We don't need PDS - Govt keeps stance, annuls agreement

The government’s decision to terminate the concession agreement between the Electricity Company of Ghana (ECG) and the private operator, Power Distribution Services Ghana Ltd (PDS), remains resolute.

According to the government, it was unable to compromise because it had been advised, and believed same to be true, that the concessionaire failed, as initially suspected, to meet a material and fundamental term of the concession agreement — to deliver and maintain valid payment securities for the transfer of assets.

The Minister of Information, Mr Kojo Oppong Nkrumah, told journalists at a news conference in Accra yesterday that Ghana had, from 9 a.m. yesterday, begun the process to terminate the agreement.

“The necessary documentations are being filed with PDS and the Energy Commission at the moment. It is expected that residual matters between the ECG and PDS will be resolved with dispatch,” he told the media.

He said the ECG remained in possession of assets, while PDS had been assisting it with some limited services in the period prior to the termination.

He told the media that the parties (America and Ghana) had been unable to resolve their differences regarding the cancellation of the concession agreement but gave an assurance that the two countries would continue to work together on other development cooperation projects.

The Information Minister noted that the issues did not border on what he termed “crisis of confidence between America and Ghana”, adding that “it has been a difference in opinion”.

Truncation

The US, through its infrastructure development agency for partner countries, the Millennium Challenge Corporation (MCC), protested Ghana’s decision to terminate the power concession agreement.

“The US notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the US 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, the MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from the ECG to PDS are no longer available,” a statement issued by the US Embassy in Accra noted.

It said the US underscored the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth.

“Moving forward, the US government, through the 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 programmes directly benefiting the people of Ghana,” it noted.

Answers

Mr Nkrumah was supported at the press conference to answer questions from media personnel by a Deputy Minister of Energy in charge of Power, Mr William Owuraku Aidoo.

Mr Aidoo addressed a number of issues that were raised during the intervening period.

He denied claims that the government had been up to some machinations, stressing that the intent had been to ensure efficiency in the ECG turnaround and the fulfilment of the broader impact.

On the issue of switching the agreement from a bank guarantee to insurance guarantee, he said the effect was the same, adding that there was nothing wrong with the change because that was the only feasible path at that stage, since the tariff methodology had not been made available.

According to him, the government was still interested in ensuring private sector participation (PSP) in the operations of the ECG, adding that there was no point for the government to acquiesce to pressure to save the $190 million grant.

No job losses

On job losses, Mr Nkrumah stressed that it was important for Ghanaians to note that no jobs were lost during the period.

“President Akufo-Addo took a solemn oath before God and the Ghanaian people that he would be faithful and true to the Republic of Ghana; that he would dedicate himself to the service and well-being of the people of the Republic of Ghana. He has done exactly that, despite the pressure,” he emphasised.

He said the decision to terminate was a difficult one, in spite of the significant international pressure, because it was necessary to protect and preserve the assets of the ECG and Ghanaians.

The already-secured $308 million, he explained, would be utilised to improve ECG’s operations, noting that measures had been put in place to ensure the smooth transition of ECG’s assets.

ECG

Meanwhile, the ECG has issued a statement in Accra explaining that it had, as of yesterday, terminated its PSP transaction agreements with PDS.

“The ECG has, therefore, assumed full operational and financial control of the electricity distribution business in the Southern Zone of Ghana with immediate effect. Consequently, all activities which were hitherto undertaken by PDS have reverted to the ECG,” it noted.

It, accordingly, urged all stakeholders and customers to engage the ECG in their normal business activities, which included metering, billing, distribution of bills, bill reconciliation, revenue collection, new service connection, disconnections and reconnections, faulty meter replacements, network faults and repairs, network operations, maintenance, expansion and rehabilitation, complaints and fault reporting.

It also advised that all payments in respect of power purchases and other related activities should take place at ECG regional and district offices, ECG existing customer service centres, ECG licensed vending stations, ECG operated cash points and ECG authorised banks.

It further stated that all cheques issued in respect of power purchases and other related activities should be in the sole name of the ECG.

Assets currently in the name of PDS would revert to the ECG with immediate effect and be rebranded in accordance with the decision over the next few weeks, the statement said.

Meanwhile, checks by the Daily Graphic in some of the operational areas where PDS assumed the assets of ECG indicated that the rebranding had started in earnest.

The team saw some workers of PDS working on distribution lines in working gear rebranded ECG.

Background

The Financial Intelligence Centre (FIC), in August 2019, froze the bank accounts of PDS following the detection of anomalies in the bank guarantee it provided prior to the takeover of the assets of the ECG.

According to the Minister of Information, the accounts were frozen prior to the issuance of an official government statement on the suspension of PDS.

He told the Daily Graphic in an August 2, 2019 interview 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 until further notice.

A statement issued by Mr Nkrumah on Tuesday, July 30, 2019, announced the suspension of the concession agreement and 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 were conducted, both home and abroad, by the government and MiDA.

MCC agreement

Ghana signed an agreement with the US government for the release of $498.2 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, would have been released after Ghana had met requirements to access the fund.