[ 2017-11-07 ]

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.”

Source - citibsinessnews.com

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