GHANA – The Government of Ghana has signed a Memorandum of Understanding (MoU) with the African Trade Insurance Agency (ATI) for the rollout of the Regional Liquidity Support Facility (RLSF) within the country.
RLSF, a joint initiative of ATI, the KfW Development Bank and the Norwegian Agency for Development Cooperation (Norad), is a financial product that is designed to address the short-term liquidity risks faced by small and medium-sized Independent Power Producers (IPPs) that sell electricity to state-owned power utilities – improving bankability and helping such projects reach financial close.
The signing of the MoU has come at an opportune time when the demand for energy in Ghana is increasing by 10% per year, coupled with the country’s focus on expanding the contribution of renewable energy sources towards the country’s energy mix.
Thanks to the MoU, IPPs in Ghana will benefit from RLSF which was not only created to help tackle climate change and attract investments by supporting renewable energy projects in ATI’s member countries but also to protect the IPPs against the risk of delayed payments by public off-takers.
Ghana has one of Africa’s highest rates of access to electricity at 86.63 per cent with 74 per cent of rural residents and 95 per cent of urban residents connected to the electricity grid. Ghana also exports excess power to the neighbouring countries of Benin, Burkina Faso and Togo.
Additionally, the country, which currently has a total installed capacity of over 5,300 MW – aspires to industrialize, modernize its agriculture, and provide economic opportunities for its growing population.
However, one of the key constraints to this vision is access to reliable and cost-efficient electric power and the sector’s current financial deficit.
RLSF will therefore be available to relieve the financial burden of the national utility, the Electricity Company of Ghana (ECG), which is often asked to provide collateral for similar liquidity instruments under power purchase agreements.
In 2020, ATI closed the year with a gross exposure of US$6.3 billion and a net profit of US$39.4 million, owing to strong demand for ATI’s insurance solutions from the international financial sector and from African governments.