CERPA proposes equity swap to ease Ghana’s energy sector debt

The Centre for Economic Research and Policy Analysis (CERPA) is urging the government to consider converting a portion of the country’s mounting energy sector debt into equity stakes for Independent Power Producers (IPPs), in a bid to ensure long-term sustainability and relieve pressure on the public purse.

According to CERPA, the substantial legacy debt owed to IPPs by state-owned utilities, such as the Electricity Company of Ghana (ECG), the Volta River Authority (VRA), and the Northern Electricity Distribution Company (NEDCo)—can be partly resolved by offering IPPs shares in these entities in lieu of cash payments.

The proposal forms part of CERPA’s latest policy brief, “The GHS1 Question: Is Ghana’s New Fuel Levy a Sustainable Path to Energy Sector Reform?”, which assesses the recently introduced GHS1-per-litre Energy Sector Recovery Levy and provides alternative recommendations to tackle the sector’s structural and financial challenges.

“The government could consider converting portions of the legacy debt owed to Independent Power Producers (IPPs) into equity stakes in state-owned utilities like ECG, VRA, and NEDCo,” CERPA recommended in the brief.

“This would grant IPPs a role in governance and management, potentially improving operational efficiency and ensuring long-term viability,” it added.

Ghana’s energy sector has long grappled with financial inefficiencies and ballooning debt, with the government estimating legacy obligations to IPPs at around 3USD.1 billion—requiring approximately $3.7 billion to fully clear.

CERPA argues that transforming IPPs from passive creditors into equity stakeholders could enhance transparency, promote operational discipline, and inject private sector innovation into the management of public utilities. The think tank believes such a move could help turn around the fortunes of Ghana’s struggling energy institutions.

The recommendation comes at a time of national debate over the GHS1 Energy Sector Levy on petroleum products. Government and the International Monetary Fund (IMF) have both defended the levy as necessary for sector recovery and broader macroeconomic stability.

While acknowledging the fiscal need, CERPA maintains that structural reforms, such as the proposed equity model, are vital for addressing the root causes of inefficiency and debt accumulation within the energy sector.

“Offering equity in lieu of cash payments could ease the government’s burden and also offer the IPPs the opportunity to play direct roles in these troubled state-owned entities,” the brief noted.

With the inclusion of IPPs in governance, CERPA suggests the sector could benefit from “different skills, expertise, direction, and commitment” to drive reform.

The think tank’s proposal is likely to generate further discourse among policymakers, sector stakeholders, and the public, as Ghana navigates its way toward a more stable and efficient energy future.

Meanwhile, the implementation of the controversial GHS1 levy, central to CERPA’s brief, has been suspended indefinitely. The levy, which was scheduled to take effect on Monday, June 16, 2025, was postponed following widespread opposition from transport unions, civil society organizations, and the general public. The Ministry of Energy said the suspension follows further consultations with stakeholders, and a new effective date will be communicated later.