{"id":370923,"date":"2017-11-10T12:42:20","date_gmt":"2017-11-10T12:42:20","guid":{"rendered":"http:\/\/citifmonline.com\/?p=370923"},"modified":"2017-11-10T12:42:20","modified_gmt":"2017-11-10T12:42:20","slug":"statement-finance-ministry-dismisses-minoritys-claims-on-energy-bond","status":"publish","type":"post","link":"https:\/\/citifmonline.com\/2017\/11\/statement-finance-ministry-dismisses-minoritys-claims-on-energy-bond\/","title":{"rendered":"Statement: Finance Ministry dismisses Minority\u2019s claims on energy bond"},"content":{"rendered":"
The Ministry of Finance has reacted to what it calls unsubstantiated claims by the Minority in Parliament over the recently issued energy bond.<\/p>\n
According to the Ministry, the arguments put forward by the minority do not reflect the actual situation.<\/p>\n
The Minority on Wednesday held a press conference where it criticized the below 6 billion cedis yield of the bond.<\/p>\n
It argued that, the turn of events is a solid basis for the Finance Minister to be hauled before the house to explain why investment advice from institutions such as the IMF among others was ignored.<\/p>\n
But the Finance Ministry has on a point by point basis, dismissed the assertions by the minority.<\/p>\n
Read the full statement of the Finance Ministry below.<\/strong><\/p>\n RESPONSE TO THE NDC\u2019S PRESS STATEMENT ON THE ESLA BACKED ENERGY BOND<\/u><\/strong><\/p>\n The Ministry of Finance takes notice of the Statement by the NDC Minority in Parliament making various unsubstantiated claims about the recently issued Energy Sector Levy Act (ESLA) backed energy bond. The Ministry as the \u2018Sponsor\u2019 of the GH\u00a210 billion Bond Programme, hereby responds to the Minority\u2019s claims as follows:<\/p>\n The Minority\u2019s statement is fraught with various factual untruths which appear to be deliberately spun to allow them to reach their own preferred conclusions:<\/p>\n In all E.S.L.A. PLC received Bids of GHC 5.32 billion (GH\u00a22.53 billion for the 7-year and GH\u00a22.8 billion for the 10-year), representing 89% of the targeted amount of GH\u00a26 billion for the first tranche under the Bond Programme.\u00a0 E.S.L.A. PLC chose to accept the total amount of GH\u00a2 4.70 billion out of a possible GH\u00a25.32 billion; representing 78% of the targeted amount as this was what it preferred within its target price range of 19%-19.5%. Making a decision based on a cost\/yields consideration, is prudent and not a failure. To claim that the issuance was a failure, is to be intellectually dishonest, if not mischief.<\/p>\n The minority again claimed that the projected consumption of petroleum products, used as a basis for projecting ESLA inflows was unrealistic. This was based on their assumption that monthly fuel consumption is equal through-out the year.<\/p>\n Historical data on consumption patterns however prove that this is a flawed assumption. Fuel consumption in the second half of the year is often higher as a result of increased economic activity and seasonal weather patterns.<\/p>\n E.S.L.A. PLC\u2019s projected consumption of petroleum products is accurate and conservative and remains in line with historical patterns.<\/p>\n The Minority claim that E.S.L.A. PLC could not meet the Debt Service Coverage Ratio (DSCR) of 1.25% but rather scored 1.1% DSCR. They arrive at the 1.1% by dividing the expected inflows from the Energy Debt Recovery Levy of GH\u00a21.281 billion by GH\u00a21.158 billion in total interest payments for both the 7-year and 10-year bonds (i.e. 1.281\/1.158 = 1.1)<\/p>\n The Minority however, did not recognize the addition of GH\u00a2600 million GoG cash support (to be provided on demand) component, as stated in the prospectus, to the GH\u00a21.28 billion. They also did not add the starting cash of GH\u00a2 350 million in the Energy Debt Recovery Levy(EDRL) Account. It is instructive to note that the addition of the two missing components in the Minority\u2019s assumptions, gives a total amount of approximately GH\u00a22.231 billion making the ratio now 1.926% (2.231\/1.158). This is far greater than the required 1.25% DSCR.<\/p>\n The Minority either did not fully understand the assumptions underlying the structure and thus failed to do the math right or was just being plainly malicious.<\/p>\n The NDC claim that they found the structure of the transaction complex to understand. They further assume that because they found it complex to understand, others must also find it complex. The good thing is that the investors for whom the bond was meant understood it and that is why they patronised the bond with bids of up to GH\u00a25.32 billion of the targeted GH\u00a26 billion bid cover ratio.<\/p>\n Their claim that ESLA is government revenue and that an ESLA backed bond must be treated as sovereign debt is incorrect. ESLA proceeds do not commingle with the consolidated fund and thus, cannot be treated as government revenue affecting GoG fiscals.<\/p>\n An E.S.L.A backed bond can equally not be treated as government\/sovereign debt. It is surprising that the former Finance Minister under the NDC, Hon. Seth Terkper shares this view and yet the Minority refuses to listen to him.<\/p>\n It is also unbelievable how the Minority would want this debt to be considered part of government debt, when in 2016, the same NDC government restructured about GH\u00a22 billion debt owed commercial banks under \u2018the VRA Phase 1 Restructuring Program\u2019 using ESLA proceeds as a payment source. If \u2018VRA Phase 1\u2019 and TOR debt restructuring were deemed prudent at the time by the NDC and treated as a non-sovereign transaction, why not the E.S.L.A. PLC\u2019s Bonds? The inconsistency in the opinions of the Minority NDC is baffling.<\/p>\n The Minority in their Statement also claim that the transaction was unconstitutional as it did not have a parliamentary approval.<\/p>\n Can the Minority be bold and indicate how the financial loss arises? This is missing in their statement. The mere mouthing of the claim that government could have gotten the bond issued at 2% lower does not legitimize that claim. What is the empirical basis? The minority fails to state it. This transaction by E.S.L.A. PLC causes no loss to the State.<\/p>\n Conclusion<\/u><\/strong><\/p>\n The Ministry re-iterates its congratulations to all who assisted with this groundbreaking transaction and shares in the view that this was a very successful and landmark transaction; the largest corporate bond issuance in Sub-Saharan Africa.<\/p>\n The Ministry of Finance under this Government, will continue to pursue measures to assist in resolving the challenges in the Energy Sector that it inherited, including the over GH\u00a210 billion worth of legacy debts and other obligations, dumsor, unreliable and intermittent power supply, high tariffs and non-performing loans within the banking sector that is threatening to cripple the banks (due to energy sector legacy debts). We hope we can count on all Ghanaians and other stakeholders for their support and encouragement as we continue to tackle this challenges head on.\u00a0<\/strong><\/p>\n \u2013<\/p>\n By: Pius Amihere Eduku\/citibusinessnews.com\/Ghana<\/p>\n","protected":false},"excerpt":{"rendered":" The Ministry of Finance has reacted to what it calls unsubstantiated claims by the Minority in Parliament over the recently issued energy bond. According to the Ministry, the arguments put forward by the minority do not reflect the actual situation. The Minority on Wednesday held a press conference where it criticized the below 6 billion […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,11],"tags":[123,2283,3],"yoast_head":"\n\n
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