–   US2.25Bn Energy Bond Saga

…In attempt to raise loan with ESLA Plc

Member of Parliament for Bolga Central, Isaac Adongo, has spoken the minds of many, calling the International Monetary Fund’s advice to the NPP government to add the US$2.5 billion ESLA-backed Energy Bond it wants to raise to Ghana’s public debt, a shoo.

In a write-up on the issue, he said the IMF had refused to allow the NPP government to use the Fund as a shady decoy in the attempt to borrow with the so-called ESLA Plc Special Purpose Vehicle because such an allowance would poison the credibility of the IMF.

“The desperate move by Government of Ghana to raise bonds, purportedly to defray the Energy Sector Debt is both very weird and revealing. A palpable false step is in the bizarre attempt to bait IMF to hang its credibility by requesting the lMF to approve the issuance of the Bond through what it calls a Special Purpose Vehicle (SPV).

“It is both strange and weird to do so because, any cursory financial analyst ought to have known that this is not tenable and the last “person” expected to make such a move is the head of Economic Management Team of Ghana (Dr. Bawumia).

“It therefore didn’t come as a surprise that government was emphatically denied that move because it simply amounted to affront to the credibility of IMF supervision to attempt to issue a bond through an ESLA PLC, which notably has only a name and a letter head. Nothing more,” Hon. Adongo had underscored.


According to Hon. Adongo, who has been a big thorn in the side of the NPP government in the matter of the Economy, the IMF’s rebuff was always going to happen because the ESLA PLC Special Purpose Vehicle that is being used to raise the bond is questionable.

ESLA PLC, as a borrower, he points out, has nothing of substantial value that it can borrow on beyond a letterhead and a name. ESLA PLC has no balance sheet whatsoever.


ESLA stands for: “Energy Sector Levy.” It is a levy backed by law.

The predecessor NDC government led by President John Mahama had instituted it to raise money to retire debilitating energy sector debts owed to local banks. As the purpose was to specifically retire the Energy Sector Loans, ESLA had been tailor made to fade out after all the sector Loans had been cleared.

The NPP, which was in opposition at the time, had condemned the NDC government for instituting the Levy, calling it a nuisance tax that it would scrap if it was voted into office. The NPP is in office now and it has refused to scrap ESLA.

As if a breakage of this campaign promise is not in bad faith enough, the same NPP government has actually re-calibrated ESLA into a Special Purpose Vehicle and is using it to borrow $2.5billion supposedly to retire the same Energy sector debts that ESLA had been instituted in the first place to raise money for.

Questionable borrower

But as a borrower, ESLA PLC has nothing beyond a name and a letterhead. The Economic Management Team of the NPP government, led by Vice President Dr. Mahamudu Bawumia, who in the very short period of 10 months has already borrowed enough to push Ghana’s debt to GDP ratio to 68%, then approached the IMF and asked it to approve the bond to be issued by ESLA PLC.

If the IMF had obliged, what the Fund would have done was a lending of its credibility to ESLA PLC, which has no balance sheet whatsoever, to enable the SPV to borrow from the money market in confidence of the IMF’s backing.

The Fund turned the government down diplomatically, rather advising it to risk its own credibility to do the borrowing and then add the debt to Ghana’s already distended public debt.

It is this diplomatic turndown by the IMF that Hon. Isaac Adongo is calling what it really is – a refusal to be a shady decoy for a strange move.

“It is completely baffling to see that Dr. Bawumia, the Finance Minister and his Harvard trained deputy do not know that such a bond will need not just a regular source of repayment but also a government/sovereign guarantee in the event that the proceeds do not flow.

“Rather remarkably, apart from the name ESLA PLC, and it’s letter head, this (SPV) has nothing of substantial value to back itself in any huge financial transaction. In simple terms, it has no Balance Sheet. Unless these bonds are preplanned to be issued to cronies who are assured because their partners are managing our finances.

“It will be great innovative economics to the see Yale and Harvard trained scholars attempt to use such a company for a multimillion dollar project,” Hon Adongo pointed out.


The MP also questioned why the NPP government would want to borrow in the name of ESLA PLC to pay Energy sector Loans when ESLA, which was instituted by the NDC for the purpose is already doing that.

He pointed out that Ghc11billion energy sector debt that the government wants to settle can be settled within four years with ESLA which is already yielding Ghc3.6 billion every year. Interestingly, the $2.5billion bond that the government wants to raise will saddle tax payers with a 10 year repayment burden  in spite of the fact that ESLA will raise Ghc36 billion within the same 10 year period.

“The options being contemplated will only shortchange the people of Ghana and perpetuate our suffering for 10 more years. A very simple arithmetic drawn from the aforementioned case will help Dr. Bawumia out: The GHC3.6 billion a year for 3 years will yield GHC10.8 billion from ESLA which will be just enough to pay the Principal sum of the $2.4 billion. By the 4th year, the figure will be about GHC14.4 billion, which is enough to clear the energy sector debt and all its accrued interest?

“We are again being told that there is another tranche of $1.3 bond to be floated. This is equally completely unnecessary.  That amount of money can be generated by ESLA in just 2 years. So why ignore this for a longer route which will still be paid by the taxpayer anyway.”

