Ghana’s energy sector has recorded a major financial reset following the clearance of about $1.47 billion in legacy debts, alongside measures that have generated hundreds of millions of dollars in savings, Energy and Green Transition Minister Dr John Abdulai Jinapor has said.
The interventions, he said, are improving liquidity across the electricity value chain, strengthening payments to Independent Power Producers (IPPs) and restoring confidence in the financial viability of the power sector.
Speaking on behalf of President John Dramani Mahama at the commissioning of the new Head Office Complex of the Public Utilities Regulatory Commission (PURC) in Accra on Thursday, Dr Jinapor said government’s settlement of the legacy debt had helped stabilise the sector after years of financial distress.
A key component of the strategy has been the increased use of natural gas instead of more expensive liquid fuels for power generation.
According to the Minister, the fuel-switching programme has generated savings of approximately $500 million, reducing the cost pressures associated with electricity generation.
Government has also renegotiated agreements with some IPPs, resulting in an additional $250 million in savings, bringing the combined savings from the two measures to about $750 million.
IPP payments improve
Dr Jinapor said reforms to the Cash Waterfall Mechanism have also substantially improved liquidity for power producers.
He disclosed that before the current administration took office, only about 16% of funds declared under the mechanism reached IPPs, leaving producers receiving approximately 42% of their invoiced amounts.
The situation, he said, has changed significantly.
“Today, we declare close to GH¢15 billion every month into the Cash Waterfall Mechanism, and IPPs receive about 100 per cent of their invoice bills,” he said.
The improved payment regime is expected to reduce the accumulation of arrears and provide IPPs with greater certainty over cash flows, supporting their ability to maintain operations and meet financial obligations.
When government assumed office, arrears across the power sector were estimated at about GH¢80 billion, placing significant financial pressure on companies operating throughout the electricity supply chain.
ECG remains key business risk
Despite the progress, Dr Jinapor identified the Electricity Company of Ghana (ECG) as a critical component of the sector’s financial sustainability.
He warned that weaknesses in ECG’s revenue collection could undermine improvements elsewhere in the electricity value chain because the company’s ability to recover revenue directly affects payments to other sector players.
He therefore urged PURC to strengthen regulatory oversight of the commercial performance of utility companies and ensure greater accountability.
For consumers and businesses, the Minister said effective regulation should translate into faster resolution of complaints, stronger enforcement and improved service delivery.
The government, he added, remains committed to working with PURC and other stakeholders to improve electricity reliability while building a financially sustainable power sector.
The combination of debt clearance, fuel-cost savings, IPP payment reforms and commercial restructuring, Dr Jinapor said, is aimed at creating a more stable investment and operating environment for Ghana’s electricity industry.
