The Technical Economic Adviser to the Vice President, Dr. Gideon Boako, has slammed the Minority for their criticism of the recently issued energy sector bond, saying they had displayed “gross ignorance” with the statements they made.
The managers of the bonds had sought to raise 6 billion cedis under two separate bonds, but accrued a total of 4.6 billion cedis after it closed the auction.
The 7-year bond received the targeted 2.4 billion cedis, whilst the 10-year bond accrued about 2.2 billion cedis, below the target of 3.6 billion cedis.
The Minority have described this development as failure by the government, as they had raised a $2.25 billion bond in hours earlier in 2017, but appeared to be struggling with the new bonds just 11 months into their administration.
However, speaking on Eyewitness News on Thursday, Gideon Boako explained that, ESLA PLC had sought to raise a ‘programme bond’ of 6 billion within a period of five years, and not a one-off bond as the Minority had suggested.
“The Minority showed gross ignorance of the whole process. They are confusing a bullet bond with a programme bond on a book-building approach. In the past, they had issued bonds as one-off. When you go to the market today and raise the bond, you are supposed to get whatever you want to get today and it goes. This bond is a programme bond for five years,” he said.
“If they had taken time to read the prospectus well they would have known that it is stated that the Energy Bond Programme will expire five years from the date of the prospectus. So ESLA PLC had decided to raise up to 6 billion within five years. If they go to the market today, they aren’t supposed to raise all the 6 billion today. It is a programme bond for five years. So the 6 billion can be raised next year. They went to the market and within two weeks, they were able to raise 4.7 billion which is about 78 percent of the 6 billion.”
The Minority organised a press conference on Wednesday, where they raised a number of issues about Government’s attempts to raise energy bonds, claiming that they had caused financial loss to the state.
They also claimed that the government had created a ‘risky’ special purpose vehicle, the ESLA PLC, which had no track record and was unknown to potential investors.
However, Gideon Boako clarified that, ESLA PLC had not been created by the government but by state-owned enterprises who were indebted to the banks and sought to raise funds to clear those debts.
“Government of Ghana has not issued any energy bond. It was a corporate bond issued by a special purpose vehicle; ESLA PLC. Government [did not create the] special purpose vehicle. State owned-enterprises that owed banks created the special purpose vehicle to raise money to enable them pay debts that they owed banks,” he said.
‘Investor confidence not diminishing’
Member of Parliament for Bolgatanga Central, Isaac Adongo, said the attempts by the government to raised bonds since April have been unsuccessful because of waning investor confidence in the ability of the managers of the economy.
“They rode on the back of the confidence of the economy that the NDC left, to raise a bond of $2.25 billion in four hours. What has now happened that in one month, they still can’t raise it? They are destroying the fundamentals that we developed for them. When they were in their honeymoon period and were taking credit we told them to wait and that their time would come. Their time has come and we have been embarrassed,” he said.
However, Dr. Boako brushed this assertion aside stating that ESLA PLC had opted to settle for a high percentage of the targeted amount instead of the entire amount in order to get better interest rates.
“On the market, it’s a demand and supply matter, we bargain. That’s what pertains on every market. This is not a boutique. The bullet bonds would be boutique items in this case. When they mention a price, you have no option to bargain. This is a book-building bond approach on a programme so we bargain,” he argued.
“That is how we operate on the market, the forces of demand and supply are at play and that is typical of every market. At the end of the day, ESLA PLC said they are not in a rush to raise the 6 billion and will not rush to go for high interest rates. They have ample time.”