Ghana is considering to buy out the debts of independent power producers as a step toward restructuring contracts and reducing its power bill, according to people familiar with the matter.

West Africa’s second-biggest economy currently pays as much as $500-million a year for power it doesn’t consume and is in talks to end the practice. Deals that obliged the government to pay for power regardless of whether or not the supplies were needed, have left the country with almost double the generation capacity it requires to meet peak demand of 2 700 MW.

The government wants to take over the companies’ loans from financial institutions through the state-owned Ghana Infrastructure Investment Fund at less onerous repayment terms, said the people, who asked not to be identified because the matter is private. The government is also talking with multilateral lenders such as the African Development Bank and International Finance Corporation to join as investors, said the people.

Cheaper finance will lower the producers’ costs and in return the government would demand that it only pays for power it needs, said the people.

SERIOUSLY CONSIDER
While negotiators for the government and power producers remain in talks about the proposal, most of the companies will consider it seriously, said the people. The plan will also allow Ghana to retain its generation capacity and save on future infrastructure expenses, said the people.

A spokesperson at the finance ministry, Deputy Minister of Energy William Aidoo and Reginald Okai, chief financial officer of the Ghana Infrastructure Investment Fund, wouldn’t immediately comment when contacted by phone.

Finance Minister Ken Ofori-Atta said earlier this month that the country will use as much as $1-billion of the proceeds of a recent $3-billion Eurobond sale to restructure Ghana’s deals with independent power producers. Power sector liabilities added 5.1-billion cedis, or 1.5% of gross domestic product, to Ghana’s debt in 2019.

The yield on Ghana’s 2027 dollar bonds that it issued February 11 rose 6 basis points on Tuesday to 6.13% at 3:06 p.m. in London.