Manila Electric Co. (Meralco) has served notice it will pull out its investment in power distribution in Ghana due to high “political risk.”
Meralco is leading a consortium to form Power Distribution Service (PDS) for the operation and maintenance of the assets and facilities of the Electricity Company of Ghana. However, PDS has been suspended by the Ghanaian government in less than six months of taking over from the ECG over alleged false claims.
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.
However, Espinosa said that Meralco is exposed to political risk following the suspension of its concession.
“The terms are good, but if we will be exposed to these types of uncertainties, we might as well pull out and just devote our attention to the country. And even in Asia, it’s more stable. Maybe we don’t have the DNA for that kind of risk in Africa yet,” Espinosa said.
PDS is a consortium between Meralco through Meridian Power Ventures Ltd. (30 percent), Angola-based firm AEnergia SA (19 percent), and three Ghanaian firms namely TG Energy Solution Ghana (18 percent); GTS Engineering Ghana Ltd. (10 percent), and TBK Ghana Ltd. (10 percent).
The suspension order was due to alleged material breaches in the provision of the demand guarantees by PDS, which were key prerequisites for the turn over of the assets and facilities.
But a week after the suspension, ECG and PDS agreed on an interim arrangement where the Meralco-led consortium would still continue activities related to the retail of electricity to ensure continued power supply and service to consumers.
These activities include meter reading, billing, distribution of bills, bill reconciliation, revenue collection and new service connections.
It would also still be responsible for disconnections and reconnections, faulty meter replacements, network faults and repairs, complaints and fault reporting to the call centers, and any other related service.
The Meralco-led PDS signed the concession agreement with ECG on March 1, a year after Millennium Development Authority (MiDA) chose Meralco as the preferred bidder for private-sector participation in ECG and the Parliament of Ghana approved the 20-year concession agreement.
Under the agreement, ECG’s assets would be leased to the PDS while the ECG would become an asset holding company.
Meralco said the PDS Consortium has planned to invest over $580 million for capital expenditures to strengthen the governance, management and operations of the ECG and improve the delivery of power to end users as well as support Ghana’s socio-economic growth.
After the end of the concession, all assets would be transferred back to ECG, it said.
Source: Daily Mail GH