PDS Wahala: Ghana to lose over $1.8bn US Funding support
Unfortunately, Ghana is likely to lose close to US$2 billion directly and indirectly from the United State of America government’s funded or assisted projects starting this year for terminating the contract between the Electricity Company of Ghana, (ECG) and the Power Distribution Service (PDS) an energy expert has said.
The U.S government through the Millennium Challenge Corporation (MCC) announced their displeasure for the cancellation of the Power Distribution Services (PDS) consortium under the concessionaire arrangement to manage and maintain the southern sector electricity distribution in the country last week.
This is partly confirmed by the Information Minister, Kojo Oppong Nkrumah who said at a press conference, last week, that country is likely to lose the Regional Compact Program, known as the “Compact 3” under the Millennium Challenge Corporation (MCC) which is expected to allow Ghana to facilitate the effective distribution of excess power to neighboring countries.
“There’s a possibility that the termination of the Power Distribution Services (PDS) concessionaire agreement and annulment of the second trench disbursement will affect the Compact 3 agreement and we are aware of that possibility, but government will continue to engage the United States government along with other matters tied to this concession agreement.”
This comes after the Government of Ghana officially announced the cancellation of PDS agreement last week at a presser. This returns the country’s over US$20 billion assets of the electricity distribution channels back to its original manager, that is, Electricity Company of Ghana (ECG).
In a breakdown analysis of the close to US$2 billion funding support, Ghana is likely to lose from the U.S, Mr. Alex Mould, former Ghana National Petroleum Corporation (GNPC) and Executive Director with the Standard Chartered Bank gave an elaborative analysis.
“What we lose by cancelling the PDS contract and not working a solution with MCC is not just $190m but nearly $1.8bn. US $190m from the Ghana Power Compact; US$400m for the Regional Compact; US $500 Government Budgetary Support; US $580 from the concessionaire among others,” the renowned energy said in a statement.
This should be a worry to all well intended government which mean well for its citizens in advancing socio-economic development and attracting investors, to reconsider its decision.
The MCC, which is the financier of the Ghana Millennium Challenge Compact II (Power Compact), is telling the government of Ghana to reverse back the terminated PDS concession and restructure the consortium to ensure friendly investment climate for the lead concessionaire (Meralco) to operate.
MCC is just demanding that government through its transaction advisor to: keep the PDS contracts; change the undesired Local shareholder and replace them with institutions like SSNIT and or Ghana Infrastructure and Financing Fund (GIFF); bring in known world class foreign distribution companies (Meralco has been approved) and eliminate AEnergia SA, Mr Mould said.
“We simply goofed on such a serious transaction!!! This is a reflection of how serious we take things in our beloved country Ghana – led by our leaders whom we have placed so much Trust to do the right things;
“The focus is not Ghana First, but rather what “We” get from managing the assets of the state which normally results in short changing the Citizens of Ghana and to the detriment of our economy;
“Please don’t blame MCC, the rules of engagement were clear. MCC are just asking us to not take us back years.
“Let’s consider the option and lifeline given by MCC: – keep the PDS contracts, – change the undesired Local shareholder and replace them with institutions like SSNIT and or GIFF, – bring in known world class foreign distribution companies (Meralco has been approved) and eliminate AEnergia SA, the scarlet pimpernel in this deal”
A termination brings to an end, PDS’ short-lived control of the country’s electricity supply.
The company was engaged in March but since its suspension on July 30, PDS had been embroiled in a corporate governance tussle among the shareholders.
A Ghanaian local consortium holds the 51% of the shares while the remaining 49% shares are for two foreign companies, Manila Electric Company Limited (Meralco), a Filipino company with 30% shares and AEnergia, an Angolan company with 19%.
However, Meralco offloaded its shares to Meridian Power Ventures Ltd in recent development about the PDS consortium brouhaha, a letter to a key transaction advisor, the US-backed Millenium Development Authority (MiDA) confirmed.
Apparently, the Minority in Parliament characterised the offloading of Meralco’s shares as evidence of clandestine attempts by the government to loot the assets of Electricity Company of Ghana by family and friends as almost all of the owners and board members of the local companies in the PDS consortium are one way or the other related people in government.
PDS was suspended after the government said it suspected the agreement was tainted with fraud. This led to the transaction advisor, MiDA, setting up an investigative body into the allegations but cleared PDS of any wrongdoing in its report.
In 2014, as part of the conditions that government needed to satisfy in order access a second Millennium Challenge Compact, named as the ‘Ghana Power Compact’(thus, bringing in private participation in the management of Ghana’s power distribution). The Compact II was to see Ghana receive US$498.2 million from the Millennium Challenge Corporation of the United States to advance economic growth and reduce poverty in Ghana.
The Power Compact was to, “directly support the energy sector strategic objectives to achieve power supply sufficiency including exports to neighbouring countries, and also supply power for new oil and gas-based industries.”
The then president John Mahama government announced the decision to, as part of the Compact II agreement, enter into a concessional agreement where a private company would take over the management of the largest power distributor in the southern part of the country, the Electricity Company of Ghana. The announcement was however met with resistance despite strenuous clarification and explanation by the government that the strategic national asset was being privatized. The workers of ECG held several public fora and protested the decision, arguing that if the government paid its debts to the power distributor and made the necessary investments, the company was capable paying its supplies and proving viable.
To ensure start the process, invitations were made for companies wishing to participate in the management of ECG to come forward. In September 2016, the Chief Executive of MiDA, Ing. Owura Kwaku Sarfo announced that out of the over 60 companies that expressed interest in the Private Sector Participation in ECG), MiDA had shortlisted six, out of which one would eventually be selected as the concessionaire.
Two of the six companies were consortiums, with the other four bidding individually.
The companies are Manila Electric Company from the Philippines; Ch Group/Edf Sa/Lmi Holdings/Veolia Sa with Ghanaian address; EngieEnergie Services, SA; from France, Bxc Company Ghana Ltd /Xiaocheng Technology Stock Company Limited, registered and operating in Ghana; EnelS.P.A.from Italy; and Tata Power Company Limited from India.
In a document titled ‘Concession for the management of, operation of, and investments in the electricity distribution business of the Electricity Company of Ghana, Pre-qualification of applicants and release of RFP,’ request for proposals were issued to the shortlisted companies on Tuesday, August 30.
Following the change in government in January 2017, the new government announced it had negotiated an amendment of the shareholding structure to ensure that Ghanaians hold the majority stake in the company. Then Energy Minister BoakyeAgyarko said the government wanted 51 percent of the shares to be held by Ghanaian citizens.
Unhappy with this state of affairs, some of the companies withdrew from the process leaving only two – Consortia – BXC Ghana and Manila Electric Company (MERALCO) from the Philippines, to submit their proposals for the management of ECG.
After evaluation of the two proposals, MiDA, which was responsible for selecting a successful bid, settled on the PhillipinoCompany, disqualifying BXC Consortium on grounds of conflict of interest. The company was faulted for failing to disclose its existing contract with ECG. It, however, sued MiDA, arguing the disqualification was “arbitrary and without basis.” BXC Consortium in its suit, sought $4m in damages – money it contended “it expended in preparing and submitting its bid.” It also sought to injunct the process but the application for an injunction was dismissed. This paved the way for MERALCO to be chosen as the successful concessionaire.
Source: Adnan Adams Mohammed