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) was in excess of $626 million a significant jump from over $559 million in the same period in the previous year.
This represents a 12.1% growth in debt, much higher than the 7.4 percent recorded in the first half of 2023.
The increase as highlighted in a Public Interest Accountability Committee report for the first half of 2024 is attributed to the 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 first half of 2024 from 22,730,386.70 MMBtu in the corresponding period of 2023.
While the invoiced value of gas supplied in first half of 2024 was $144 million compared to more than $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 emphasised the severe implications of this escalating debt for the operational viability of both GNGLC and VRA.
It also raised concerns about potential violations of the Petroleum Holding Funds (PHF) statutory architecture, as proceeds from natural gas sales were 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 demanded urgent attention from stakeholders to ensure the long-term financial stability of these critical players in Ghana’s energy sector.
It said resolving the VRA’s financial difficulties and improving the efficiency of the CWM were crucial steps towards mitigating the current crisis and preventing further escalation of GNGLC’s debt.
