The World Bank Group’s Board of Executive Directors today approved a US$60 million International Development Association (IDA*) credit for Ghana to improve the Electricity Company of Ghana’s (ECG) financial performance, minimize its commercial losses, and ultimately contribute to increased revenue and cash flow.

The credit provides additional financing to the Ghana Energy Development and Access Project (GEDAP) originally approved by the Bank Group’s Board on July 26, 2007, including US$90 million and an additional US$70 million approved on June 3, 2010.

The GEDAP funds have broadly supported (i) Sector and Institutional Development; (ii) Electricity Distribution Improvement; (iii) Electricity Access and Renewable Energy; (iv) Expanded Capacity for Electricity Distribution Improvement; (v) Revenue Collection Improvement; and (vi) Management and Planning Enhancement.

Most of this new financing will be used to increase the scope and impact of ongoing activities to strengthen ECG’s billing and metering systems to improve its operational efficiency. As the agency responsible for managing the energy consumer accounts, ECG’s performance has a major impact on the entire energy value chain.

Ghana is currently experiencing a significant shortage of electricity. Improving ECG’s performance could help create better conditions for attracting private financing to generate desperately needed new power. This shortage of power is also curtailing economic growth and adversely affecting the profitability and sustainability of businesses.

ECG’s operational and financial performance is critical to the sustainability of the entire energy sector value chain.

Despite continued efforts in reducing operational losses and cost-reflective tariffs, ECG’s revenue collection performance has declined while its costs have increased sharply. The long-standing issue of public bodies not paying for their electricity continues to burden the sector without any reimbursements of the uncollected revenues from the Government.

“We are happy to be providing additional resources to support Ghana’s energy sector and it is our hope that ECG would use these resources to build much needed operational capacity, fix the bottlenecks hindering its smooth operation and financial stability, and deliver reliable and sustainable services to its customers,” said Yusupha Crookes, World Bank Country Director for Ghana.

ECG needs to invest about US$200 million annually over the next decade to keep up with rapidly growing power demand and improve service quality to acceptable levels. A significant portion of ECG’s investments are funded by short-term commercial debt and suppliers’ credits, which are expensive and pose an additional financial burden on the sector.