Monday, 15 January 2018

Govt begins implementing Cash Waterfall Mechanism

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By Elorm Desewu

The President Akufo Addo led administration has begun implementing the Cash Waterfall Mechanism (CWM) aimed at ensuring all active players in the power sector value chain benefit proportionately from revenues collected by ECG and VRA from its deregulated market, including foreign sales in a transparent manner.

Cabinet has already approved the CWM and the process for its implementation has commenced under a joint team from the Ministries of Finance and Energy. Accordingly, guidelines are being developed to ensure effective implementation of the CWM.

The objectives of these guidelines include, developing an equitable mechanism for allocating and paying collected revenue to all utility service providers and fuel suppliers.

The government believes effective execution of the CWM will address the energy sector SOE debt, improve efficiency and strengthen the financial position of the SOEs. This will enable SOEs to secure sustainable working capital to finance their operations and enable the creation of a more financially robust, efficient and reliable power utility sector.

Consultations are currently ongoing with the various stakeholder institutions to amend portions of the ESLA to allow a more effective mechanism for collecting, utilisation and reporting on the levies.

Almost two-years into the implementation of ESLA, it has contributed significantly to paying down VRA and TORs debt due banks and trade creditors to the tune of GH¢1,861.17 million as at September 2017.

This figure comprises of GH¢1,508.69 million and GH¢352.48 million paid to VRA’s and TOR’s creditor banks and trade creditors respectively. Additionally, GH¢484.29 million has been transferred to partially settle foreign exchange under-recoveries owed the Bulk Oil Distribution Companies, support the Strategic Stock Reserve programme of Government, and subsidize premix and residual fuel oil.

 In 2017, a total of ¢934.09 million was transferred to partially settle the debts of energy sector SOEs. These include an amount of GH¢165.43 million in respect of the debt recovery of TOR, GH¢47.0 million for the payment of downstream foreign exchange under-recoveries, and GH¢721.66 million for the payment of power utility debts. In addition, GH¢701.83 million and GH¢18.26 million were transferred to the Road Fund and Energy Fund respectively to support road maintenance and the activities of the Energy Commission.