Gov’t eyes GNPC Explorco’s earnings for US$83.3m AEB subscription

The country is expected to fork out approximately US$83.4million by March 31, 2024 as its initial subscription capital to the recently proposed Africa Energy Bank (AEB), which it is seeking to host.

However, with the tight fiscal space that the country currently finds itself in, government has asked the Ghana National Petroleum Corporation (GNPC) – a state-owned oil firm anticipated to be a key beneficiary of the AEB – to allocate earnings of its subsidiary, GNPC Explorco, to cover the country’s equity in the AEB.

Part of the plan also includes tapping into the Ghana Heritage Fund to raise the initial AEB subscription fee. These investments are seen as necessary in the country’s bid to host the bank.

The establishment of AEB, which has been approved by the African Petroleum Producers Organisation (APPO) Council of Ministers, is expected to primarily provide funding for developing African Regional Energy Infrastructure.

This is being pursued as a long-term strategy to tackle challenges posed by the global paradigm-shift from fossil fuels to clean energy. More importantly, it is to ensure that the continent is not left with multi-trillion worth of stranded hydrocarbon resources, as it will provide funding to African focused oil-producing companies.

AEB is seen as a catalyst in raising funds for African member-countries. Ghana became a member of APPO on 4^th November 2022 at its 43^rd Council meeting in Congo, Brazzaville.

It is noted that the establishment of AEB offers considerable benefits to the country; including leveraging its membership to obtain funding support for the its exploration and production operations.

Also, the country could secure funding for upstream oil and gas infrastructure projects – or logistics support for pipelines, rehabilitation of refineries or building new refineries.

Furthermore, Ghana can leverage the opportunity to obtain funding support from the AEB to maintain its infrastructure and provide support for developing regional markets. This will boost prospects for the much-talked about petroleum and petrochemical hub, and also create markets for natural gas and power produced in the country.

At their 44^th Ordinary Session held in Cotonou, Benin, on November 2, 2023, the Council of Ministers is said to have urged that member-countries provide full support for the AEB’s establishment by paying their capital share and ratifying the documents establishing it.

To this end, the AEB agreement between AfreximBank, APPO and member-states is to provide the basis for raising capital and related financial and non-financial services to establish the AEB.

It also provides for developing a charter and setting up subsidiaries, offices, branches or agencies of the bank. The AEB is envisioned to be an international institution with a full juridical personality under the member-states’ laws.

The bank’s Shareholding will be open to independent African states; African continental, regional and sub-regional financial institutions; African private and public investors and international banks, and shall be acquired per the charter.

The agreement also provides for the bank to be exempted from all direct and indirect taxes.

Moreover, the AEB charter provides its mandate, governance structure and regulation of the company, including matters such as board composition, capital allocation and management.

It makes provision for different classes of shares to be issued, with the Class A shares allotted to APPO members, African national oil companies (NOCs) and AfreximBank. Class B is for African states while Class C is for non-African entities. Class A will have not less than 60 percent of the shares, Class B will have not less than 25 percent, and Class C not more than 15 percent.

Parliament’s Committee on Mines and Energy, in its report at the third session of the 8^th Parliament, concluded that the agreement for establishing AEB and related matters will be of tremendous benefit to members of APPO.

“The establishment of AEB will provide access to capital for exploration, production and marketing of oil & gas, and the development of technology and skills in various parts of the continent,” it stated.

It therefore recommended parliament to adopt its report and ratify the relevant documents for the creation of AEB – which comprise the agreement for establishing AEB and its charter.

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