PwC Urges Government to Renegotiate Power Agreements as Energy Sector Debt Continues to Strain Fiscal Health

Professional services firm PwC has raised concerns over the continued burden of energy sector debt, highlighting the inefficiencies and escalating debt levels that are placing a significant strain on the country’s fiscal health.

In its analysis of Ghana’s 2025 Budget, PwC recommended that the government urgently consider renegotiating the existing Power Purchase Agreements (PPAs) to reduce both fixed capacity charges and operational costs. The firm argued that such a move is essential to ease the financial pressures weighing on the country and to ensure the long-term sustainability of the energy sector. PwC further emphasized that renegotiations should be carried out in line with established PPA guidelines, suggesting that the government take a cooperative approach, particularly since there are nine existing agreements that need to be addressed.

Addressing the operational challenges faced by Ghana’s power distributors—the Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCo)—was also identified as a crucial step in reducing the debt burden. PwC stressed the importance of improving the collection systems of these distributors, which would enable them to generate the necessary funds to settle outstanding debts owed to Independent Power Producers (IPPs) and other stakeholders in the energy sector. The firm noted that strengthening these operational processes would enhance the financial stability of the energy sector and contribute to a more sustainable fiscal outlook.

Furthermore, PwC welcomed the government’s proposal to construct a new gas project management infrastructure. The firm noted that such a development is critical to avoiding delays, cost overruns, and other operational challenges that have historically plagued the energy sector. Effective management of this new gas infrastructure is seen as an essential component for improving the sector’s reliability and reducing potential financial risks.

On the subject of Environmental, Social, and Governance (ESG) issues, PwC expressed concern about the government’s plan to abolish the emissions levy on industries and vehicles. The firm warned that removing this levy could undermine the country’s commitment to climate sustainability, potentially weakening its ability to meet environmental targets. Although PwC acknowledged the immediate benefits of reducing the tax burden on citizens and industries, the long-term environmental consequences of this decision remain a point of concern.

Despite these reservations, PwC acknowledged the government’s commitment to social sustainability through its allocation of funds to support disaster victims. Specifically, the government has earmarked GH¢242.5 million for the victims of the Akosombo dam spillage and GH¢200 million for those affected by tidal waves in Ketu South. These funds are intended to aid in resettlement efforts, repair damaged infrastructure, and support the economic recovery of the affected communities. PwC commended the government for its attention to social issues, noting that such investments demonstrate a commitment to the well-being of citizens, particularly those who have been adversely impacted by natural disasters.

In conclusion, while PwC commended the government’s focus on social sustainability and the steps being taken to address energy sector challenges, it reiterated the need for urgent reforms in the energy sector to mitigate the fiscal risks posed by rising debt and inefficiencies. The firm’s analysis called for a balanced approach, one that ensures the long-term viability of both the energy sector and the country’s overall fiscal health.