The United States of America has described the termination of the concession agreement with Power Distribution Services (PDS) as unwarranted.

Despite the government’s claims of fraud in the deal, the US in a statement from its Embassy insists that the agreement was valid.

“Based upon the conclusions of the independent forensic investigation, the U.S. 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.”

The termination of the deal means Ghana will be losing out on $190 million.

The statement noted that, following the termination of the deal, the Millennium Challenge Corporation (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 US, however, says it will “continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA). ”

“This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.”

The Compact comprised of two tranches of funding; the first being $308 million which was made available upon the official start of the current Compact, and the second tranche of $190 million, which was contingent on a successful concession agreement.

The agreement for a 20-year concession was approved on July 24, 2018, by Parliament leading to the private-sector participation in Ghana’s power distribution.

PDS is a consortium between Meralco, Angola-based firm Aenergia SA and three Ghanaian firms namely TG Energy Solution Ghana, GTS Engineering Ghana Ltd. and TBK Ghana Ltd.

Why the deal was terminated

PDS was in July 2019 found to have presented invalid insurance security for the takeover of ECG assets.

The company was initially supposed to furnish the ECG with payment securities in the form of either a demand guarantee or a letter of credit issued by a bank.

The insurance guarantee came about because of difficulties experienced with raising a bank guarantee.

PDS appealed to use a demand guarantee issued by an A-rated insurance company.

PDS thus submitted the Payment Securities in the form of demand guarantees issued by a Qatari insurance firm, Al Koot Insurance and Reinsurance, which eventually became the source fraud after it was discovered that there were fabricated letters and forged signatures.

The government also noted that Al Koot did not have the capacity to engage in such a transaction based
on its net worth.

The company was also not authorised to issue demand guarantees.

Find below the full US Embassy statement

On October 19, 2019, the Government of Ghana (GoG) informed the Millennium Challenge Corporation (MCC) in Washington, D.C. of its decision to terminate the concession agreement between Electricity Company of Ghana (ECG) and private operator Power Distribution Services Ghana Ltd (PDS).

The United States of America notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the U.S. 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 United States underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth. In this spirit, the United States has worked with the Government of Ghana since the latter’s July 30 suspension of the concession in the hopes of finding a mutually acceptable solution that respected contract sanctity and the Government of Ghana’s interest in restructuring the concession.

Moving forward, the U.S. Government, through MCC, will continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA). This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.

The U.S. Government is a committed partner and has full confidence in MiDA to lead the joint effort to deliver the projects funded through the $308 million remaining under the MCC Ghana Power Compact.  The U.S. Government looks forward to continuing to work together with MiDA and the Government of Ghana to implement the remainder of the Power Compact.

Background:

On March 1, 2019, Ghana Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.

The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and a second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.

Citi News


Leave a Reply