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.
Details
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.
Source: GhanaJustice| N. Cudjoe
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