PDS and ECG
The government has finally brought the much needed closure to the confusion surrounding the Power Distribution Services (PDS)/Electricity Company of Ghana (ECG) concession.
In the light of the development, the ECG is now on its own and has already issued a statement to that effect.
Information Minister Kojo Oppong Nkrumah, who announced the government’s official position yesterday at a news conference, said, “The Government of Ghana consequently from 9:30 am today is commencing a process to terminate.”
He said the decision to terminate followed due to the inability of the Ghanaian and their American counterparts to agree on a common path to the resolution of the sticking point.
Necessary Documentation
“As a mark of seriousness, the necessary documentations are being filed with the PDS and the Energy Commission,” the minister said, adding that “it is expected that residual matters between ECG and PDS would be resolved with dispatch.”
ECG Assets
“ECG has remained in possession of assets while PDS has been assisting it with some limited services in the period during which the concession was suspended prior to the termination,” the minister stated.
He said the two governments would continue to work together “on other development cooperation projects. This has not been a crisis between us and the Americans. It has been a difference in opinion which we have mutually agreed to respect.”
NDC Mischief
Turning to the activities of the opposition NDC in the raging subject, the minister recalled what they did to the ruling party in the matter of the China Synohydro arrangements when they sought to have the International Monetary Fund (IMF) scuttle the transaction but failed.
Clear Distortions
The NDC has tried to implicate President Akufo-Akufo’s government in the PDS brouhaha but records of current events have proved otherwise.
“Government reiterates that neither the government nor the President has had any interest in PDS,” the minister pointed out.
“PDS is a consortium created by the company Meralco which was the successful bidder in the selection process. Government or its assigns supervised by the MCC which process was initiated in 2016. This political distortion will not wash.”
No Proof
The minister said the NDC had not been able to adduce any proof of corruption in the concession agreement.
“The evidence is that the Akufo-Addo administration is the one which through due diligence discovered the suspected breach and has proceeded to act to preserve national assets. Again this propaganda will not wash,” he added.
Common Regret
The two sides, the minister said, regret the turn of events as a result of their inability to find a mutually agreeable path for the utilization of the $498 million as contained in the deal.
No Compromise
Tracing the genesis of the disagreement, he said Ghana is unable to compromise on the outstanding issues because as he put it “we are advised and believe same to be true that the concessionaire failed as initially suspected to meet the material and fundamental terms of the concessionaire agreement which was to deliver and maintain valid security payments of the assets.”
Insurers
On the American side, he said, “The insurers have indicated they do not intend to stand by the purported guarantees which are that a termination is unwarranted and that restructuring would be more tolerable.”
First-Hand Information
The press conference which came later than expected having been announced and postponed to Tuesday offered Ghanaians the first opportunity to hear government’s position on a thorny subject which has lingered on for the past few weeks.
The press conference came on the heels of an exchange of discordant correspondences between the American and their Ghanaian counterparts, none of which clearly stated what the endgame was, until the Yankees fired the last salvo announcing the revocation of the arrangement of releasing $190 million out of a total of $490 million, and now the government narration and final decision about the commencement of the process of termination.
America Stops Deal
In their reaction sequel to the foregone, the US Embassy in Accra recalled government’s information to the MCC about its decision to terminate the concession agreement between the ECG and the PDS.
“The United States of America notes this with regret. Based upon the conclusions of the independent forensic investigation, the US position is that the transfer of operations, maintenance and management of the Southern Distribution Network to the private concessionaire on March 1, 2019 was valid and therefore the termination is unwarranted. As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available,” the Embassy indicated.
The US, the statement, pointed out is a committed partner and has full confidence in the Millennium Development Authority (MiDA) to lead the joint effort to deliver the projects funded through the $308 million with MiDA explaining that this funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network.
MCC Order
The Millennium Challenge Corporation (MCC) soon after Ghana’s announcement about its desire to exit the programme directed a restoration of the status quo.
The directive was contained in an October 18, 2019 correspondence from the Principal Deputy Vice President, Department of the Compact Operations of the MCC, Kyeh Kim.
The request of the MCC, through the Finance Minister Ken Ofori-Atta, is that the termination of the arrangement be nullified.
