECG reduce its unplanned distribution line outages, and distribution commercial losses resulting from meter tampering, and electricity theft, among others. This will lead to a more reliable supply of electricity, which will create an enabling economic activity such as improving industrial activities and boost economic growth through a reduction in the cost of production’, the Finance Committee chairman, James K. Avedzi (Hon.), said this on the floor of the House.
Having regard to the constitutional obligations imposed on loan agreements involving the Government of Ghana, the Minister for Finance, Seth Terkper, who doubles as the Minister responsible for Power, laid in Parliament for approval of the Agreement covering the Second Additional Funding Credit Facility and the On-lending Agreement involving the ECG.