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Ghanaian Power Utility Volta Plans $500 Million Bond Sale

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Oct. 18 (Bloomberg) -- Volta River Authority, Ghana’s largest power producer, plans to sell $500 million of debt abroad to fund a 10-year plan that will almost double electricity generation in West Africa’s second-largest economy.

The state-owned company will add 2,500 megawatts of capacity to Ghana’s power grid as part of a $4.5 billion expansion program, Ebenezer Tagoe, the director of finance, said in an interview in the capital, Accra, on Oct. 16. The Accra-based company has a capacity of 2,104 megawatts, or 79 percent of the nation’s installed power and operates Akosombo Dam, also known as Volta Dam. Sunon Asogli Power Ghana Co., Cenit and Bui Hep produce the rest.

“We have over 16 projects to develop across the country made up of expansion and building of new thermal plants, solar panels and renewable energy facilities,” he said. The “financing strategy includes $500 million in foreign bonds.”

Electricity shortages are hampering Ghana’s economic growth, which has already been limited by a drop in the price of gold, the largest source of foreign revenue. The government is turning to international markets to borrow money at lower costs for infrastructure projects. Ghana, which imports a majority of the motor fuel it needs, wants to double crude oil output by 2021.

Borrowing Costs

The nation’s credit rating was cut yesterday by Fitch Ratings to B, five levels below investment grade. Ghana spends about 70 percent of tax revenue to pay government workers, sapping money needed for infrastructure investment.

“VRA’s cost of borrowing will definitely be higher, because Ghana is now perceived as a riskier borrower,” Collins Appiah, head of asset management at Accra-based NDK Asset Management Ltd., said by phone.

Ghana gets about half of its electricity from thermal energy and uses oil products to fuel the plants because of a natural-gas shortfall of about 230 million cubic feet, Kofi Ellis, director of business planning at the VRA, said in a separate interview on Oct. 16. Electricity demand is growing at an average 10 percent annually, Ellis said.

“We will need 1 billion standard cubic feet daily in the next 10 years to power our plants and keep pace with economic growth,” he said.

LNG Plant

Ghana gets 70 million cubic feet from Nigeria through the West African Gas Pipeline Co. and expects to get as much as 90 million cubic feet from the Jubilee gas project off Ghana’s western coast by next year, Ellis said. That is still short of the 300 million standard cubic feet it needs daily, he said.

VRA will build a $150 million facility to offload liquefied natural gas near Takoradi by the end of 2016, Ellis said. The company will lease floating vessels to store the LNG and do the re-gasification, he said. LNG is gas chilled to a liquid state for transport by sea.

The cedi was unchanged at 2.19 per dollar at 4:23 p.m. in Accra.

To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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