Government says it has refinanced Ghs 8 billion out of the Ghs 10 billion energy sector debts bequeathed to it by the previous government.
According to government, the refinancing has been possible due to the amendment of the Energy Sector Levy Act (ESLA) into a Special Purpose Vehicle (SPV) – ESLA Plc – to issue long-term bonds backed by ESLA receivables.
“Over the last four years, E.S.L.A. PLC successfully refinanced debts in excess of GH¢8.00 billion under the programme. Out of this amount GH¢1,870.3 million was settled in cash to creditors, while the remaining GH¢6,186.1 million was covered by debt swaps,” said government.
In debt refinancing, a borrower applies for a new loan or debt instrument that has better terms than a previous contract and can be used to pay down the previous obligation. In this circumstance, a debt refinancing can allow borrowers to pay much less interest over time for the same nominal loan.
According to government, the performance of the Energy Sector Levies was adversely impacted by the COVID-19 pandemic as expected receipts from electricity levies were not realised due to a slowdown in business activity at the onset of the pandemic coupled with lower recovery of electricity bills from households and businesses severely hit by the pandemic.
Government however, outperformed its target in petroleum levies mobilization by about 7 percent, despite the partial withdrawal of the Price Stabilisation Levy in early 2020 to cushion consumers from paying higher petroleum prices at the pumps.
The positive performance was as a result of an increase in the Energy Debt Recovery and Road Fund Levies towards the end of 2019 without a corresponding revision of the 2020 targets, as well as an increase in the volume of petroleum products consumed in the last two quarters of 2020 when the coronavirus restrictions were eased.
On the outlook of the of the levies in the medium-term, government asserted the outlook remains positive as overall projection is expected to record an average growth of 12 percent over the medium-term (2021-2024).
It is expected that the positive growth forecast will impact on the operations of the sector as revenues that are generated will be used to address the challenges facing the sector. Compared with the 2020 forecast, projection for 2021 is estimated to increase by GH¢ 634.77 million (12.0 percent).
Government established the Energy Sector Levies Act (ESLA) 2015, Act 899, as amended, to consolidate levies collected under the sector, provide funding for power generation and the clearance of legacy debts accumulated within the sector, support road maintenance, provide funding for the regulation, management, development and utilisation of sustainable energy resources under the Energy Commission, provide funding for investments in public lighting and the National Electrification Programme, and subsidise Premix and Residual Fuel Oil.
ESLA Plc has, since its inception, issued bonds worth Ghs 8.294 billion while there is a total outstanding of Ghs 7.63 billion following a buyback of some Ghs 664 million in June 2019.
The major channel through which funds are mobilized to pay bondholders is the Energy Debt Recovery Levy (EDRL).
In 2019, the EDRL collections stood at a monthly average of Ghs 140.6 million. This represents 101.21 percent of expected collections and is above the 88.50 percent expected realisation of projected amounts.
Excess collections for 2019 presented some cash flow robustness and supported the issuance of new tranches in the first quarter of 2020.
For January-October 2020, actual EDRL collections stand at a monthly average of Ghs 128.1 million. Actual cash collections for the period represent 80.79 percent of expected collections.
In nominal terms, on a monthly average, EDRL collection for 2020 is lesser than that of 2019.
However, data for September and October 2020 show increased collections of Ghs 180.4 million and Ghs 190.7 million respectively above the projected average monthly collection of Ghs 158.6m for 2020.