Sean Cairncross – CEO, MCC
Barely 48 hours after the government’s
termination of the Power Distribution Services (PDS) concession arrangement,
the Millennium Challenge Corporation (MCC) has reportedly directed a
restoration of the status quo.
The directive was contained in an
October 18, 2019 correspondence from the Principal Deputy Vice-President,
Department of the Compact Operations of the MCC, Kyeh Kim.
The development has opened a fresh
chapter in a corporate governance imbroglio that has plagued the transfer of
the assets of Electricity Company of Ghana (ECG) to PDS and the distribution of
power by the latter in the country.
The request of the MCC, overseers
of the deal, through the Finance Minister, Ken Ofori-Atta, is that the termination
of the arrangement be nullified.
Who
Blinks First?
With both parties — Government of Ghana and
the MCC each carrying their baggage and digging in — it is
difficult to determine who blinks first.
DAILY GUIDE is
getting signals that the MCC request is likely to hit a snag since the government
has resolved to stick to the original plan to restructure the whole concession.
New
Arrangement
The Finance Minister has already
drawn a roadmap including a tender process to replace PDS, a restricted
arrangement which the minister noted “shall be undertaken timeously by
fast-tracking some of the processes without compromising the integrity and
transparency of the procurement process.”
Revocation
Implications
The implication of the revocation
of the termination is surely going to prompt the pertinent question about whether
or not government must ignore the opportunity cost of the termination.
Not obliging the demand of the MCC
could deny Ghana a whopping amount of $190 million of the compact money which
by the arrangement is meant to enhance the operations and distribution of power
in the country.
Far-reaching
Demands
The far-reaching demands of the
MCC, as contained in the correspondence to the Finance Minister referred to as
Government of Ghana milestone, are “the reinstatement of PDS’ concession rights
under the Transaction Agreements, lifting of the suspension of the Lease and
Assignment Agreement (LAA), Bulk Supply Agreement (BSA) and the Government
Support Agreement (GSA).”
The MCC further directed that the government
cause the Energy Commission to lift the suspension of PDS Retail Supply licence.
On the part of the MCC, it will release
to MIDA the Tranche II Funding and permit such funding to be committed to
approve contracts under the Compact Multi-Year Financial Plan.
Finally, the MCC will authorize
the resumption of activities towards the development of a regional compact
involving Ghana.
Genesis
The MCC’s reaction comes on the
heels of a government announcement about its termination of the concession agreement
between it and the PDS.
A
letter from the Finance Minister which spelt out government position and the factors which informed the decision went viral soon after
it was issued and addressed to Sean Cairncross, the Executive Officer of the MCC
in Washington DC, United States.
Key Meeting
The
Finance Minister in his correspondence alluded to an earlier meeting between
the “Secretary to the President, Nana Bediatuo Asante, and I, on the
one hand and the Principal Vice-President of the MCC, Kyeh Kim, and the
Resident Country Director-Ghana of MCC, Kenneth Miller on the other hand held
in Washington DC on Friday, October 18, 2019.”
Implementation Plan
The implementation plan from the MCC in Washington, the
minister observed, was deficient failing to contain the substance of what was
agreed upon in the New York meeting.
So Many Issues
So
many issues have been raised about this subject but the most contentious are
those advanced by the opposition National Democratic Congress (NDC) members,
who think the concession which was started during their tenure is fraught with
improprieties, the ratio of shares to the various parties particularly standing
as the thorniest footnote.
No Proof
The President has suffered a continuous barrage of attacks by
opposition elements as a man who could be benefitting monetarily from the
concession, without convincing proof.
Irony
Now
that government is seeking to terminate the deal, it is ironic that the same
elements attacking the government do not find it necessary to support the
efforts if indeed they actually find something wrong with the state of affairs
as they stand today.
Untenable
The
transaction, according to the minister’s letter, “has become untenable” adding that the government of the
United States of America should be
concerned about the lack of security for a transaction involving the commitment
of funds. Government, he said, “intends to see this process through in a manner
that follows due process and protects the interests of all parties.”
Short Journey
The journey started in March this year with the ECG letting
go its traditional role of power supply to the PDS as per the arrangement after
the private sector participation was introduced by then Mahama-led National
Democratic Congress (NDC) government to enable it to access cash from the MCA
account set up by the US government.
When the reality of the deal dawned on many Ghanaians as the
ECG took a backstage, they began to question the integrity of the arrangement
and wished a reversal would be a better option but for the legalities entailed
in the contract.
ECG Privatization
In August 2014, Ghana and United States of America – acting
through the MCC – entered into a Millennium Challenge Compact.
The Compact provided for a grant of up to US$498,200,000 to
advance economic growth and reduce poverty in Ghana, and commits Ghana and the
MCC to a five-year economic development programme that would fund investments
in the country’s power sector and as part of the deal, the government agreed to
put ECG in private hands to be supervised by the Millennium Development
Authority (MiDA).
Per the Mahama-led initial agreement, the concessionaire was
to hold 80% stake and manage ECG for 25 years, while the Ghanaian ownership was
to hold the remaining 20% stake.
However, President Akufo-Addo, upon assumption of office and
through the then Energy Minister Boakye Agyarko, got the US government to
review the terms where the Ghanaian ownership now stands at 51% share with the
foreign investor taking the remaining 49%.
The Ghanaian local consortia holding the 51% of the shares
in PDS include TG Energy Solutions Limited (TG), with 18%; Santa Baron Ventures
Limited (Santa), with 13%; as well as GTS Engineering Services Limited (GTS)
and TBK Ghana Limited (TBK), with 10% each.
The remaining 49% are for Pilipino consortia (foreigners) including Manila Electric Company Limited (Meralco), with 30% shares and Aenergia, an Angolan company, with 19% shares.
By A.R. Gomda
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