PDS accounts frozen over anomalies in bank guarantee

The Financial Intelligence Centre (FIC) has frozen the bank accounts of Power Distribution Services (PDS) following the detection of anomalies in the bank guarantee it provided prior to the takeover of the assets of the Electricity Company of Ghana (ECG).

According to the Minister of Information, Mr Kojo Oppong Nkrumah, the accounts were frozen prior to the issuance of an official government statement last Tuesday on the suspension of PDS.

He told the Daily Graphic that the government quickly alerted the FIC after the detection of anomalies in the PDS guarantee, resulting in the freezing of the company’s accounts. He explained that the accounts would remain frozen until investigations were completed and all issues unravelled.

“It is important for Ghanaians to note that the government is committed to ensuring that all assets of the Electricity Company of Ghana (ECG) are secure,” Mr Nkrumah assured.

The retransfer of ECG’s assets in the possession of PDS was ongoing, the minister said.

Asked what the atmosphere was between the management of PDS and the ECG, Mr Nkrumah said, “Tense but moving.”

Suspension

A statement issued by Mr Nkrumah on Tuesday, July 30, 2019, to announce the suspension of the concession agreement, explained that the decision followed the “detection of fundamental and material breaches of PDS’s obligation in the provision of Payment Securities (Demand Guarantees) for the transaction which were discovered upon further due diligence”.

“The demand guarantees were key prerequisites for the lease of assets on March 1, 2019 to secure the assets that were transferred to the concessionaire,” the statement said.

Investigations continue both home and abroad.

Compact

Mr Nkrumah told journalists on Thursday, August 1, 2019, that the government was taking steps to secure the second tranche of $190 million compact from the American government following the suspension of PDS operations.

 Subsequently, a team has been tasked to continue engagement with the American government through its agency, the Millennium Challenge Corporation (MCC).

He told journalists: “This engagement is about the possible next steps after the enquiry and channels for sharing information as part of this enquiry.”

According to him, the team was expected to also be in the United States of America (USA) possibly next week as part of their engagement.

He also told the media last Thursday that a full-scale enquiry into the detected breaches had commenced and would end within 30 days.

Due diligence

According to Mr Nkrumah, initial due diligence, led by the transaction advisors, did not detect anything wrong.

Second level checks, led by the Ghana side, initially yielded a response from Al-Koot, the Qatari insurance company providing the guarantee bond, confirming the guarantee, he said.

A third level check led by the Ghanaian side, according to the information minister, resulted in the detection of anomalies within Al-Koot, thereby triggering a fourth level check.

He said “the fourth level check involved sending an initial team from the Ghana Mission in Qatar to engage with Al-Koot officials for further verification. This fourth level further proved the anomalies and suggested untoward actions which are now the subject of the full-scale enquiry,” Mr Nkrumah disclosed.

The PDS has responded to the suspension and denied any wrongdoing on its part.

 A statement the company issued said: “The PDS has taken note of the statement issued by the government....and wishes to state for the record that it has always acted and would continue to act in good faith at all times.”

It said the company would go through due process “by complying with the terms of the transaction agreement executed between it and the Electricity Company of Ghana, on the one hand, and the government, through the Ministry of Finance, on the other.”

MCC Agreement

Ghana signed an agreement with the US government for the release of $498 million to support the transformation of Ghana’s power sector and stimulate private investment.

The first tranche of $308.2 million was released in 2016.

Per the MCC agreement, the second tranche, amounting to $190 million, will be released after Ghana meets requirements to access the fund.