A road show to present the much-awaited energy bond to investors is expected to start on Monday, October 16, through to October 19, in New York, Boston, and in London, to raise about GH¢6billion as first tranche.
“Presumably, a week after the road show we would expect settlement of the proceeds from sale of the bond. So, give and take, by end of this month we would expect the bond issue,” Deputy Energy Minister in charge of Finance and Infrastructure, Joseph Cudjoe, told the B&FT.
The issuance of a second tranche, he said, will depend on how well the first goes.
Government is hoping to use the fifteen-year bond to settle an estimated GH¢10billion debt that entangles energy sector agencies, including the Volta River Authority and the Electricity Company of Ghana.
The Energy Sector Levies slapped on petroleum products are expected to be used to offset the bond.
“The proceeds are to be used to settle the energy sector’s indebtedness – from the IPPs through to the VRA and all the major players,” Joseph Cudjoe said.
“The impact will definitely be bringing liquidity to the sector, and it will also provide the floor to look at the long-term solvency or cash needs of sector players,” he added.
As at the end of 2016, the net debt to banks and fuel suppliers amounted to US$1.3billion. State-owned power producer Volta River Authority (VRA) alone owed the banks about US$782million.
In June, government announced Fidelity and StanChart as lead arrangers of the bond. They are expected to work closely with members of their respective syndicates/consortia and any other local banks/ financial institutions as co-managers, with a view to building capacity locally and facilitating knowledge transfer, according to the Finance Ministry.
The bond, the ministry indicates, is “to resolve the challenges of the energy sector, improve our country risk and debt sustainability outlook, as well as deepen our domestic capital market and promote broader economic growth and development”.
Bankers – who have been badly exposed to the lingering debt – have been eagerly awaiting issuance of the bond. Aside from shrinking the portfolio of bad debt in the banking sector, bankers also believe the bond could press lending rates which have persistently remained high despite a fall in several economic indicators, even if marginally.
“Once the BDCs and energy sector debts are all resolved, it will go into reducing NPLs and subsequently cost of credit. Given more time and space, we will see reductions in lending rates,” Ecobank Ghana’s Chief Finance Officer, Edward Botchway, told the B&FT in August.
“The ESLA SPV is expected to issue bond(s) to the tune of about GH¢108billion, being the total estimated legacy debt within the energy sector. A portion of the bond proceeds will also be used to refinance previously restructured debt due banks that are currently being repaid with ESLA receivables, as well as the BDC debt due the banks,” the Finance Ministry said in a press release in June.