ESLA proceeds reached GHS962.02 million in Q1 2022, rising 29.08 percent year-on-year fueled by the jump in prices of petroleum products over the period, according to a recent BoG Monetary Policy Report.

While this represents huge funds flowing into ESLA PLC for the purposes of settling energy sector debts, this falls short of the projected funds of GHS1,084.47 million in Q1 2022, reflecting a decline of 11.31 per cent.

The energy sector debt has remained on the high side, threatening to rise to GHS12.5 billion by 2023, according to analysts. Indeed, the contribution of the country’s energy sector debts to its debt vulnerabilities cannot be overlooked, and the World Bank and other Ratings Agencies have cited this problem.

Historically, ESLA PLC, the energy sector Levy Act special purpose vehicle had received an average of GHS1.8 billion between 2017 and 2021 since its establishment. Within the same period, ESLA PLC received about GHS 7.4 billion as disbursement from the energy sector levies.

Spending of ESLA Receipts

Regards spending, ESLA PLC has spent about GHS 5.7 billion cumulatively, representing about 77 per cent of total collections in making coupon payments to bondholders.

Despite the relatively scanty receipts from the energy sector levies as highlighted over the last five years, ESLA PLC’s operations have also shrunk the possibility of using all amounts obtained for the payment of outstanding debts.

“The ESLA PLC has introduced significant administrative and bond issuance costs, which are drawn from the disbursements from EDRL”, according to the Africa Centre for Energy Policy (ACEP). Between 2017 and 2021, bond issue costs and administrative expenses amounted to about GHS 208 million.

“It is essential to highlight that ESLA was never a silver bullet to address the legacy debts even at its establishment. As of the end of 2016, the energy sector debt was about GHS 10 billion with a renegotiated interest rate of 22 per cent on the cedi values and 8.5% on the dollar values.”
ACEP

Outlook for ESLA Receipts

The medium-term outlook suggests 12.0 percent growth of the levies from 2021-2024. Based on government’s projections, the ESLA levies are expected to rise from GHS5.28 billion in 2021 to GHS7.43 billion in 2024. However, with the 2021 ESLA receipts falling short this amount by more than GHS2 billion raises concerns over the sustainability of debt repayment.

Given this worrying trend, this means that the government’s 12 per cent increase per annum projection for the ESLA proceeds for the periods to 2024 could fall short this year and perhaps in the subsequent years compared with the rate of growth in accumulated debts in the sector.

It must be acknowledged that the government has laid out a number of actions to manage the growth in energy sector debts including embarking on renegotiating tariffs of all Power Purchase Agreements (PPAs) to minimize the average cost of power generation, the use of the cash waterfall mechanism, among other actions.

It is expected that the growth in the ESLA proceeds will contribute to the reduction in the financing challenges facing the energy sector, but so must there be a drastic decline in the accumulation of debts going forward.