The question of who is responsible for the long-standing energy sector debt — and who is fixing it — has once again taken centre stage in the country’
The question of who is responsible for the long-standing energy sector debt — and who is fixing it — has once again taken centre stage in the country’s political discourse, following claims by the Mahama administration that it has paid US$1.47 billion to stabilise the sector within its first year in office.
While supporters of the governing National Democratic Congress (NDC) have hailed the payments as proof of sound leadership, critics insist the debt crisis itself has deep roots in decisions taken during John Dramani Mahama’s earlier tenure between 2012 and 2017.
To understand the current situation, it is important to revisit the origins of Ghana’s energy challenges. During Mahama’s previous administration, Ghana faced a severe power crisis — popularly known as dumsor — which pushed government into hurried negotiations with Independent Power Producers (IPPs).
In a bid to avert prolonged blackouts and reassure investors, the government entered into several Power Purchase Agreements (PPAs), many of which were structured as “take-or-pay” contracts.
These agreements obligated the state to pay for fixed amounts of electricity whether or not the power was actually consumed.
Subsequent reviews revealed that Ghana had contracted far more generation capacity than it needed at the time. As a result, the state was compelled to pay for excess power, draining public finances.
Estimates by energy sector analysts and state institutions later put the cost of these excess capacity charges between US$2.1 billion and US$2.5 billion.
This legacy significantly worsened the financial health of the energy sector and contributed to mounting arrears owed to power producers and gas suppliers.
When President Nana Addo Dankwa Akufo-Addo assumed office in 2017, the energy sector was already burdened by debt and strained supplier relationships.
Several power producers were reportedly unwilling to supply electricity without guarantees, forcing the new government to renegotiate contracts, restructure debts and stabilise power supply during its first term.
The Akufo-Addo administration managed to keep the lights on, but the debt overhang persisted, compounded by payment shortfalls to gas suppliers such as ENI and Vitol under the Offshore Cape Three Points (OCTP) Sankofa Gas Project.
By the time President Mahama returned to office in January 2025, according to the Ministry of Finance, the situation had deteriorated further.
The Minister for Finance, Dr. Cassiel Ato Forson says the energy sector was on the brink of collapse, largely due to years of accumulated non-payment for gas supplied from the OCTP field.
This non-payment had fully exhausted the US$500 million World Bank Partial Risk Guarantee (PRG), a facility originally established in 2015 under the NDC to underpin nearly US$8 billion in private sector investment in the energy sector.
The PRG was designed as a financial backstop to guarantee payments to Sankofa partners ENI and Vitol in the event of government default.
Its depletion, the Finance Ministry argues, severely undermined Ghana’s credibility with international partners and posed a major risk to future investment in the sector.
In response, the Mahama administration embarked on what it describes as an aggressive and coordinated energy sector reset.
As at December 31, 2025, government had fully repaid US$597.15 million — inclusive of interest — that had been drawn down under the World Bank guarantee, thereby restoring the facility in full.
In addition, between January and December 2025, the government cleared all outstanding gas invoices owed to ENI and Vitol, amounting to approximately US$480 million, and made budgetary provisions to ensure timely payments going forward.
The Finance Ministry further disclosed that engagements with Tullow Oil and Jubilee Field partners have resulted in a roadmap to guarantee full payment for gas off-taken, with the aim of supporting reliable nationwide electricity generation and boosting industrial growth.
These discussions have reportedly led to increased gas production, as government pushes to expand domestic gas supply and reduce reliance on expensive liquid fuels.
Beyond gas payments, the Mahama administration says it has renegotiated all IPP agreements to secure better value for money and reduce future fiscal risks.
In 2025 alone, government settled about US$393 million in legacy IPP debts. Beneficiaries included Karpowership Ghana (US$120 million), Cenpower (US$59.4 million), Twin City Energy/Amandi (US$37.9 million), Early Power (US$42 million), Sunon Asogli (US$54 million), AKSA Energy (US$30 million), Cenit Energy (US$30 million), among others.
In total, the Ministry of Finance estimates that approximately US$1.47 billion was paid in the 2025 fiscal year to rescue and stabilise the energy sector.
Officials insist that, beyond clearing inherited arrears, the disciplined application of the Cash Waterfall Mechanism has ensured that most IPP invoices for 2025 have been paid on time.
While the National Democratic Congress government presents these payments as evidence that “the era of uncontrolled energy sector debt accumulation is over,” critics argue that the narrative is incomplete without acknowledging the role played by earlier policy decisions, particularly the costly take-or-pay PPAs signed under Mahama’s first term.
COMMENTS