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20 July 2016

VRA’s problems spell doom for power sector – ACEP

Gibbon Project, Khao Phra Thaeo National Park, Phuket, Thailand.

Energy think-tank, African Centre for Energy Policy (ACEP), says financial and distribution challenges at the Volta River Authority (VRA) spell doom for Ghana’s power sector.

ACEP Director, Mohammed Amin Adam, has predicted that until power producers – particularly the VRA – fix financial and technical inefficiencies, the sector is not likely to rise above recurring challenges.

He notes that the inefficient management of power distribution companies such as the Electricity of Company of Ghana (ECG) has caused the financial challenges confronting the VRA.

“I have difficulty seeing that end as far as the financial and poor management challenges with the distribution companies persist.

The distribution companies are not performing well, that is why they are unable to pay the bills for the purchase of power from the VRA and so you cannot have the VRA being so strong with the distribution being so weak; you need both of them to be strong,” Dr Adam told Accra-based Citi FM.

He said the country’s power challenges are not technical as some experts have sought to explain but largely the result of financial difficulties.

Amin Adam’s assessment of the country’s power sector follows government’s plans to restructure the VRA’s huge debts owed banks.

According to the sector Power Ministry, the restructuring will among others things see an extension of the maturity of VRA’s debts to five years.

Also, government is seeking that the interest rates on the cedi and dollar components of the debt are reduced from 32% to 22% and 11% to 8.5% respectively.

Dr Amin Adam also believes the long-standing issue relating to the finances of the VRA could be addressed when a proper financial model is put in place to enable the VRA to claim all outstanding debts and improve its liquidity.

He also fears the projections by the Energy Commission that Ghana will spend in excess of $1.5 billion to purchase fuel could have dire consequences for the country if the current situation remains unresolved.

In the past few weeks, the country has been facing a shortfall in the power supply that has resulted in unscheduled intermittent power cuts or ‘dumsor’.

Authorities in the power sector have blamed delays in crude oil supply.

Not long ago the country was plunged into a severe load shedding exercise that brought discomfort to homes and crippled businesses.

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