M a r k e t N e w s
Ghana government backtracks on power utility privatization
Posted on : Sunday , 21st December 2014
Ghana has admitted that it is privatizing the country's power utility as part of conditions to access foreign funding, barely six months after it dismissed reports about the move.
The government is holding a series of stakeholder meetings to consider concession or partial privatization of the Electricity Company of Ghana (ECG).
"Government is considering concession or partial privatization of power utility, Electricity Company of Ghana," Frank Ocran, Stakeholders Consultation Committee on Energy chairman said.
The Energy ministry had in July denied reports that the ECG would be privatized as part of conditions attached to the second Millennium Challenge Compact (MCC).
But in a dramatic turn of events, the government this week began soliciting views on its options towards the privatization of the power utility by the middle of next year.
The move follows Ghana's qualification to receive $500 million under compact two of the MCC to help turn the energy sector around.
ECG is riddled with inefficiencies, inflicting damages on companies and household electronic appliances.
Ocran said the challenges facing the energy sector were enormous and the government could no longer inject capital into ECG.
The government says the company has not yet been sold to any private entity.
"We have not signed a contract yet, we are soliciting views to take a decision and there will be international competitive bidding," said top official in the Power Distribution division, Sulemana Abubakari.
Officials also said the company's assets would still be state owned under the arrangement when the deal is concluded.
Ghana reportedly loses between two to five per cent of its Gross Domestic Product annually as a result of lost economic output due to insufficient and unreliable power supply.
ECG has been suffering from both operational and net income losses, and is not in a position to fund its much-needed capital investment programme of GH₵10.8 billion over the next 25 years, according to Ocran.
This represents an annual average of over GH₵400 million in real terms, he added.
Meanwhile, an International Finance Corporation report has indicated that the ECG losses about $350 million in revenue every year.
On aggregate, technical, commercial and collection losses were around 35 percent, implying an annual revenue loss of $350 million, it said, adding each percentage loss is estimated at $1 million.
"This implies additional revenue of around $175 million would have been available if the company's losses were halved," said Ocran.
Source : theafricareport.com
