Ghana National Gas Company Faces Growing Debt Crisis Amid VRA Payment Struggles

The Ghana National Gas Company Limited (GNGLC) is grappling with a deepening financial crisis, largely stemming from the inability of the Volta River Authority (VRA) to fulfill its debt obligations. By June 30, 2024, GNGLC’s debt to the Ghana National Petroleum Corporation (GNPC) had soared above $626 million, marking a troubling 12.1% increase compared to the previous year. The increase is significantly higher than the 7.4% recorded in the first half of 2023, raising alarms about the company’s long-term financial health.

The escalating debt is primarily attributed to VRA’s persistent financial challenges, which have prevented the authority from paying for the gas supplied by GNGLC. Along with this, the volume of raw gas supplied by GNPC to GNGLC also saw a minor drop, further straining the finances of both companies. The invoiced value of the gas supplied in the first half of 2024 was $144 million, a stark contrast to the previous year’s figure of $9.3 million, with GNGLC only receiving $121 million in credit notes, leaving an outstanding debt of $22 million.

In addition to these issues, the payments received by GNGLC through the Cash Waterfall Mechanism (CWM) were lower than expected. By June 2024, the cumulative payments reached just $10 million, covering invoices from November 2023 to April 2024. This was a significant drop from the $18.2 million received during the same period in 2023, further exacerbating GNGLC’s mounting financial challenges.

The PIAC report highlighted the serious implications of GNGLC’s growing debt for the operational stability of both the company and VRA. There are also concerns about the potential violation of the Petroleum Holding Funds (PHF) statutory framework, which relies on natural gas sales as a key revenue source. This situation calls for immediate intervention from stakeholders to safeguard the financial stability of critical entities within Ghana’s energy sector.

Experts have stressed the urgency of addressing VRA’s financial difficulties and improving the efficiency of the Cash Waterfall Mechanism to prevent further deterioration of GNGLC’s financial position. Without urgent corrective actions, the ongoing debt crisis could have long-lasting repercussions on Ghana’s energy infrastructure and economy.

Source: CITI NEWSROOM