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Legacy Debt of the petroleum sector and the Power sector
I have been reading on ESLA and trying to make sense of the numbers so that we can all appreciate why we have to pay 10% of the price of petrol as a levy to pay for unpaid subsidies in the past (and maybe current subsidies)
I will be searching for official numbers of what was owed to BDCs (and for what) since the ring fencing end of 2016 to date
I also tried getting my head over the TOR debt amounts owed since the ring fencing in 2014
I have also tried getting my head around the amounts owed to the various players in the electricity (power) value chain, namely IPPs, VRA, GRIDCo and ECG;
I have come to a conclusion that legacy debt is a myth becos we just have debt;
the so called legacy debt is being commingled with new debt that has been generated since 2016 to date, as we speak.
We all know ESLA was set up to allow us to charge some levies – the energy Debt recovery levy and the price stabilisation levy – which would be paid into the ESLA accounts and will be used per specific protocols to pay down specific debts in the petroleum and power sectors
I will be doing some more digging as to how much was the known official ring fenced debt, when the ring fence cut-off date was , and how much new debt has been accumulated;
Also, I will try unravelling how much we have actually collected in the ESLA accounts since inception of ESLA in 2015, and the uses of these funds; I.e, how much was paid directly to the players ie BDC, TOR and power sector value chain players, and how much in bonds have been issued and what the approximate annual debt service of these bonds is, which will give us an idea of how many years we will be paying almost GHp50 for every litre of petrol and diesel we buy (GHp30 for LPG per kg)
I will also try and forecast how much money will be collected into ESLA and how much of the collections we intend using to meet the debt service of the bonds issued; and also when we would have cleared the official legacy debt from the balance sheets of the players in petroleum sector in BDCs and TOR, and players in the power sector
History of legacy Debts
Legacy Energy Debt is government debt.
From a risk perspective and from a government revenue and expenditure basis, as well as from a control of funds and ultimate beneficiary perspective , ESLA is Govt levy, and the Legacy debt that ESLA is to service is Govt debt – either directly, as to what govt pays from unpaid subsidies promised, or indirectly as an irresponsible shareholder who allowed mismanagement of the companies that have accrued this debt mainly from income losses due to inefficiencies (TOR and ECG) or excessive debt (and accrued interest) sitting on the books of the SOEs (indirect Govt debt) rather than on Govts books directly
The latter is and has always been a way of all governments, in the past and currently, mask their real debt from the likes of WB, IMF and other multilateral institutions AND GOVERNMENTS, which are all senior creditors of this country and who support govt through grants, soft loans, and other credit support for various programs and compacts
a. Legacy Debt as Validated by EY (GHS M)
ESLA 1 ESLA 2 Total
VRA 3,900 449 4,349
ECG 325.3 – 325.3
TOR 1,600 340 1,940
BDC 600 – 600
GRIDCo – – –
Total 6425.3. 789 7,214.3
Note : a GHS6B Bond issuance means GHS1,200M coupon payments a year
The Act imposed various levies on the price per litre (ppl) of petrol, diesel, MGO, fueloil, kerosene as well as on the ppkg and ppkwh of LPG and Electricity respectively. The levies were applied as follows:
i. EDRL – A levy of GH¢0.41/ppl was imposed on petrol and diesel, GH¢0.03/ppl on MGO, GH¢0.04/ppl on Fuel Oil and GH¢0.37/ppkg on LPG.
ii. Road Fund Levy – The ESLA applies a levy of GH¢0.40/ppl on petrol/diesel. Prior to the ESLA, the NPA’s Prescribed Petroleum Pricing Regulations, 2012 (PPPR) applied a rate of GH¢0.07/ppl of petrol and diesel.
The rate was increased under the ESLA to supplement funding from the budget in support of road maintenance.
iii. Energy Fund Levy – GH¢0.01/ppl was levied on petrol, diesel, kerosene and fuel oil to support the Energy Commission’s activities.
Prior to the establishment of the ESLA, a levy of GH¢0.0005 was applied under the PPPR.
iv. PSRL – A rate of GH¢0.12/ppl was imposed on petrol while GH¢0.10/ppl and GH¢0.10/ppkg were applied on diesel and LPG respectively.
