Banks to be repaid from $2.4bn energy bond by end of August

Business News of Friday, 4 August 2017



State owned power producer, the Volta River Authority owed the banks to the tune of $782m

Banks that are exposed to the energy sector debt should be receiving their due from the proceeds of the bond by the middle of this month [August].

It will follow the issuance of the 15-year energy bond to clear the 2.4 billion dollar debt, barring any last minute changes.

According to the Managing Director of Cal Bank, Mr. Frank Adu Junior, the move should correct the balance sheets of banks that are exposed to the debt.

This he also believes will restore confidence in the banking sector that has been hugely affected by the legacy debt.

“Financial closing is mid-August so I would assume that by that time the funds will be available for distribution. This will help by cleaning up Cal Bank’s BDC debt.”

Although Cal Bank is part of banks owed the amount, Mr. Adu insists that adequate mechanisms have been instituted to reduce shocks.

“This is not killing the bank because we took our provisions after the financial sector review and our capital adequacy ratio is still 19 percent so we are very well capitalized and we have provisioned for the BDC exposure,” he added.

As at the end of 2016, available documents to Citi Business News stated that the net debt to banks and fuel suppliers amounted to 1.3 billion dollars.

A further breakdown also showed that the banks are owed 782 million dollars, while fuel suppliers are owed 440 million dollars.

State owned power producer, the Volta River Authority (VRA) owed the banks to the tune of 782 million dollars.

VRA also contributed 278 million dollars to the 440 million dollars owed fuel suppliers, while TOR contributed 162 million dollars.

Finance Ministry selects transaction advisors

The Finance Ministry in June selected Fidelity Bank and Standard Chartered Bank as lead managers for the bond issuance.

As part of their duties, the banks are expected to work closely with members of their respective syndicates/consortia and any other local banks/ financial institutions as Co-managers with the view to building capacity locally and facilitating knowledge transfer.

“The Lead Joint Managers on behalf of Government (the “Sponsor”) shall set up a Special Purpose Vehicle (ESLA-SPV) to issue a long-term bonds (The “Energy Bond” or the “Bond”) on the back of ESLA receivables assigned to the SPV, which shall be listed on the Ghana Stock Exchange (GSE),” a statement by the Finance Ministry said.

Economist cautions of appropriate timing of bond

Economist, Professor Godfred Bokpin has told Citi Business News the seeming delay in the issuance of the energy bonds may be deliberate to attract more buyers.

According to Professor Bokpin, the country will suffer more should the bond fail to yield the needed amount hence the need for government to get its timing right.

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