Ghana to use US$1 billion to restructure power deals

Ghana plans to use as much as $1 billion of the Eurobonds it sold last week to help restructure the country’s obligations to independent power producers, said Finance Minister Ken Ofori-Atta.

The West African country is in talks to re-negotiate supply deals with the power companies known as IPPs. The currently take-or-pay agreements mean the government is billed even for unused electricity.

“We are going to put about $1 billion aside from the proceeds of the Eurobond to look at how we resolve those IPP issues,” Ofori-Atta said in a broadcast on Joy FM. “We are in the middle of negotiating this take-or-pay which is just egregious to the country and we came out boldly to say that we are not going to continue with this type of unbalanced contracts for our country anymore.”

Ghana sold sub-Saharan Africa’s longest-ever Eurobond as part of a $3 billion deal that was almost five times oversubscribed last week. With power capacity that’s almost double the country’s peak demand needs, Ghana’s electricity utility has to pay independent producers about $450 million every year for energy that it doesn’t consume.

Ghana will spend another $1 billion of the Eurobond proceeds to retire more expensive debts to reduce interest costs, while the rest will go toward infrastructure projects, Ofori-Atta said.