Excess money from ESLA

Hon. Adongo questioned what the NPP government intends to do with Ghc21.6billion that the ESLA will be raising for the government in the next six years if it is borrowing in the name of ESLA PLC to pay energy sector debts at the same time that ESLA is raising money for the same purpose.

The Bolga Central MP expressed suspicion that the ESLA PLC bond is an attempt to use the name of Ghana to raise a money that will be shared among cronies of the government while the Ghanaian tax payer is forced to repay later.

He pooh-poohed claims by government that the ESLA PLC bond is aimed to raise money to pay banks owed energy sector debts to prevent them from collapsing saying that the argument that such debts have become Non Performing Loans is a lie.


A Non Performing Loan is a loan that cannot be clawed back by a bank because the borrower has no way of repaying. Hon. Adongo dismissed the claim saying the NDC government had re structured such loans with ESLA which has since been yielding steadily to retire such loans.

“This argument from government is completely false, it is deceptive and totally misleading. The Energy Sector Debts ceased to be NPL when the NDC Government restructured these debt in 2015 with the participating banks. The NDC Government subsequently got Parliament to pass the Energy Sector Levy Act (ESLA) to provide regular streams of revenue to pay the debt. Dr. Bawumia and his economic management team should know this. If they were sleeping in opposition and cared to do more talking and propaganda than knowing the happenings within Government, now they are in office and have the books and the records. They have a responsibility to read and enlighten themselves.”

He pointed out that the Monetary Policy Committee (MPC) report in January 2017, reflecting the year ending 2016, indicated that, NPLs declined on the start of disbursement of ESLA proceeds to pay the Debts.

According to the report, NPLs declined from 19% in October 2016, to 18% in November 2016 and to 17% in December 2016.

The MP said these declines in NPLs even excluded $165million that had been paid to the banks in December 2016. These same ESLA payments have continued into 2017.

Hon. Isaac Adongo questioned the integrity of Vice President Bawumia and Finance Minister, Ken Ofori-Atta as economists when the two are calling restructured loans Non Performing Loans.

Cost of NPP incompetence

He said there were indeed some NPLs on the balance sheets of some banks which are even rising, but these NPLs are rising due to the incompetent management of the Economy by the NPP government, including refusal to pay contractors owed by government.

“It must be noted that, notwithstanding the ESLA payments to the banks, there still exist some NPLs in the books of Banks. In fact, recent reviews of the MPC show that the NPLs have only actually started rising. This rise is clearly on the account of Government poor policy judgment.

“Government’s decision not to pay or to postpone payments (for whatever reasons) to contractors and other service providers who took loans from banks, account for this problem. It is therefore clear that the NPLs in the banking sector today is not the Energy Sector Debts. Government must not be allowed to blame its incompetence on someone else. Dr Bawumia should be told to stop developing and launching fake mobile apps and focus on his core mandate.”

Contingent liability

Now that the IMF has left the NPP government marooned with its own incompetent decision to raise monies for loans that are already being serviced, Hon. Adongo pointed out that the opportunity cost in going ahead to raise the loan will be contingent liability to the tax payer.

What this means is that the NPP government will only saddle the poor Ghanaian tax payer with more debt to pay.

“To raise this bond requires verifiable assurances through a strong Balance Sheet of the sponsoring institution or a Sovereign Guarantee. But we all know that, sovereign guarantees are no longer fashionable.

“The energy sector companies don’t have a good balance sheet with these loans hanging on them. Making issuance in their name simply means a change of the names of loan creditors. This adds nothing to their balance sheet and financial credibility. As indicated earlier, ESLA PLC only has a name and a Letterhead as its assets. No Balance Sheet to back any transaction. So if it must transact, it has to do so on the strength of government guarantee. This attracts a contingent liability.”

Nuisance tax

Hon. Adongo warned prospective investors about the attempt by the NPP government to raise money with a tax and urged Ghanaian tax payers to rise and resist the move by the incompetent government to saddle them with more debt.

“I will like to inform investors and potential investors that, ESLA is a nuisance tax after Four (4) years. The public reserve the right to rise against the continuous existence of it, much for its concomitant hardship. A responsible government will respond by scrapping it. The investors will be left naked under such a situation with their helpless SPV. The choice of name of that special purpose vehicle (ESLA PLC) is very strange. NPP believed ESLA to be a Nuisance Tax. Isn’t it strange that, now this nuisance tax acronym has become the star company on road shows across the world to raise money for NPP in government?” Hon. Adongo sneered.

Terkper’s take

Meanwhile former Finance Minister, Seth Terkper, has urged the NPP government not to heed the advice of the IMF and saddle the public with the new debt.

Rather, he says the government should put the new debt on the balance sheet of the Volta River Authority (VRA).

He explained that the risk in ballooning public debt is real, “If we do not manage the levy well. However, the opportunity cost of not issuing the bond is higher, given the potential collapse of more banks under the weight of SOE debt, as happened with the Capital and UT banks.

“Our view is that, even if this multilateral view prevails, Ghana should keep-to-plan and not classify such bonds or loans as public debt in the Public Accounts sent to Parliament—provided we continue to take certain concrete steps under the new debt management policy. We understand that the IMF takes a public debt view for the 5th ECF Programme Review.”




Source: therepublicnewsonline.com

The Republic News Online

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