Minority raises fresh alarm over $2.5bn Energy bond

The Minority in Parliament has vowed to resist government plan to raise a $2.5bn bond to pay off energy sector debts estimated at $2.4 billion.

Minority leader Haruna Iddrisu said the bond with 15-year payment plan will be a burden on the taxpayer.

He said there was no justification for the bond because the erstwhile NDC government had put in place a strategy to settle all energy sector debts within five years.

“How can an arrangement meant to liquidate a loan over 5 years in the previous administration metamorphose into 15 years under this administration?”

Finance minister Ken Ofori-Atta and Vice-President Dr. Mahamudu Bawumia
The Minority leader outlined steps the previous Mahama government took to remove Ghana’s number one barrier to reliable power – energy sector debts heaped up between 2012 and 2016.

The NDC government passed the Energy Sector Levies Act (Act 899) in 2015 to impose energy sector levies and taxes on petroleum products with guarantees that it will be used to pay off the debts.

He said the levies, which the NPP opposed, were to be halted immediately the debts were cleared. The levies included a 5% rate for street light levy and another 5% levy for the national electrification charge which led to electricity prices going up.

Total Energy Fund collections for 2017 is estimated at GH¢31.41 million. At least $800m of the $2.4bn debt is owed local banks, triggering fears of a systemic collapse of the financial sector.

The Minority threw adjectives at the government’s new plan to prolong the debt re-payment calling it “shocking”, “astonishing” and “certainly unacceptable” plan that “beats our imagination”.

“What at all informs the NPP Government’s strong affinity for Bonds if not for self-gain?” the MP lamented, referring to three other bonds issued by the six-month-old government.

He admitted that although the Minority may not prevail in resisting the issuing of the bond in parliament, it will review it if it wins power in 2020.

statement on Energy Bonds

ENERGY SECTOR BOND

The minority has also noted with concern an announcement by the NPP Government to the effect that it intends to issue a 15 year Bond to settle what it describes as outstanding debts in the energy sector.

It will be recalled that in an effort to deal with the perennial debt confronting the Energy sector SOEs the NDC Government introduced the Energy Sector Levy Act 2015 (Act 899) which was meant to consolidate all the existing levies into a properly structured revenue stream flow to deal with the debt stock in a comprehensive manner.

Consequently, the NDC government through then Minister for Finance, Hon. Seth Terkper, took appropriate steps to restructure the debt owed by the Power Sector Industry players which resulted in a renegotiation of outstanding obligations.




This led to the affected banks cutting their interest rates for both the Cedi and Dollar components. This move culminated in a payment plan which was agreed upon by the various shareholders.

Based on detailed analyses conducted taking into account the upfront payment made, the entire debt stock was scheduled to be amortized over a period of 3 to 5 years. The NDC Government further made provision for sunset clauses which was aimed at terminating the levies upon completion of payment within the stipulated period.

It is therefore shocking, astonishing and beats our imagination to hear of the NPP Government planning to extend the repayment period over a 15 year period, through what they describe as Energy Sector Bonds. This is certainly unacceptable as it is completely at variance with the intended repayment time period of a maximum of 5 years.

For the avoidance of doubt, the then Minister of Finance, Hon Seth Terkper, had started sanitizing the Markets of Energy Bonds to finance the investment needs of the sector and wean them off central Government or Sovereign Guarantee.

These discussions were based on the “self-financing” rule for commercial projects. In the case of the energy sector, it would be based on “receivables” or revenue from projects, such as the Thermal plants, not ESLA.

What at all informs the NPP Government’s strong affinity for Bonds if not for self gain?

It must not be lost on us that the NPP then in opposition vehemently opposed the Energy Sector Levy promising to scrap same upon assumption of office. Why has the NPP woefully failed to honour this promise?

On the contrary, the Akufo-Addo/Bawumia government has capitulated and seeking to burden Ghanaians with a 15 year payment period. This singular act will span almost 4 successive Governments and Parliaments. How can an arrangement meant to liquidate a loan over 5 years in the previous administration metamorphose into 15 years under this administration?

We wish to state emphatically and unequivocally that the NDC Minority is vehemently opposed to this 15 year bond arrangement that appears to surreptitiously extend and impose the ESLA on Ghanaians for 15 years.

Therefore, the NDC is serving notice that we oppose the measure and should the majority use its numbers to have its way we shall review this decision, God willing, upon assumption of office on January 7, 2021.

Source: Myjoyonline.com