As part of efforts to reduce the financial burden on Tema Oil Refinery in the wake of soaring oil prices on the globe, officials of the Refinery, in partnership with government, have signed a Memorandum of Understanding with a consortium of financial institutions to review the existing debts and restructure part of it in the short term to ensure continuous operation.
Information gathered by The Statesman indicates that both parties agreed to restructure GH¢120 million of the company's total debt of GH¢263.40 million into a five-year US Dollar denominated loan.
This is expected to reduce the level of TOR's current overdraft with Ghana Commercial Bank which amounts to GH¢469.82 million and also reduce the cost of financing the debt through high interest payments.
The decision was taken by government to speed up the payment of TOR's debt on realising the difficulty in getting reimbursement from the Debt Recovery Levy Fund which was introduced to pay it off.
Officials say TOR's debt comprises principal and interest on overdrafts the government of the National Democratic Congress received from GCB when it wanted to subsidise fuel prices in the country.
The negotiation forced GCB to finance petroleum product subsidies under the NDC era as well as subsidies incurred during the reformation of the National Petroleum Authority from regulated pricing to the deregulated pricing regime.
It is believed that the Import Parity Pricing method used by TOR a few years ago further contributed to an under-recovery sum of GH¢33.6 million .
The Statesman gathered that government initially failed to record the debt incurred by TOR from the construction of the Residual Fluid Catalytic Cracker at a cost of USD 210 million. This, officials say added more debts to the widely publicised GH¢430 million (¢4.3 trillion) inherited by the NPP Government in 2001.
The Statesman further gathered that the NPP government in 2003 and 2004 absorbed GH¢320 million (¢3.2 trillion) of the GH¢430 million from TOR's books. This was financed with GH¢240 million (¢2.4 trillion) TOR Bonds and GH¢80 million (¢800 billion) cash.
Following the absorption, the original TOR debt arising out of NDC's subsidisation policy was reduced to GH¢110 million (¢1.1 trillion) but it continued to attract interest at GCB rates which added more debts to the already existing one .
Between October 2003 and December 2006, government was said to have paid off GH¢450 million of the debts to GCB which helped to reduce the balance of TOR's debt to GH¢110 million as at August 2006.
Indications are that the debt, would have increased to GH¢560 million by now if the stated amount had not been paid.
According to Haruna Maiga, Communications Officer of the Minister of Finance, Government and TOR continue to take very stringent measures to keep the situation under control through the strengthening of inventory and receivable management systems. This, he believes will help reduce the levels held in addition to the interest charges.
"From TOR's own resources, the RFCC loan would have been fully repaid by the end of 2009. Consequently, the cash flows would be boosted by at least USD 40 million annually to accelerate the retirement of the overdraft with GCB. TOR has further recommended the payment of the principal and interest debts from the DRLF or the issue of bonds. We believe that this will go a long way to improve the overall debt situation," he stated.