The Ghana National Gas Company Limited (GNGLC) is facing a debt crisis, primarily due to the inability of the Volta River Authority (VRA) to meet its debt service obligations.
As of June 30, 2024, GNGLC’s debt to the Ghana National Petroleum Corporation (GNPC) soured above $626 million, a significant jump from an excess of $559 million in the same period last year.
This represents a concerning 12.1 % growth in debt, much higher than the 7.4% recorded in the first half of 2023.
The increase as highlighted in a Public Interest Accountability Committee (PIAC) report for the first half of 2024 is attributed to VRA’s ongoing financial challenges, which have hampered its ability to pay for the gas supplied by GNGLC.
The volume of raw gas received by GNGLC from GNPC also saw a slight decline, falling to 22,158,283.5 MMBtu in the first half of 2024 from 22,730,386.70 MMBtu in the corresponding period of 2023.
The invoiced value of gas supplied in the first half of 2024 was $144 million compared to an excess of $9. 3 million in the same period last year,
GNGLC only received a credit note of $121 million.
This leaves an outstanding debt of $22 million for the period, which, when added to the opening balance of $604 million, culminates in the total debt stock of $626 million.
The report emphasized the severe implications of this escalating debt for the operational viability of both GNGLC and VRA.
It also raises concerns about potential violations of the Petroleum Holding Funds (PHF) statutory architecture, as proceeds from natural gas sales are a crucial source of revenue for the fund.
Adding to the financial strain, payments received by GNGLC through the Cash Waterfall Mechanism (CWM) have also fallen short.
Cumulative payments through the CWM reached $10 million by the end of June 2024, covering invoices from November 2023 to April 2024.
This is significantly lower than the $18.2 million received in the same period in 2023, further exacerbating GNGLC’s financial woes and contributing to the increased debt exposure.
PIAC noted that the situation demands urgent attention from stakeholders to ensure the long-term financial stability of these critical players in Ghana’s energy sector.
It said resolving VRA’s financial difficulties and improving the efficiency of the CWM are crucial steps towards mitigating the current crisis and preventing further escalation of GNGLC’s debt.
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