Meralco-led PDS did no wrong in Ghana – Audit report

Manila Electric Co. (Meralco) and its partners did not commit material breaches in the concession agreement to operate Ghana power distribution utility, according to an independent audit by US government foreign aid agency Millennium Challenge Corp. (MCC).

As a result, MCC is terminating its $190 million funding for Ghana after the latter’s government scrapped the deal with Meralco and partners to operate and maintain power distribution services.

The MCC conducted a parallel, independent audit of the concession agreement as the Government of Ghana suspended and investigated the alleged fraud.

“In contrast to the findings of the Government of Ghana’s investigation of the matter, the independent audit concluded that there was no information to suggest fraud in the transaction,” MCC said.

Based on the independent audit findings, MCC also said the suspension of the concession agreement “was unfounded” and that the rights of Power Distribution Services Ghana Ltd. (PDS) as concessionaire “should be restored.”

PDS is a consortium between Meralco through Meridian Power Ventures ltd. (30 percent), Angola-based firm AEnergia SA (19 percent), and three Ghanaian firms namely TG Energy Solution Ghana (18 percent); GTS Engineering Ghana Limited (10 percent), and TBK Ghana Limited (10 percent).

“MCC communicated this view to the Government of Ghana in numerous discussions in September and October. In these discussions, MCC also stressed that a failure to restore the concession would likely lead to reduction of compact funding by $190 million,” it said.

However, the Government of Ghana proceeded to cancel the agreement with PDS on grounds of alleged material breaches.

This drove MCC to terminate the rest of its $190 million compact funding as private sector participation in Ghana’s electricity company is a critical basis for its aid.

The US foreign aid agency said compact activities that would be eliminated as a result of the partial termination of compact funding include changing the governance structure of the utility by bringing in a private sector operator and infrastructure improvements designed to reduce losses and outages and improve service quality.

“MCC intends to continue to provide the remaining balance of compact funding, which will continue to be managed and implemented by MiDA (Millennium Development Authority). It is planned that this funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access in key markets, and advance energy efficiency programs,” it said.

The Meralco-led PDS signed the concession agreement with ECG on March 1, a year after Millennium Development Authority (MiDA) chose Meralco as the preferred bidder for private-sector participation in Electricity Company of Ghana (ECG) and the Parliament of Ghana approved the 20-year concession agreement.

Under the agreement, ECG’s assets would be leased to the PDS while the ECG would become an asset holding company.

Meralco said the PDS Consortium had planned to invest over $580 million for capital expenditures to strengthen the governance, management and operations of the ECG and improve the delivery of power to end users as well as support Ghana’s socio-economic growth.

The concession agreement was suspended in July and was terminated in October.

Source: Philstar Global