Government is pondering the idea of either issuing new bonds to cater for the rising energy sector debts on the back of changes to the Energy Sector Levies and Accounts or to shelve plans for the bonds until Energy Sector Levies and Accounts (ESLA) inflows improve significantly.
A decision is expected to be taken before July 29, 2019 and announced in the mid-year budget review to be presented to Parliament on the same day.
Dr. Mark Assibey-Yeboah, Chairman of the Finance Committee of Parliament told the B&FT that: “We had met them earlier, and they said they were thinking of issuing a new bond of about a billion cedis to take care of some outstanding hardcore liabilities of SoEs in the energy sector.
“But today the Finance Minister said, looking at the ESLA flows, they are unable to do so presently but [may issue new bonds] in the near future. [His response] tells me that if the flows increase, the only way the flows will increase is to increase the taxes therein, so we will know [when the mid-year budget review is read] if the Energy Sector Levies and Accounts are going to see some changes. So, if there is an increase in there, as a consequence you will see a bond being issued; but if it’s in the near future, [ then no bonds will be issued] let’s wait and see.”
E.S.L.A. PLC is authorised to carry on the following business among others: to issue debt securities backed by receivables collected under the Energy Sector Levies Act, assigned to the Company by the government of Ghana acting through the Ministry of Finance for the purpose of servicing the debt securities and related expenses.
“I can also enter into such other arrangements and transactions in relation to the issuance of debt securities as may be necessary or required by the government of Ghana acting through the Ministry of Finance.”
On the Energy Sector debts, which have accumulated as a result of non-payments of subsidies by government – and also the difficulties and challenges associated with ECG’s capacity to collect tariffs, Dr. Steve Manteaw, Chairman of PIAC, clarified that it is being dealt with on two fronts.
“We have actually dealt with that problem [of poor revenue collection] through the ECG concession. We [now] have PDS, which we anticipate will be more efficient in collecting the tariffs. On the legacy side, which is the existing debt portfolio, what government is trying to do is liquidate them through the Energy Sector Levy.”
He added that: “We know some bonds have been raised in times past; but according to the Energy Sector players, they did not benefit from the bonds. My own personal information is that a lot of it went to the banks to offset credit loss, and so going forward we anticipate that future bonds that will be raised through the energy sector levy will prioritise payments to the energy sector entities so they are able to defray their debts”.
E.S.L.A. PLC, in June this year, announced the successful issuance of a GH¢10-year bond maturing June 15, 2029.
Bids of GH¢1.147billion were submitted with yields ranging from 19.50% to 19.90% – out of which GH¢1billion was accepted at coupon of 19.85%.
Proceeds from the GH¢1billion bond issuance will be used to settle portions of the outstanding legacy debt and other obligations due suppliers and other creditors within the energy sector.
This brings the total issuance under the GH¢10bn Bond Programme to GH¢6.665billion. The outstanding amounts on E.S.L.A. PLC bonds is GH¢6billion – being GH¢2.260billion, GH¢2.740billion and GH¢1billion for the 2024, 2027 and 2029 bond maturities respectively, following the successful buyback and cancellation of GH¢664.720million of portions of the 2024 and 2027 bonds by E.S.L.A. PLC.