TOR Debt: The Bare Facts Presented By The Minority Caucus

ON 2ND FEBRUARY, 2011

For the past two years the nation has been inundated with information about the TOR Debt that was inherited by the NDC administration when it assumed office. Since January 2009 various figures have been bandied abound and the conflicting figures have left Ghanaians in the dark about the stock of debt that was inherited in 2008. It is important to remind Ghanaians about the contradictions in the figures of the TOR debt.

1. On Monday, 19th January 2009, Hon. Moses Asaga at the time a Member of the NDC Economic Team on a TV Africa Programme, “Matters Arising” stated that the TOR debt, as at December 31, 2008 stood at GH¢1 billion.

2. On April 14, 2009 four months into his Presidency, at his encounter with journalists at the Castle, the President, H.E. Atta-Mills, stated that the TOR debt, as at when he assumed office was GH¢1.14 billion.

3. Five months into the NDC regime, in May 2009, the Government’s Transition Team released a document, supposed to have come from TOR itself, which put TOR debt at the close of December 2008 at GH¢473 million.

4. At about 10.37 p.m. on Thursday June 11, 2009, six months into the NDC rule, the Vice President John Mahama stated on Metro TV’s Good Evening Ghana programme that the TOR debt at the close of December 2008 was GH¢930 million.

5. On Friday June 12, 2009, 24 hours after the Vice President’s intervention, the Minister responsible for Energy, Dr. Oteng Adjei said on the floor of Parliament that the TOR debt at the close of December 2008 was GH¢106 million.

6. On the floor of Parliament in December 2010 whilst contributing to a debate on the Tema Oil Refinery Debt Recovery Levy, the Minister for Finance and Economic Planning, Dr. Kwabena Dufuor at the insistence of the minority put the TOR debt at GH¢880 million at the end of March 2009. He revealed that GH¢445 millionout of that amount had been refinanced to sustain Ghana Commercial Bank leaving a balance of GH¢435 million. That refinancing exercise itself was without Parliamentary approval. Notwithstanding, the Minister added that interest accumulation and other matters had since pushed the outstanding amount of GH¢435 million to GH¢630 million.

7. At 8.45 a.m. on Tuesday January 4, 2011 on Joy FM’s Super Morning Show, Mr. Alex Mould, the Chief Executive of NPA stated in his defence of petroleum price hikes which had just been announced by government that the TOR debt inherited by the NDC was GH¢1.5 billion.

8. Then on January 8, 2011, President Mills in his encounter with some selected media men stated that the TOR debt he inherited was GH¢1.48 billion. This figure is different from what he the President told the nation on April 14, 2009 when he said the figure was GH¢1.14 billion. The President has inflated his own initial figure by GH¢380 million.

9. As late as January 23, 2011 Hon. Fiifi Kwetey in a direct response to a question put to him by the host of ‘Talking Point’ progromme retorted that the TOR debt as reflected in the audited accounts was GH¢1.448 billion.

The President’s image makers portray him as a man of integrity and as such may not want his double tongue to be questioned. This latest figure from the President is significantly different from what the Vice President stated. When the President sent his Finance Minister to Parliament, the Minister came with a different figure. The President’s new figure conflicts with that of his Ministers, appointees and spokespersons.

About two weeks ago, the Vice President H.E. John Mahama charged the NPA to come up with the actual state of TOR’s debt as at December 31, 2008. The question to ask is if the Vice President, the President of the nation, the Finance Minister, the Minister of Energy and his deputies, the Government’s transition team did not know the actual state of TOR’s debt as at December 31, 2008 all this while then what informed the figures that these persons and bodies put forth in the public domain?

Ladies and Gentle, we now have nine figures given at different times with respect to the TOR debt. Quite amazing! Clearly, the President and his representatives and spokespersons have shown that they cannot be trusted with their statements on the TOR debt.

Ladies and Gentlemen, this piece is an attempt to demystify the problem so Ghanaians will know the facts. The information that we present is taken out of the data presented by TOR management to the Transition Team on Energy dated January 16th and 23rd 2009.
In this analysis we are focusing on TOR debt that arose out of under-recovery because of government decision not to increase the prices of Petroleum products due to increase in world price of crude oil. TOR as a commercial entity on its own has also over the years incurred debt on either short term or long term basis for acquisition of capital assets. This debt is therefore not the responsibility of Government. Again, some losses are incurred by TOR as a result of currency fluctuations. These are not due to under-recoveries.

I. THE DEBT STOCK (PRINCIPAL PLUS INTEREST)

In the reports presented to the Transition Team on Energy, TOR reported that it’s stock of net debt as of January 1, 2001 amounted to GH¢276.77 million comprising current liabilities due to under-recovery (government subsidy) of GH¢201.5 million and a long-term loan of GH¢75.27million for capital assets. It is further reported that from 2001 to 2007, TOR made additional losses of GH¢193.77 million due to government induced subsidy as well as debt owed by security agencies to TOR. An additional long-term loan of GH¢97.36 million for capital assets was also contracted during this period. We are aware that after the audit of TOR’s account this figure (GH¢97.36) million has, after some reclassification, been revised downwards to GH¢44.74 million.

