Danger! energy crises loom over growing sector debt
The Chamber of Independent Power Producers and Bulk Consumers [CIPDIB] has hinted the Ghanaian power consumers of possible power outages in the next few days (within a 7-8 working days period), if the Power Distribution Services (PDS) fails to pay its huge financial debt to the Independent Power Producers (IPPs).
A statement issued and signed by the Chief Executive Officer of CIPDIB, Mr. Elikplim Kwabla Apetorgbor urged the government through the Ministry of Energy to compel PDS to expressly pay all accumulated invoices to the IPPs within the seven days.
The statement further urged the government to not only make PDS pay its debts to the IPPs; but also be made to pay interest on all overdue invoices which the IPPs could have profitably utilized.
It also called on Millennium Development Authority (MiDA) to compel PDS to adhere to best business practices and respect the terms of the PPAs and ensure the nation derive the optimum benefit from the concession arrangement.
The leadership of CIPDIB emphatically stated that “should PDS fail to respect the terms of the PPA and make payment to the IPPs within the 7-8 working days period; our members would be left with no choice than to shut down PDS’s plants as they could not continue to be saddled with huge debts”.
Meanwhile, the Power Distributions Services took over some operations and management of Electricity Company of Ghana (ECG) from March 1, 2019 with the expectation to deliver a more quality service to power consumers than its host, ECG.
Below is the full Statement
CHAMBER OF INDEPENDENT POWER PRODUCERS, DISTRIBUTORS AND BULK CONSUMERS, GHANA (CIPDIB).
DANGER! ENERGY CRISES LOOM OVER GROWING POWER SECTOR DEBT!
1. It would be recalled that the operations of the Electricity Company of Ghana (ECG] came under barrage of criticisms because of perceived inefficiencies which included but not limited to the huge indebtedness to power generators particularly the Independent Power Producers [IPPs].
2. Against this backdrop and the need to revamp the ECG, there were efforts by successive governments to improve the management of this all important institution to drive the industrialization agenda of the country.
3. This effort eventually culminated in the takeover of some operations and management of ECG from March 1, 2019 by the Power Distributions Services [PDS].
4. Being a private sector led, the PDS, was expected to deliver a more quality service than its host- ECG.
5. This implies that various stakeholders in the power sector have high performance expectations from PDS. The consumers for instance expect reliable, affordable and sustainable power supply.
6. For IPPs, the expectation was that the PDS will honor and abide by the terms of the Power Purchase Agreements (PPAs) inherited particularly by avoiding the delay in paying for power purchases with respect to the bargained credit days.
7. Regrettably however, the PDS appears to be reliving some of the very bad contractual and bad business practices that characterized its host -ECG.
8. Energy can neither be stored nor destroyed. This presupposes that consumers are paying for the power consumed and PDS is accumulating the revenues. It is very frustrating to note that PDS, for the past four (4) months, since taking over from March 1, 2019 to date, has not remit any payment to the IPPs yet!
9. In the midst of this issue, one would have expected PDS to engage the players in a bid to inform them of any challenges, if there is, but efforts so far made to cause PDS to honor its contractual bargains has yielded virtually no result.
10. Meanwhile, the huge financial indebtedness of PDS towards the IPPs implies that the IPPs are saddled with huge debts to their creditors and suppliers and also challenged in paying employees’ salaries.
11. At the moment, most of the IPPs are stressed up and finding it extremely difficult to manage their operations and management costs. Some have to depend on overdrafts to be able to pay salaries and others.
12. For love of country and its people, some IPPs had gone a step further to incur extra financial cost in borrowing to procure fuel to ensure reliable power supply.
13. Constrained by these existential threats, the Chamber of Independent Power Producers and Bulk Consumers [CIPDIB], is by this release alerting the consuming public of looming power outages unless PDS fulfills its financial obligations to the IPPs within a 7-day period.
14. CIPDIB is urging the government through the Ministry of Energy to cause PDS to expressly release funds to pay all accumulated invoices to the IPPs within seven days.
15. CIPDIB further wants to urge government to not only make PDS pay its debts to the IPPs; but that PDS must also be made to pay interest on all overdue invoices which the IPPs could have profitably utilized.
16. We call on MiDA to compel PDS to do things to ensure best business practices and respect the terms of the PPAs and ensure the nation derive the optimum benefit from the concession arrangement.
17. We caution that should PDS fail to respect the terms of the PPA and make payment to the IPPs within the 7-day period; our members will be left with no choice than to shut down their plants as they cannot continue to be saddled with huge debts. This action although has huge implications for jobs – cannot be avoided.
18. We reiterate the need to depoliticize the power sector and discourage undue political interferences from the sector and allow the sector to be operated as a pure business.
19. Finally, CIPDIB is urging all participants in the power sector to ensure transparency in our dealings as it is key to the growth and sustainability of the sector.
Elikplim Kwabla Apetorgbor
Chief Executive Officer, CIPDIB.