Govt cautions public against cancelled and withdrawn 2010 STX deal

The government has cautioned the public against accepting transfer or assignment of the sovereign guarantee it gave STX Engineering and Construction Ghana Limited in 2011.

According to the government, the suppliers' credit and financing agreement, as well as the sovereign guarantee issued in favour of STX Engineering and Construction Ghana Limited in 2010 and 2011 respectively, has since been cancelled and withdrawn.

Accordingly, it has advised the general public that any person who accepts the transfer or assignment of the sovereign guarantee without conducting the necessary due diligence does so at its peril.

In a public notice, published in the Daily Graphic newspaper on Monday, August 20, the Ministry of Finance explained that, on April 27, 2011, it issued a sovereign guarantee in favour of STX Engineering and Construction Ghana Limited for the amount of US$1,525,443,468 plus any interest and fees accrued.

The Sovereign guarantee, it added, was a collateral for a suppliers credit for the construction of 30,000 housing units for the security services housing project.

It said the guarantee was premised on a suppliers credit and financing agreement dated December 14, 2010, between STX and government of Ghana through the Ministry of Finance and Economic Planning.

However, following STX’s failure to secure financing for the security services housing project in order for the EPC contract to become effective, it said Cabinet on August 17, 2015, approved the termination of the suppliers' credit and financing agreement of 2010 and the withdrawal of the sovereign guarantee of 2011.

It said, “The Bank of Ghana on 12th September 2017 confirmed the cancellation of the Sovereign guarantee by swift advice to the beneficiary bank, Barclays Bank of Ghana.”

Per the public announcement, the Ministry of Finance, therefore, wants the general public to take note and be advised that the said agreement between STX has been cancelled and the sovereign guarantee withdrawn.

Background

A sovereign guarantee is an undertaking given by host countries to assure project lenders that the government will take certain actions or refrain from taking certain actions affecting the project.

The government provided a sovereign guarantee to serve as a financial backbone for STX Ghana in the execution of President J.E.A. Mills government’s housing project which was meant to provide some 30,000 housing units for the security services.

The off-taker agreement entered into with STX Korea ceased to exist in 2012, following the Cabinet’s decision to back out of the deal.

The government’s position was that the agreement had ceased to exist as of 2012 and that the project became stillborn because of changes in the shareholding structure of STX Ghana, a development which prompted the Korean partners to drag their Ghanaian partner, Mr Asamoah, to court over alleged falsification of corporate documents and unlawful reconstitution of the board.

Government’s position was that since there was no binding contract, STX Ghana had no right to parade itself that it possessed the $1.5 million guarantee to execute the project.

The then sector Minister, Enoch Teye Mensah said “the managers [of STX] only came to waste everybody’s time by holding the nation to ransom in connection with the deal,” and said the lands allocated to STX for the housing project has since been repossessed by the government.

President John Evans Atta Mills, on January 27, 2011, cut the sod for the commencement of the project, which at the time was expected to be the biggest investment made by the government in the housing sector.

The project was, however, fraught with problems resulting from the Korean and Ghanaian partners engaging in a turf war over ownership and control of the company.