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Business News of Monday, 10 August 2020

Source: Business 24

Rising debts to GRIDCo could risk power stability

The Institute of Energy Security (IES), a think tank, has cautioned that the country’s power stability may be affected if the companies that owe the Ghana Grid Company (GRIDCo) do not repay their debts soon.

The institute said aside from the Electricity Company of Ghana (ECG), the indebtedness of the Northern Electricity Distribution Company (NEDCo), the Volta Aluminum Company (VALCO) and some mining companies to GRIDCo has contributed to the financial woes of the power transmission company.

“The debts owed by these companies to GRIDCo is rising to unprecedented levels and may likely render GRIDCo incapable of executing its critical projects that would make the national transmission system robust and improve the reliability of power supply,” the energy think tank told Business24.

According to IES, ECG’s debt to GRIDCo has increased by 31 percent to GH¢1.11bn in June 2020 from GH¢850.99m at the end of 2019. NEDCo’s indebtedness increased from GH¢227.33m to GH¢270.47m over the same period, while VALCO’s went up from US$33.92m to US$35.36m.

The IES said the situation could negatively influence the day-to-day operations of GRIDCo and could stall the many key projects being undertaken by the company to improve its operations and efficiency.

The debts may also make it difficult for the power transmitter to meet its financial obligations to financiers, contractors, suppliers, and service providers.

“For three consecutive years, GRIDCo has been recording losses, with a net loss of GH¢114.3m in 2019. Even in 2015, when GRIDCo produced good financial results, with total revenue of GH¢472.35m and net profit of GH¢44.80m, most of the profit recorded was in debt,” the think tank said.

“The current happenings thus clearly indicate that the year 2020 may experience another round of losses for state power utilities,” it added.

Remedial actions

The IES said the toughest leadership test is approaching, where government and its allied institutions in the power sector would have to show how they intend to bring back power utilities into cost-effective and profitable ways.

“Most critically, government must proffer new ways in which to recover revenues owed GRIDCo from institutions, whether private or state, and from the Energy Sector Levies Act (ESLA) Fund,” the IES said.

According to the think tank, ECG must deal with the high commercial and technical losses in its system and must commit to clearing all the debt owed GRIDCo, to guarantee reliable power supply to its distribution network.

It said GRIDCo must also consider cutting back on some expenses, including capital expenditure, and focus on things that are necessary to produce a robust transmission system to manage the current challenges.

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