The Electricity Company of Ghana (ECG) has revealed a staggering loss of GH¢10.21 billion for the fiscal year 2022, a significant leap from the GH¢1.91 billion loss recorded in 2021.
This 433% surge in losses is primarily attributed to exchange rate losses due to the cedi’s depreciation and increased power distribution costs.
The financial downturn coincides with widespread consumer dissatisfaction over intermittent power supply, which has led to extended periods of darkness and significant disruptions to daily activities. These operational challenges and their impact on consumers were detailed in the latest Auditor General’s Report on public boards, corporations, and other statutory institutions.
Despite the reported losses, ECG experienced a 24.1% increase in income, rising from GH¢12.10 billion in 2021 to GH¢15.03 billion in 2022. This growth was largely driven by increased internally generated funds and government grants, the latter being payments made to power producers on behalf of ECG.
However, ECG’s total expenditure surged by 80%, reaching GH¢25.23 billion in 2022 compared to GH¢14.02 billion in the previous year. This increase was mainly due to higher direct costs associated with power purchase and transmission, coupled with significant foreign exchange losses.
ECG’s financial statements revealed notable changes in assets and liabilities. Non-current assets increased by 45.6% to GH¢32.71 billion in 2022 from GH¢22.46 billion in 2021, driven by revaluation and additional procurement of property, plant, and equipment. Current assets grew by 23.1%, rising to GH¢10.14 billion in 2022 from GH¢8.24 billion in 2021, primarily due to an increase in trade and other receivables.
Additionally, total liabilities of the company swelled by 66.3%, reaching GH¢29.43 billion in 2022 from GH¢17.69 billion in 2021, largely due to an increase in trade and other payables. Non-current liabilities also rose by 16.4%, totaling GH¢6.37 billion in 2022.
Deteriorating Financial Ratios
The Auditor General’s Report highlighted a decline in ECG’s current ratio to 0.3:1 in 2022 from 0.5:1 in 2021, indicating the company’s continued struggle to meet short-term financial obligations. This deteriorating financial health underscores the pressing need for strategic interventions to stabilize ECG’s finances and enhance its service delivery.
The Auditor General’s Report emphasized the importance of ECG adhering to Section 52 of the Public Financial Management Act, 2016 (Act 921), which mandates the establishment of proper control systems for asset management to prevent theft, loss, wastage, and misuse. Given the severe financial losses and operational challenges, there is a critical need for ECG to implement effective measures to safeguard its assets and improve financial management practices.
The alarming financial performance of ECG in 2022 calls for urgent and strategic interventions. Key areas of focus should include implementing robust currency risk management strategies to mitigate the impact of exchange rate fluctuations on the company’s finances. Identifying and eliminating inefficiencies in the power distribution process can help reduce operational costs, while enhancing asset management practices can prevent losses and wastage as mandated by the Public Financial Management Act.
Exploring innovative ways to increase revenue, such as investing in advanced metering infrastructure, can reduce losses from non-technical sources. Strengthening collaboration with key stakeholders, including the government, regulatory bodies, and consumers, is essential to address the systemic issues affecting power supply and financial stability.
While the increase in income provides a silver lining, the escalating expenditures and deteriorating financial ratios underscore the need for immediate and strategic actions to stabilize ECG’s financial health and enhance service delivery.
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