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Weekly Insights – Ghana – 16/06/2017 – Nimed Capital Limited

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Energy Sector Bond Issued: Tenor Reviewed From 15-Year To 10-Year

Government of Ghana finally advances on the issuance of the energy sector bond to clear the $2.4 billion debt owed, that has put pressure on State Owned Enterprises (SoEs), private companies who owe banks and energy suppliers. The bond seeks to raise $2.5 billion dollars (GHC 10 billion) using an exchange rate of 4 Cedis to 1 USD

The initial tenor of the bond was 15 years, but currently has been reviewed downwards to 10 years to retire the legacy debt in the energy sector. The 10-year energy bond will be led by joint managers Fidelity Bank and Standard Chartered Bank. The Lead Managers on behalf of Government shall set up a Special Purpose Vehicle (ESLA-SPV) to issue the long-term bond or 10-year Energy Bond on the back of ESLA receivables assigned to the SPV, which shall be listed on the Ghana Stock Exchange (GSE).

The ESLA SPV is expected to issue the bond to the tune of about GHC10 billion, with fractions of the bond proceeds being used to refinance previously restructured debt due Banks that are currently being repaid, with an initial payment of 250 million Cedis made to banks.

Impact on Private Sector

Debts owed by government is cited as a major threat to the energy sector growth. The provision of the bond will strengthen the balance sheets of the affected companies and position them as an eligible company for investments. In general, it would improve liquidity positions of Bulk Distribution Companies (BDCs) and banks.

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