Sean Cairncross – CEO, MCC
Barely 48 hours after the government’s termination of the Power Distribution Services (PDS) concession arrangement, the Millennium Challenge Corporation (MCC) has reportedly 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 development has opened a fresh chapter in a corporate governance imbroglio that has plagued the transfer of the assets of Electricity Company of Ghana (ECG) to PDS and the distribution of power by the latter in the country.
The request of the MCC, overseers of the deal, through the Finance Minister, Ken Ofori-Atta, is that the termination of the arrangement be nullified.
Who Blinks First?
With both parties — Government of Ghana and the MCC each carrying their baggage and digging in — it is difficult to determine who blinks first.
DAILY GUIDE is getting signals that the MCC request is likely to hit a snag since the government has resolved to stick to the original plan to restructure the whole concession.
New Arrangement
The Finance Minister has already drawn a roadmap including a tender process to replace PDS, a restricted arrangement which the minister noted “shall be undertaken timeously by fast-tracking some of the processes without compromising the integrity and transparency of the procurement process.”
Revocation Implications
The implication of the revocation of the termination is surely going to prompt the pertinent question about whether or not government must ignore the opportunity cost of the termination.
Not obliging the demand of the MCC could deny Ghana a whopping amount of $190 million of the compact money which by the arrangement is meant to enhance the operations and distribution of power in the country.
Far-reaching Demands
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 directed that the government cause the Energy Commission to lift the suspension of PDS Retail Supply licence.
On the part of the MCC, it will release to MIDA the Tranche II Funding and permit such funding to be committed to approve contracts under the Compact Multi-Year Financial Plan.
Finally, the MCC will authorize the resumption of activities towards the development of a regional compact involving Ghana.
Genesis
The MCC’s reaction comes on the heels of a government announcement about its termination of the concession agreement between it and the PDS.
A letter from the Finance Minister which spelt out government position and the factors which informed the decision went viral soon after it was issued and addressed to Sean Cairncross, the Executive Officer of the MCC in Washington DC, United States.
Key Meeting
The Finance Minister in his correspondence alluded to an earlier 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 18, 2019.”
Implementation Plan
The implementation plan from the MCC in Washington, the minister observed, was deficient failing to contain the substance of what was agreed upon in the New York meeting.
So Many Issues
So many issues have been raised about this subject but the most contentious are those advanced by the opposition National Democratic Congress (NDC) members, who think the concession which was started during their tenure is fraught with improprieties, the ratio of shares to the various parties particularly standing as the thorniest footnote.
No Proof
The President has suffered a continuous barrage of attacks by opposition elements as a man who could be benefitting monetarily from the concession, without convincing proof.
Irony
Now that government is seeking to terminate the deal, it is ironic that the same elements attacking the government do not find it necessary to support the efforts if indeed they actually find something wrong with the state of affairs as they stand today.
Untenable
The transaction, according to the minister’s letter, “has become untenable” adding that the government of the United States of America should be concerned about the lack of security for a transaction involving the commitment of funds. Government, he said, “intends to see this process through in a manner that follows due process and protects the interests of all parties.”
Short Journey
The journey started in March this year with the ECG letting go its traditional role of power supply to the PDS as per the arrangement after the private sector participation was introduced by then Mahama-led National Democratic Congress (NDC) government to enable it to access cash from the MCA account set up by the US government.
When the reality of the deal dawned on many Ghanaians as the ECG took a backstage, they began to question the integrity of the arrangement and wished a reversal would be a better option but for the legalities entailed in the contract.
ECG Privatization
In August 2014, Ghana and United States of America – acting through the MCC – entered into a Millennium Challenge Compact.
The Compact provided for a grant of up to US$498,200,000 to advance economic growth and reduce poverty in Ghana, and commits Ghana and the MCC to a five-year economic development programme that would fund investments in the country’s power sector and as part of the deal, the government agreed to put ECG in private hands to be supervised by the Millennium Development Authority (MiDA).
Per the Mahama-led initial agreement, the concessionaire was to hold 80% stake and manage ECG for 25 years, while the Ghanaian ownership was to hold the remaining 20% stake.
However, President Akufo-Addo, upon assumption of office and through the then Energy Minister Boakye Agyarko, got the US government to review the terms where the Ghanaian ownership now stands at 51% share with the foreign investor taking the remaining 49%.
The Ghanaian local consortia holding the 51% of the shares in PDS include TG Energy Solutions Limited (TG), with 18%; Santa Baron Ventures Limited (Santa), with 13%; as well as GTS Engineering Services Limited (GTS) and TBK Ghana Limited (TBK), with 10% each.
The remaining 49% are for Pilipino consortia (foreigners) including Manila Electric Company Limited (Meralco), with 30% shares and Aenergia, an Angolan company, with 19% shares.
By A.R. Gomda