Ghana severs ties with Meralco-led PDS after scandal

John Peter Amewu is the Energy Minister
John Peter Amewu is the Energy Minister

Ghana has terminated its contract with Meralco-led Power Distribution Service (PDS) after detecting false claims in the contract a few months ago.

The West African nation had to suspend the concession agreement within six months after it came to light that PDS breached aspects of the contract.

“The Government of Ghana through the Ministry of Finance and the Electricity Company of Ghana (ECG) Ltd. has suspended the concession agreement with Power Distribution Services (PDS) Ghana Limited with immediate effect,” Kojo Oppong Nkrumah, Information Minister announced on July 30, 2019.

He added: “The decision follows the detection of fundamental and material breaches of PDS’ obligation in the provision of Payment Securities (Demand Guarantees) for the transaction which have been discovered upon further due diligence.

“The Demand Guarantees were key prerequisites for the lease of assets on 1st March, 2019 to secure the assets that were transferred to the concessionaire. The government is conducting a full enquiry into the matter, and the outcome will inform the next course of action”.

Weeks after investigating the anomaly, the Ghana government has gone ahead to cancel the contract, although local media say the US government is not in support.

PDS took over ECG on March 1 after its major shareholder Meralco Consortium from the Philippines won the Millennium Challenge Power Compact Two from the U.S.A.

In September, Manila Electric Co. (Meralco) served notice it will pull out of its investment in power distribution in Ghana due to high “political risk.”

The CEO of Meralco, Ray Espinosa, is worried about the situation in Ghana, adding they would not hesitate to pull out if the situation does not change.

“We’re still waiting for developments. It’s a Ghana government issue,” Meralco president and CEO Ray Espinosa said.

The Genesis

On August 5, 2014, the government of Ghana executed the second Millennium Challenge Compact with the US government with the objective of, inter alia, increasing private sector investment and the productivity and profitability of micro, small, medium and large scale businesses.

Among the six projects within the second compact is the ECG Financial and Operational Turnaround Project (EFOT), which seeks to introduce a orivate sector oarticipant in the management and operations of ECG.

According to the statement, consequently, the GoG, under the auspices of the Millennium Development Authority, embarked upon a competitive procurement process which resulted in the selection of an acceptable partner to manage, operate and invest in ECG’s operations for 20 years.

The Meralco-led Consortium was declared the winning bidder on April 20, 2018.

Meralco has partnered AEnergia SA, an Angolan company, and three Ghanaian companies–TG Energy Solutions Ghana Limited, Santa Power Limited and GTS Power Limited to form Power Distribution Services Ghana Limited, the statement indicated.

PDS is 51 percent Ghanaian-owned as required by the government of Ghana.

The concessionaire, PDS, is expected to strengthen the governance, management and operations of ECG and improve the delivery of power to end users to support socio-economic growth in Ghana, according to the statement.

It added that “the general public and customers of ECG are, hereby, informed that effective 1st March, 2019, PDS will be the electricity service provider in all of ECG’s operational areas in the southern distribution zone of Ghana.

The ECG will continue to operate as a bulk energy trader and the asset owners.”

Source: Daily Mail GH

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