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The Ghanaian government has signed a Memorandum of Understanding (MoU) with the African Trade Insurance Agency (ATI) for the launching of the Regional Liquidity Support Facility (RLSF) within the country, supporting its mission to promote access to reliable, clean, and affordable electricity.
The RLSF is a financial product jointly developed by the ATI, Germany’s KfW Development Bank, and the Norwegian Agency for Development Cooperation (Norad). It is designed to address the short-term liquidity risks faced by small and medium-sized power project developers that sell electricity to state-owned power utilities. The initiative improves bankability to help renewable energy projects reach financial close.
The MoU signing has come at an opportune time as Ghana’s electricity demand is increasing by 10% each year, coupled with the country’s target of increasing the share of renewables in its energy mix. The new step is clearly a win for the clean energy sector and independent power producers (IPPs) in the country.
The IPPs will be highly benefited from the RLSF that is created to help tackle climate change and attract public & private investments by supporting renewable energy projects in ATI’s member countries. The initiative also backs the IPPs against the risk of delayed payments by public off-takers.
According to the World Bank’s report, Ghana has one of the continent’s highest electricity access rates at nearly 86% and exports the excess power to its neighboring countries such as Benin, Burkina Faso, and Togo. The total installed power capacity in this West African country is over 5.3 GW and it seeks to industrialize, modernize its agriculture and provide economic opportunities for the people.
However, one of the major limitations to this target is access to reliable & cost-efficient electric electricity along with the agriculture sector’s current financial deficit. The public utility Electricity Company of Ghana (ECG) is often asked to provide collateral for similar liquidity instruments under power purchase agreements (PPAs).
The RLSF will therefore be helpful in relieving the financial burden of ECG. Ghana is among the nine ATI Member States those have signed the RLSF MoU along with Benin, Burundi, Ivory Coast, Madagascar, Malawi, Togo, Uganda, and Zambia.