Social and traditional media went agog with commentaries about the development some of them highly politicized.
Far Reaching
The far-reaching demands of the MCC as contained in the correspondence to the Finance Minister referred to as Government of Ghana milestone are ‘the reinstatement of PDS’ concession rights under the Transaction Agreements, lifting of the suspension of the Lease and Assignment Agreement (LAA), Bulk Supply Agreement (BSA) and the Government Support Agreement (GSA).
The MCC further directs that the government ‘cause the Energy Commission to lift the suspension of PDS’ Retail Supply licence.
First Salvo
The first salvo in this whole brouhaha was fired from the government’s corner when the Finance Minister announced earlier the termination of the deal in a correspondence to the MCC.
The long correspondence laid out all the segments of the agreement, the genesis, factors which informed the decision including the fact that government is, regardless of the decision, committed to private sector participation.
Crucial Meeting
According to the Finance Minister, the development followed as he put it “a meeting between the Secretary to the President, Nana Bediatuo Asante, and I, on the one hand and the Principal Vice President of the MCC, Kyeh Kim, and the Resident Country Director-Ghana of MCC, Kenneth Miller, on the other hand held in Washington DC on Friday October 18th, 2019.”
Main Suspension
Government in August suspended the PDS Concession when the Information Minister announced to journalists that within 30-days, a fact-finding committee set up by government would come out with its findings on the alleged breaches of the power concession by PDS.
After long negotiations, the Millennium Challenge Compact (the Compact) was signed on August 4, 2019 between the MCC acting on behalf of the Government of the United States and the Government of Ghana acting through the Finance Minister.
A key condition under the private sector arrangement was to introduce a concessionaire into the distribution sector, who would inject private capital into the operations of the Electricity Company of Ghana.
Transaction Advisors
The two key advisors to the managers of the Compact, MiDA, were the International Finance Corporation (IFC) and Hunton and Williams, an international law firm based in New York.
Through an international competitive tender, Meralco of the Philippines was selected as the concessionaire.
In order to satisfy the local content requirement under the transaction, a special purpose vehicle, Power Distribution Services, was incorporated in Ghana to be the operator, with PDS shareholding being Meralco (Philippines) 30 per cent shares; Aenergia S.A. (Angola) 19 per cent shares; GTS Engineering Services of Ghana, Santa Baron Ventures of Ghana and TG Energy of Ghana – together 51 per cent shares.
Over 40 conditions precedent, five considered critical, were required to be fulfilled by PDS under the LAA and BSA.
Critical Conditions
Two of the critical condition precedents, according to the document, were the provision of a BSA Payment Security and an LAA Payment Security (Conditions Precedent 24 and 31 respectively.)
They were preconditions to the occurrence of the Transfer Date and the exercise of the rights and obligations of the parties, and in terms of the Transaction Agreements, constituted security for PDS’ obligations under the BSA and LAA, according to the document.
Conditions Precedent 24 and 31 required PDS to furnish ECG payment securities in the form of either a Demand Guarantee or a Letter of Credit issued by a Qualified Bank, it noted.
Owing to difficulties experienced with raising a bank guarantee, PDS formally requested MiDA to accept a demand guarantee issued by an A-rated insurance company, it said.
Upon the advice of IFC and Hunton and Williams, the MiDA Board accepted the request of PDS, it added.
Al Koot Factor
Consequently, PDS submitted the Payment Securities in the form of Demand Guarantees issued by a Qatari insurance firm, Al Koot Insurance, and Reinsurance (Al Koot) on 27th February 2019, two days before the Transfer Date of 1st March 2019.
Following failure to receive satisfactory confirmation by IFC and Hutton and Williams of whether adequate due diligence had been performed on the validity of the Demand Guarantees purportedly issued by Al Koot, by a letter dated 28th February, 2019, ECG took the initiative to ascertain from Al Koot itself proof of or confirmation of the due authorization for the execution of the Demand Guarantees by that firm.
ECG also requested Al Koot to confirm compliance with relevant laws and regulations to which the Demand Guarantees would be subject in relation to the substantial exposure in the total sum of $350, 000, 000.00) that Al Koot had undertaken in favour of ECG, it said.
By Melvin Turlue