The levy was imposed to provide buffer for under recoveries or subsidies to stabilize petroleum prices for the consumer.
v. PLL – A rate of 3.0% is applied on the ppkWh of electricity consumed. The rate was initially pegged at 5%/ppkWh.
This was however revised downwards to 3%/ppkWh in the amendment of the ESLA Act 946 to provide some relief to consumers.
vi. NESL – A rate of 2.0% is applied on the ppkWh of electricity consumed. The rate was initially pegged at 5%/ppkWh.
This was however revised downwards to 2%/ppkWh in the amendment of the ESLA Act 946 to provide some relief to consumers.
The total levies applied on the ppl/ppkg/ppkWh of products lifted under the ESLA is as follows:
i. A total of GH¢0.94 and GH¢0.92 is charged per litre of petrol and diesel respectively;
ii. GH¢0.03 is charged per litre of MGO;
iii. GH¢0.05 is charged per litre of Fuel Oil;
iv. GH¢0.47 is charged on the price per kilogram of LPG;
v. GH¢0.01 is charged per litre of kerosene; and
vi. a total levy of 5.0 percent which includes 2.0/3.0 percent NESL/PLL is charged on
the ppkWh of electricity consumed.
Sections three (3) to five (5) of the Act establishes three (3) accounts,
⁃ the Energy Debt Service Account (EDSA),
⁃ the Power Generation and Infrastructure Support Sub-Account (PGISsA), a sub-account of the EDSA,
⁃ and the Price Stabilisation and Recovery Account (PSRA).
The EDSA and PGISsA were established for the purposes of receiving EDRL collections. The PSRA was established on the other hand for receiving PSRL collections
In addition to the accounts established under the ESLA, the Minister for Finance, in line with Section 7 (b) of the ESLA, instructed the CAGD to open and operate the Energy Debt Recovery Levy Account (EDRLA) for the purposes of receiving and distributing EDRL collections into the EDSA and PGISsA.
The account was created to avoid the comingling of EDRL collections with other funds that were collected into the Petroleum Collection Account (PCA) at the Bank of Ghana.
Per the Act, an amount of GH¢0.12/ppl of petrol, GH¢0.10/ppl of diesel and GH¢0.10/ppkg of LPG is to be collected and transferred into the PSRA to be used as buffer for under recoveries or subsidies to stabilize petroleum prices for the consumer.
Section 3 (2) of the Act requires levies collected and lodged into the EDSA to be utilised on:
a) the debt recovery of the Tema Oil Refinery (TOR); and
b) the payment of downstream petroleum sector foreign exchange under recoveries.
Section 4 (3) of the Act requires that the Power Generation and Infrastructure Support Sub-Account shall be used for the following purposes:
a) to support the payment of power utility debt;
b) to ensure power supply sustainability to achieve a secure, reliable and quality
c) for power generation and infrastructure support recoveries; and
d) to support power infrastructure risk mitigation including partial risk guarantees.
The EDRL was created to avoid the comingling of ESLA funds with other petroleum related levies in the Petroleum Collection Account. Consequently, EDRL collections are paid into the EDRLA and subsequently distributed into the EDSA and PGISsA
Section 5 (2) of the Act requires that the Price Stabilisation and Recovery Levy shall be used as follows:
a) as buffer for under recoveries in the petroleum sector; b) to stabilise petroleum prices for consumers; and
c) to subsidise premix and residual fuel oil.
As part of the Government’s plan to refinance Energy Sector Debts, E.S.L.A. Plc was incorporated in September 2017 as an independent special purpose vehicle to, among others, issue debt securities for the purpose of refinancing the Energy Sector Debt.
Below is the funds projected and actually received from the two main Levies
Prog. Coll. Act
EDRL. 1,364 1,472
PSRL. 402 143
Prog. Coll. Act
EDRL 1,358 1,356
PSRL. 415 345
*Utilization of Levies * 1,667.6M
Amount transferred to ESLA PLC in 2018
Premix and RFP subsidy is 245.45M
Debt service 297.2
Road maintenance 324.9
Total Devt service for 2018 was 1,043.3M
Total Bonds Issued are
7Y Nov17. 2,308.6
10Y Nov17. 2,375.3m
10Y Jan18. 615.95
10Y Aug18. 264.8