Again, from TOR’s own account, in 2008, there was further under-recovery (subsidy) of GH¢96.52 million and losses from holding stocks, (resulting from a reduction in pump prices) that amounted to GH¢42.05 million. Thus in 2008, government’s policy on petroleum pricing caused TOR to accumulate additional debt of GH¢138.57 million.

Finally, TOR’s reports show that an amount of GH¢268 million has accumulated as a result of direct interest cost on the principal debt accumulated over the period, 2001-2008.

Since the acquisition or contracting of the long-term loans for capital assets does not arise out of government’s action, but out of TOR’s normal commercial practices we exclude the stock of long-term debt from the analysis. It can therefore be conclude that at the end of 2008, the stock of debt that TOR accumulated from principal and interest due to government’s action or inaction amounts to GH¢801.84 million (see table 1). Of this amount, a net debt of GH¢201.5 million was inherited by the NPP administration and the balance, GH¢600.34 million (including interest accumulation) was accumulated during the period 2001 to 2008.

II. SERVICING OF THE DEBT (BONDS & DIRECT PAYMENTS)

In 2001, the NPP administration in an attempt to deal with the problem of the original stock of TOR net debt of GH¢201.5 million that it had inherited, issued bonds to pay off part of the debt. The initial stock of bonds issued amounted to GH¢97.94 million, of which GCB bought GH¢65.67 million and Standard Chartered Bank bought GH¢32.27 million. It is instructive to note that at the time these bonds were issued, Mr. Alex Mould, the current CEO of NPA was the chief negotiator for Standard Chartered Bank.

Again in 2002, government issued an additional stock of bonds amounting to GH¢142.1 million to retire part of the debt. This was sold to Ghana Commercial Bank.

Furthermore, in 2004, government issued additional stock of bonds amounting to GH¢46.89 million to retire part of the debt. This was sold to the Bank of Ghana.

Additionally, in lieu of issuing bonds to retire the debt, government made cash payments to TOR amounting to GH¢50.73 million. Thus by the end of 2004, government had made a total payment of GH¢337.66 million towards the retirement of the stock of debt at TOR resulting from under-recovery.

In addition to the issuance of bonds and cash payments, TOR management confirms in the reports that from 2003 to 2008, Government paid an amount of GH¢454.91 million from the debt recovery fund to TOR. This amount does not include payments that the NPA may have made to Bulk Importers. This means that between 1st January 2001 and 31st December 2008 the NPP government paid a total amount of at least GH¢792.57 million towards retiring the TOR debt (see Table 2) arising out of under-recovery.

What all this means is that from TOR’s own records:

1. The total stock of debt it inherited in 2001 as a result of under-recovery (subsidies) was GH¢201.5 million

2. Between 2001 and 2008 an additional stock of debt amounting to GH¢332.34 had accumulated, bringing the accumulated stock to GH¢533.84 million. If you include the interest accumulated over the years of GH¢268 million, then the total stock of TOR debt arising from under-recovery including the inherited debt and the accumulation between 2001and 2008 is GH¢801.84 million. (Table 1)

3. The total payments made towards retiring the total stock of accumulated debt between 2001 and 2008 amounts to GH¢792.57 million. (Table 2) The net effect is that as of 31st December, 2008 an amount of only GH¢9.27 million (table 3) was left to be paid to TOR towards the retirement of the entire debt caused by the government’s policy not to increase prices of petroleum products to reflect world market prices of crude oil over the period.

4. Out of the total payments made, an amount of GH¢454.91million was paid directly to TOR from the debt recovery fund and the balance was paid from bond proceeds and cash payments from GOG. Bonds were issued to Ghana Commercial Bank, Standard Chartered Bank and Bank of Ghana. It is instructive to note that the retirement of the bonds issued including interest due required the use of funds from the TOR Debt Recovery Fund, among others.

5. The estimated receivables from the TOR debt recovery levy as given by TOR to the transitional team is GH¢720.31 million. Out of this GH¢454.91 million was paid directly to TOR and the balance of GH¢265.4 million was used to retire part of the GH¢286.93 million bond held by Ghana Commercial Bank (GCB), Bank of Ghana (BOG), and Standard Chartered Bank. It is worth noting that all the bonds were scheduled to be fully retired as at April 2009. The retirement of the bond include interest payments on a half yearly basis, beginning in December 2001, till the bonds were fully retired, payable from the Debt Recovery Fund.

These are the facts on the TOR Debt as it relates to Ghana government’s unwillingness to increase prices of petroleum products from the period when TOR was set up till end 2008, as reflected in TOR’s reports provided to the Transition team on energy dated January 16th and 23rd respectively.
The Tables below provide further illumination about the profile of the TOR debt and how attempts to retire the debt fared.

