Power customers owe NEDCo GH¢1.27bn – Report

Government of Ghana owes the Northern Electricity Distribution Company (NEDCo) more than ¢1.27 billion for power consumed, the Auditor-General’s 2021 report has revealed.

Section 91 of the Public Financial Management Act, 2016 (Act 921) provides that the board of directors of a public corporation shall ensure the efficient management of the financial resources of the public corporation including the collection and receipt of money due to that public corporation.

It also states that where a public corporation wilfully or negligently fails to ensure that money due to that public corporation is collected or received, the minister shall, upon the recommendation of the Auditor-General, withdraw or suspend the emoluments of the members of the governing body of the public corporation, either jointly or severally.

However, the audit team said its review of NEDCo’s receivables disclosed a total amount of GH¢1,278,322,542.60 due from power customers as of December 31, 2020.

The team said “inadequate follow up and effective mechanism to recover the outstanding receivables contributed to this lapse” that has “negatively affected the company’s cash flow”.

“We recommended that the management of the company should intensify its efforts and improve its mechanism to recover the outstanding receivables. We further advised the management to develop an instalment payment plan for the customers and deduct at source, whenever the customers purchase credit at the sales outlets,” it stated.

“We also recommended to management to task the area managers to educate the customers on instalment plan before it is implemented”, the report said.

The management of NEDCo responded that a significant portion of the receivable balance of GH¢1,278,322,542.60 is due from Ministries, Departments and Agencies (MDAs).

The management noted that it is working with the government of Ghana, through the Ministries of Finance and Energy, for the settlement of the MDAs’ debts.

Also, it said payment plans had been signed between NEDCo customers with significant debts.

Additionally, the management said it continues to invest in the acquisition and installation of prepayment meters as a means of reducing the rate of debt accumulation.

In terms of financial performance, the report, which relates to the audited financial statements of NEDCo for the year ended 31 December 2020, also said the company recorded a loss of GH¢379,021 in 2020 as compared with a loss of GH¢343,307 registered in 2019.

Total income increased by GH¢127,553 or 20.4% to GH¢751,821 in 2020 from GH¢624,268 in 2019.

It was due to a GH¢114,319 or 19.9% increase in revenue from the sale of electricity to residential and non-residential customers.

The total expenditure incurred in 2020 amounted to GH¢1,130,842, as compared with GH¢967,575 in 2019, resulting in an increase of 15.9% or GH¢154,078.

This was mainly due to a 15.8% or GH¢142,523 increase in the cost of sales, the report noted.

The increase in the cost of sales was mainly due to a GH¢106,389 or 22.2% increase in the purchase of electricity.

Non-current assets decreased from GH¢741,168 in 2019 to GH¢733,220 in 2020, representing a reduction of GH¢7,948 or 1.1%.

The marginal reduction was due to depreciation charges during the year.

The current assets increased by 7.6% or GH¢101,587 from GH¢1,344,098 in 2019 to GH¢1,445,685 in 2020.

This was mainly due to an increase in power sale receivables over the period by GH¢159,624 or 15.2%.

Current liabilities increased by 27.2% or 131,250 from GH¢483,363 in 2019 to GH¢614,613 in 2020.

This was due to an increase in trade and other payables from GH¢445,868 in 2019 to GH¢573,413 in 2020 representing an increase of GH¢127,545 or 26.4 %.

Non-current liabilities showed an increase of 28.3% to GH¢1,367,145 in 2020 from GH¢1,065,505 in 2019.

The increase was due to an increase of GH¢301,640 by VRA (inter-trade) representing 28.4% of GH¢1,062,842 in 2019. 559.

The company’s liquidity ratio measured in the current ratio declined from 2.78:1 in 2019 to 2.35:1 in 2020.

Despite the reduction in the liquidity ratio, the report said the company can meet its short-term obligations as and when they fall due when compared with the benchmark ratio of 2:1.