Mahama Administration Clears US$1.47bn Energy Sector Debt, Restores World Bank Guarantee Within First Year

Mahama Administration Clears US$1.47bn Energy Sector Debt, Restores World Bank Guarantee Within First Year

The Government of Ghana, under President John Dramani Mahama, has paid a total of US$1.470 billion in 2025 to clear legacy energy sector debts, restore a depleted World Bank guarantee, and stabilise power generation—marking one of the most decisive fiscal interventions in the sector’s recent history.

When President Mahama assumed office in January 2025, the energy sector was under severe strain. Years of non-payment for gas supplied from the Offshore Cape Three Points (OCTP) field had pushed the sector to the brink, resulting in the complete exhaustion of a US$500 million World Bank Partial Risk Guarantee (PRG) that underpinned Ghana’s flagship Sankofa Gas Project.

The PRG, established in 2015 under a previous NDC administration, was instrumental in mobilising nearly US$8 billion in private investment, guaranteeing payments to project partners ENI and Vitol in the event of state payment shortfalls. Its depletion had raised serious concerns among international investors about Ghana’s governance standards and creditworthiness.

Restoring Credibility and Confidence

As of 31 December 2025, government had fully repaid US$597.15 million, inclusive of interest, drawn on the World Bank guarantee—thereby restoring the facility in full. In parallel, outstanding gas invoices owed to ENI and Vitol for electricity generation were cleared, amounting to approximately US$480 million, bringing Ghana fully current on its obligations to the Sankofa partners.

The Ministry of Finance confirmed that adequate budgetary provisions have been secured to sustain timely payments going forward, signalling a shift from crisis management to structured financial discipline.

Legacy IPP Debts Settled

Beyond gas payments, the administration also settled substantial legacy debts owed to Independent Power Producers (IPPs). In 2025 alone, government paid US$392.81 million to IPPs, including:

Karpowership Ghana Co. Ltd – US$120 million

Cenpower Generation Co. Ltd – US$59.44 million

Sunon Asogli Ghana Ltd – US$54 million

Early Power Ltd – US$42 million

AKSA Energy Ltd – US$30 million

Cenit Energy Ltd – US$30 million

Twin City Energy (Amandi) – US$37.99 million

BXC Company Ltd – US$10.56 million

Meinergy Technology – US$8.82 million

These payments were complemented by the successful renegotiation of all IPP agreements to secure improved value for money for the Ghanaian taxpayer.

Gas Supply and Industrial Growth

Government engagements with Tullow Oil and Jubilee Field partners have produced a clear roadmap to guarantee full payment for gas off-take, while upstream engagements have already resulted in increased gas production. The strategy aims to expand domestic gas supply, reduce dependence on expensive liquid fuels, and support reliable nationwide electricity generation.

Through disciplined implementation of the Cash Waterfall Mechanism by the Ministry of Energy, government reports it has remained largely current on IPP invoices throughout 2025.

Analysis: Why This Matters

1. Restoring Investor Confidence

The full restoration of the World Bank PRG is arguably the most significant outcome. Guarantees of this nature are confidence instruments; their depletion sends alarm bells through global capital markets. Rebuilding it within a year signals fiscal seriousness and reopens Ghana’s energy sector to lower-cost private financing.

2. Preventing Power Crises

Energy sector debt has historically translated into fuel shortages, plant shutdowns, and nationwide power instability. By clearing arrears and staying current, government has reduced the risk of a return to erratic electricity supply, protecting households and businesses alike.

3. Reducing Fiscal Leakages

Renegotiated IPP contracts and adherence to the Cash Waterfall Mechanism address structural inefficiencies that previously allowed arrears to accumulate unchecked. This shifts the sector from emergency bailouts to predictable financial management.

4. Industrial and Macroeconomic Impact

Reliable and affordable power is foundational to industrialisation. Increased domestic gas production reduces exposure to volatile global fuel prices, improves balance-of-payments dynamics, and supports the competitiveness of Ghanaian industry.

5. Governance Signal

Beyond the numbers, the intervention sends a broader governance message: that legacy debts—however politically inconvenient—will be confronted rather than deferred. This has implications not just for energy, but for Ghana’s overall public financial management culture.

Bottom Line

By paying US$1.470 billion in a single fiscal year to stabilise the energy sector, the Mahama Administration has addressed one of Ghana’s most persistent economic vulnerabilities. Whether these gains endure will depend on sustained discipline, but the immediate signal—to citizens, industry, and international partners—is unmistakable: the era of uncontrolled energy sector debt accumulation is being decisively brought to a close.