TABLE 1: TOTAL GOVERNMENT INDUCED DEBT

Date of debt Amount GH¢ million

Prior to 2001 201.50

2001 - 2007 193.77

2008 138.57

Interest on debt 268

Total 801.84

TABLE 2: PAYMENT OF DEBT

Year Type of payment Amount GH¢ million

2001 Bond issued

(GCB) 65.67
2001 Bond issued
(Standard Charted Bank) 32.27
2002 Bond issued
(GCB) 142.10
2004 Bond issued
(BOG) 46.89
2004 Direct payment
(GOG) 50.73
End 2004 Sub total 337.66
2003 - 2008 Direct payment PDRL
(GOG)
454.91
Grand Total 792.57

• Note that Bonds were retired using part of the TOR Debt Recovery Fund.
TABLE 3: BALANCE OF GOVERNMENT INDUCED DEBT
AS OF 31ST DECEMBER, 2008


GH¢

Table Debt
801.84


Total Payments

792.57

Outstanding Balance
9.27


Ladies and Gentlemen while the NPP inherited a government induced debt of 201.50 million in 2001, the outstanding debt stock as at the end of December, 2008 due to under-recoveries was only GH¢9.27 million.

Ladies and Gentlemen, the information we have provided is up to December 31, 2008. These are the cold, hard, bare facts. The Government of the NDC in covering up their own ineptitude have often resorted to maligning the NPP administration and tended to blame their own inaction or very false step of theirs on the “crippling Tema Oil Refinery (TOR) debt” that the NPP left to them which has, according to them, led the country’s economy in a “hard and parlous state”. The figures we have provided certainly do not lend credence to the assertions of the NDC.

As mentioned earlier, the Deputy Minister for Finance, Mr. Fiifi Kwetey stated categorically that from the audited accounts of TOR “the TOR debt as of December 31, 2008 stood at GH¢1.448 billion. Coming from a deputy Minister of Finance and Economy Planning one would have no reason to doubt his assertion. But having had a look at the audited accounts as of December 31, 2008, one wonders whether the Deputy Minister in his answer to the host was being disingenuous, or simply could not read the audited accounts well enough or was bluntly lying. We don’t know which one he is guilty of but we will provide the facts so Ghanaians can decide for themselves.

A closer look at the audited accounts shows that as of December 31, 2008, TOR had assets amounting to GH¢918.24 million. The composition of these assts are (a) Property, plant and equipment GH¢290.53 million, (b) Investments GH¢0.34 million and (c) current assets amounting to GH¢727.40 million.
On the liability side TOR had liabilities amounting to GH¢1448.02 million. This comprise of (a) current liabilities of GH¢1443.2 million and (b) long-tem loan of GH¢44.74 million.

From the above data one can conclude that as of December 31, 2008, TOR’s net current liabilities or TOR’s total net debt from all sources including long-term debts used to acquire capital assets, exchange rate losses, and normal loans for commercial operations, among others amounted to GH¢715.88 million. If however account is taken of TOR’s property, plant and equipment and TOR’s long-term loans then TOR’s net debt would amount to GH¢469.76 million as reported by the audited accounts.

So Ladies and Gentlemen, when the President and his Deputy Minister of Finance and Economic Planning state categorically that TOR’s debt is GH¢1.448 million are they being economical with the truth? Or are they showing their lack of understanding of basic accounting principles? Surely a Professor of Tax Law and a former Commissioner of Taxes cannot in any way be said to be ignorant of basic accounting principles.

The NDC should now tell us what has happened at TOR between January 7, 2009 and now. What amount has been added to the TOR debt by their own commissions and omissions. What is the total cost to the nation in under-recoveries? What is the total cost to the nation in interest building on the debt stock they met and what has been added thereunto? What losses have accumulated at TOR by the resort to GNPC to purchase crude oil for refinery by TOR? Above all, the nation may have to be informed about the losses to the economy since January 2009 occasioned by the inability to supply crude oil to TOR for the long periods in 2009 in particular and early 2010 and the practice of importing refine petroleum products. Finally, the Public should be informed about what percentage of the 30% increase in petrol prices is attributed to the TOR debt.
Ladies and gentlemen, our elders have an adage: “if you cannot carry your load, you do not blame it on your headpad”. The NDC have shown demonstrably, that they cannot bear the administration of the nation and they and their apologists should cease blaming the previous administration. They should be told that a government is after all elected to solve problems and not to explain it. Into their third and penultimate year they cannot make any headway and they keep passing the buck. At this rate 2012 would meet President Mills unprepared for anything with little achievement and he will continue to tell Ghanaians that the supposed mess caused by the NPP is so huge that he needs additional four years to accomplish his task. Discerning Ghanaians know better than the packaged untruths that the NDC has since 2009 been warring.

Ladies and Gentlemen, once again we thank you very much for your response to our invitation.