Energy sector welcomes payment of sector arrears: But urges gov’t to settle over US$1bn owed to generators

By Kizito CUDJOE & Sandra Agyeiwa OTOO

Government has reduced its energy sector debt burden after paying US$1.47billion in 2025 to clear legacy arrears and restore a key World Bank payment guarantee – but more than US$1.1billion remains outstanding to Independent Power Producers (IPPs), keeping fiscal risks elevated, industry officials say.

The payments, announced by Finance Minister Dr. Cassiel Ato Forson, were made within the first year of President John Dramani Mahama’s administration and targetted longstanding liabilities that had undermined investor confidence and strained public finances.

As of December 31, 2025, government had fully repaid US$597.15million, including interest drawn under the World Bank Partial Risk Guarantee (PRG); thus restoring the facility in full, the Finance Ministry said. The guarantee, established in 2015, has been critical in mobilising private investment into the country’s gas-to-power infrastructure.

In parallel, government cleared all outstanding gas invoices owed to ENI and Vitol between January and December 2025, with payments totalling about US$480million. The ministry says budgetary provisions have been secured to keep the country current on its obligations to the Sankofa gas partners.

Government has also reached agreements with Tullow Oil and Jubilee Field partners on a structured roadmap for gas payments, a move that has contributed to higher gas output and reduced reliance on more expensive liquid fuels for power generation.

As part of a broader energy sector reset, the Mahama administration renegotiated power purchase agreements with Independent Power Producers to improve value for money and address legacy payment backlogs. In 2025 alone, government paid about US$393million in arrears to IPPs.

Industry groups welcomed these payments but cautioned that the clean-up remains incomplete. The Independent Power Generators Ghana (IPGG) said settling part of the arrears had eased liquidity pressures and reduced the risk of supply disruptions, but warned that significant liabilities remain.

According to the Executive Director of IPGs Ghana, Elikplim Kwabla Apetorgbor, roughly           US$300million of IPP arrears was forgiven after the negotiations – bringing total outstanding obligations to about US$1.5billion. Of that amount, government has so far committed around US$400million… leaving approximately US$1.1billion still unpaid.

Policy analysts say the remaining balance will continue to pose a systemic risk unless structural weaknesses in the power sector are addressed.

The Africa Sustainable Energy Centre (ASEC) said clearance of legacy debts and restoration of the World Bank guarantee marks an important stabilisation milestone, but warned that underlying drivers of debt accumulation persist.

ASEC identified persistent revenue and commercial losses at the Electricity Company of Ghana (ECG) as a key contributor to recurring financial stress in the sector, calling for urgent reforms to strengthen revenue assurance.

The group urged accelerated deployment of smart metering and advanced revenue management systems, particularly for commercial and industrial customers which account for a disproportionate share of electricity consumption and revenue potential.

Analysts say without sustained improvements in ECG’s collections and payment discipline, the sector risks sliding back into arrears – potentially forcing higher tariffs or renewed government intervention, outcomes that could weigh on households, industry and the broader fiscal consolidation effort.

The Policy Lead for Petroleum and Conventional Energy at the Africa Centre for Energy Policy (ACEP), Kodzo Yoatse, said the payments are consistent with long-standing budget support to the sector which has averaged US$1 to US$1.2billion annually.

He cautioned that without sustained efficiency reforms, the fiscal burden will continue to divert resources from social spending.

The Executive Director-Centre for Environmental Management and Sustainable Energy, Benjamin Insiah, said the debt redemption positions the sector for modernisation and expansion, though moderate risks persist due to remaining distribution-level liabilities.

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