CERPA Urges Gov’t to Consider Converting Part of Energy Sector Debt into Equity for IPPs

As Ghana seeks sustainable solutions to its ballooning energy sector debt, policy think tank, the Centre for Economic Research and Policy Analysis (CERPA), is proposing a bold and transformative move to the government to convert portions of the debt owed to Independent Power Producers (IPPs) into equity stakes.

CERPA believes the huge debt owed by key state-owned utility companies like the Electricity Company of Ghana (ECG), Volta River Authority (VRA), and Northern Electricity Distribution Company (NEDCo) could be converted into equities to ease the debt burden on the government.

The recommendation is part of CERPA’s latest policy brief, “The GH¢1 Question: Is Ghana’s New Fuel Levy a Sustainable Path to Energy Sector Reform?”, which analyses the recently introduced GH¢1 per litre energy sector levy and explores long-term solutions to the sector’s financial woes.

CERPA argues that 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.

With the coming on board of the IPPs with different skills, expertise, direction, and commitment, CERPA believes this could lead to a turnaround of the state entities.

The move, if adopted, would mark a shift in how the government engages with private power producers, transforming them from creditors into strategic partners. CERPA says it could create a new model for accountability, operational discipline, and investment in the struggling energy sector.

“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,” the economic research and policy analysis think tank recommended.

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

Ghana’s energy sector legacy debt to IPPs has been a major source of pressure on the public purse and is cited as one of the drivers behind the controversial GH¢1 fuel levy.

The government estimates the total legacy debt to be hovering around $3.1 billion which needs about $3.7 billion to clear.

Although the levy has generated a heated debate in the country, the IMF and government officials have defended the levy as essential to stabilizing the sector and restoring macroeconomic balance.

CERPA’s recommendation adds a fresh perspective to the conversation, calling for structural reforms beyond taxation. It emphasizes that clearing the energy sector’s financial overhang requires not just more money, but better governance, transparency, and innovation in policy thinking.

The equity stake model, if adopted, could pave the way for more sustainable partnerships between government and the private sector, while gradually relieving consumers of the burden of rising fuel costs meant to plug sector deficits.

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