We're taking the necessary steps to tackle arrears under debt restructuring exercise — Finance Ministry assure IPPs

Government has assured of its commitment to honouring outstanding payments to Independent Power Producers (IPPs) under the ongoing debt restructuring exercise.

The government further promised to ensure that the financial sustainability of the entire power sector value chain is restored.

The Finance Ministry in a statement said, “in respect of the Arrears, Government will engage with IPPs under the ongoing debt restructuring exercise, with a view to restructuring the arrears in a manner consistent with the Government’s debt targets of 5596 NPV of debt-to-GDP and external debt service ratio of 1896 to revenue by 2028, amongst others, to achieve a moderate risk of debt distress under the IMF-WB Low Income Count, (LIC) – Debt Sustainability Analysis (DSA) framework”.

The Finance Ministry further assured that it is taking the necessary steps to address the arrears.

The Finance Ministry said, “government wishes to assure IPPs that it is taking the necessary steps to address the arrears as part of its external debt restructuring exercise. This is to forestall the build-up of future arrears and improve on efficiency within the sector”.

The Finance Ministry added in its statement that it has rolled out some measures to ensure payments are in line with IPP’s respective Power Purchase Agreements (PPAs).

“Government has rolled out a raft of structural reforms, aimed at generating sufficient cash to ensure payments in line with your respective Power Purchase Agreements (PPAs). These measures include but are not limited to:

i. PURC’s tariff increase in September 2022 by an average of 27%;

ii, PURC’s implementation of the Quarterly Tariff Adjustment in the last quarter of 2022, muffing in a tariff increase of 29.96% to address forex losses and inflation;

iii. the review of the Cash Waterfall Mechanism (“CWM”) and inclusion of VRA ‘s revenue stream therein; and

iv. Power Purchase Agreement (“PPA”) renegotiations with IPPs, with a view to restructuring PPAs and reducing power generation costs”.

The arrears, the Finance Ministry’s statement explained, “are a critical part of Government’s stock of arrears and outstanding debt obligations, the resolution of which remains a key element to be addressed, as part of Government’s engagement with the International Monetary Fund (-IMF) for a programme that is now at the Staff Level Agreement (“SLA”) stage”.

Read below the Finance Ministry’s full statement

-Citinewsroom