Ghana: Gh10bn Energy Bond Roadshow kicks off in London

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Ghana’s government has started a roadshow for the energy sector bond to be used to clear the energy sector debt.

The roadshow will be carried out in London and is the first of two to be conducted ahead of the issuing of the bond.

The bond is expected to be rollout in tranches with the first to raise 6 billion cedis; the equivalent of about 1.3 billion dollars.

The second roadshow will be carried out in Accra on the 23rd of this month.

Earlier, a Deputy Energy Minister in charge of Finance, Joseph Cudjoe explained that the decision to issue the bond in tranches is to attract the competitive price as possible.

“We are looking at raising 6 to 7 billion cedis at this stage because sometimes when it comes to raising funds, strategically if you go in with the huge amounts, investors can bargain for a higher yield. But if you control it and make it smaller, then many investors that show interest can accept very competitive rates.”

It is also understood that the government and the IMF have been deliberating on whether the bond be issued as a Sovereign one or not.

While the government plans to issue the bond on the books of power companies with strong financial statements, the IMF is urging that the bond is issued as a Sovereign one.

By this, it will be considered as an amount borrowed by the government of Ghana which will also be calculated as part of the country’s already ballooning debt.

It is unclear what the outcome of the deliberations with the IMF has been as the government is yet to officially make any comment on the issue.

But an Economist, Dr. Ebo Turkson at the University of Ghana, has advised the government not go in for a Sovereign bond issue, as this will impact adversely on the economy.

“These institutions in the energy sector should be made viable to be able to go and borrow on their own. Of course, they can get some government support for their borrowing so I am not in support for Sovereign bonds on behalf of institutions rather than have the institutions go and borrow themselves.”

“If the institutions do not devour and pay the money, then the government will have to pay, which will pile up on our debts … but if the institutions borrow based on their own balance sheet, it makes them more efficient and repay those debts,” he observed.

The energy bond when successful is expected to raise some 10 billion cedis which will be used to clear all outstanding debts in the energy sector.

Majority of the debt include monies owed commercial banks which have complained of the impact of the delay in the issuing of the bond, on their operations.

Standard Chartered Bank, Standard Chartered Bank Ghana Limited and Fidelity Bank Ghana limited have been selected as arrangers of a series of fixed-income investor meetings in London and Accra, commencing on October 19th, 2017.

Co-Managers on the mandate are Temple Investments and GCB Bank.

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