VRA turns to private capital to bridge power gap

Power producer, the Volta River Authority (VRA), is seeking more long- term private capital, of up to 12 years, to increase its generating capacity.

Kirk Koffi, Chief Executive of the Authority, said: "going into the future, we are supposed to go into the market to raise capital to see how best we can enhance our operations.

“We need to go to the market to raise more facilities like this to add on the needed capacity in the country. Medium term ones of between five to seven years and we are also looking at other facilities of up to 12 years.

His comments follow the signing of a US$150million facility agreement with the African Export Import Bank ( Afreximbank), arranged by C- Nergy Ghana Limited, a subsidiary of C-Nergy Global Holdings (Pty) Limited, a South African- based investment advisory services firm.

The US$150million facility constitutes the first tranche of a total balance sheet restricting requirement of US$450million.

Electricity demand has been growing by 10 percent year-on-year for the past couple of years. However, power producers are unable to keep up with the domestic- consumption led growth in demand given the huge capital required to bring on-stream more thermal generation.

Government has also been unable to commit the needed resources to expand generation given its limited budget.

The power situation this year, is also compounded by the lack of inflow into the Akosombo and Bui dams. The situation has forced the Authority to shut down two of the six turbines at the Akosombo Generating Station in order to maintain the integrity of the dam.

The lack of enough generation in the system has prompted an electricity load- shedding, much to the disdain of industrial consumers.

Thermal generation has also been an expensive venture over the years in respect of the huge sums of money required to purchase crude. VRA at times has had to fall on Fidelity Bank for loans to purchase crude oil for thermal generation.

The start of gas processing in the Western Region is expected to help bridge the shortfall in hydro generation but not necessarily to correct the deficit in the power generation.

The 2015 budget approved by Parliament, grants utilities the concession to go to the capital market, on the strength of its own balance sheet, to raise capital for their operations and various expansion projects.

Mr. Koffi acknowledges that as "lower middle income country, we cannot get the soft loans we used to get to expand our operations, so we need to look at facilities like what we have signed with Afreximbank."

Michael Cobblah, a Director of C-Nergy Ghana Limited, said the facility is not an additional loan that VRA is taking on, but rather replacing their short term commitments with medium term funds to give room for the Authority to operate.

C- Nergy expects to close the additional US$ 300 million before the end of the year to cater for a substantial part of VRA's balance sheet restructuring.

On completion, VRA's working capital position will improve significantly, a pre-requisite for going into the capital market--to support other measures being pursued to improve the efficiency of power generation and supply in Ghana.