Gov’t seeks $1bn private capital for power distribution
To improve the country’s erratic power distribution and billing system, government is seeking over US$1billion of private investment in power distribution sub-stations, Energy Minister, Boakye Agyarko, has said.
Speaking at the recently held National Policy Summit in Accra, the minister said there is the need for critical investment in power distribution and billing infrastructure, especially in the area of substations in the capital and Kumasi.
“To put up one substation in Greater Accra alone costs $25million and Greater Accra alone needs three of such. We also need two substations in Kumasi to be able to stabilise power distribution. The opportunities therefore are in the investment in distribution networks, the billing and collection of electricity bills, and more importantly, where we privatise the last mile,” he said.
“Looking at the investment requirements, we require not less than a US$1billion in total,” he added.
According to professional services company KPMG, many countries in Africa have placed a high premium on power generation at the expense of all the other elements along the value chain.
The focus on generation, it says, has shifted the emphasis of investments away from transmission and distribution, which remain largely underdeveloped, and which, in turn, undermine efforts to increase supply capacity.
To reverse the situation, Mr. Agyarko believes private capital, which has transformed the generation end of the value chain, is critical for the distribution end as well.
He explained that the inability of the distribution companies to retrieve debts owed them, has negatively affected the development of the sector.
This has led to a situation where the Electricity Company of Ghana (ECG) ---the major distributor of power, is unable to pay power producers like the Volta River Authority (VRA), and Independent Power Producers (IPPs).
As at last year, the amount owed the power producers, stood in excess of US$2.4 billion. This came as a result of the ECG’s inability to effectively mobilise revenues from consumers to pay power producers.
Also, the borrowings of four firms- VRA, ECG, GRIDCo and TOR, all put together, hit GH¢19 billion at the end of 2015, triggering concerns of systemic crisis in the face of the debt linkages between state-owned companies and banks.
As a result, the ECG is also said to be working with a negative capital to the tune of GH¢2 billion.
“The last time I checked,” the Minister said, “ECG, for example, had a negative working capital of GH2 billion; it tells you that your receivables are more than your payables.”
“We need to shift the balance sheets of the distribution agencies, and we seek to do so by inviting private sector participation in the distribution sector and to improve the technical and commercial aspects,” Mr. Agyarko added.
Among other things, he disclosed that the Ministry is in the process of developing a power sector master plan that will make sure that all the issues of the power sector are properly aligned.
The policy goal of the plan will be to attain and maintain adequate generation reserves and margins, while bringing about efficiency in the sector.