Investor uncertainty, others impacted energy bond

Improper packaging, uncertainty as well as political composition of the Board of ESLA have been cited as possible reasons for the underperformance of the energy bond.

It follows ESLA Plc’s failure to raise the 6 billion cedis targeted under the first tranche of the energy bond.

ESLA Plc received a total of 4.69 billion cedis after close of auction on Friday, November 3, 2017.

The outcome was also after a seven day extension of the 10 year bond, initially planned to raise some 3.6 billion cedis.

Commenting on this development, Dr. Lord Mensah of the University of Ghana Business School blamed the lack of clarity on the mode of issuing and uncertainty as basis for the low patronage by investors.

“The managers of the roadshow for the energy bond did not package the bond very well; in that no nobody was clear including investors on who owned the bond; i.e. government or the power companies. They took it normal as any one of the roadshows that they usually embark on,” he asserted.

An Investment banker, Mahama Iddrisu couldn’t agree more as he believes the lack of an apolitical ESLA board made investors panic over fear of possible change in government hence the future of ESLA and their investments.

“The composition of the Board of ESLA which has elements of the government’s control is a factor for the under subscription. In addition, the policy of the Treasury Single Account which moves all of government’s money from the commercial banks and has compelled the banks to rely on money from companies and individuals.”

The energy debt is estimated at 10 billion cedis (2.5 billion dollars).

But in all, government accrued some 4.69 billion cedis from the energy bond.

The 7 year component raked in 2.4 billion cedis as targeted, at an interest rate of 19 percent.

However, the 10 year bond failed to hit the 3.6 billion cedis mark.

It accrued some 2.29 billion cedis at an interest rate of 19.5 percent.

This means that the total amount received was about 22 percent less than the targeted 6 billion cedis.

Lead managers of the bond have however told Citi Business News the process is an ongoing one and that they will go back unto the market and if the market conditions are right, they will issue it.

Meanwhile Citi Business News has learnt there will be a revaluation of the whole process together with an assessment of its performance on the stock market which will determine the timing to go back unto the market to raise the additional money.

Explaining government’s position on the performance of the bond, a Deputy Information Minister, Kojo Oppong Nkrumah said,

“If indeed at other times bonds have been oversubscribed, we ask ourselves at what rate was the bond issued. If we decided to sell this bond at twenty-five percent, I can assure you that it would have been oversubscribed. For the record, we had an eighty-nine percent uptake from investors but we are settling on seventy-eight percent.”

According to analysts, commercial banks as well as Bulk Oil Distribution Companies (BDCs) will have to wait a little longer before laying claim to all the outstanding payments due them.

Meanwhile Dr. Lord Mensah believes disbursements should be effected as soon as possible to improve the money available for the operations of the affected institutions, particularly banks.

“If they are not able to raise the money, whatever amount that they have raised, they should settle a part of the debt and take time and I believe they should be able to pay with the ESLA.”

By: Pius Amihere Eduku/

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