{"id":701742,"date":"2019-09-09T11:00:58","date_gmt":"2019-09-09T11:00:58","guid":{"rendered":"https:\/\/ghana-mma.com\/2019\/09\/09\/pds-milks-ecg-to-pay-12m-guarantee\/"},"modified":"2019-09-09T11:00:58","modified_gmt":"2019-09-09T11:00:58","slug":"pds-milks-ecg-to-pay-12m-guarantee","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2019\/09\/09\/pds-milks-ecg-to-pay-12m-guarantee\/","title":{"rendered":"PDS \u2018Milks\u2019 ECG To Pay $12m Guarantee"},"content":{"rendered":"

<\/p>\n

\n

William Hutton Mensah \u2013 PDS Boss and Ing Samuel Boakye Appiah \u2013 ECG Boss<\/strong><\/p>\n

It
\nappears the new managers of the Electricity Company of Ghana\u2019s (ECG) assets\u2012 Power Distribution Services (PDS) Limited\u2012 is relying heavily on cash flow from the sale of electricity to meet
\nits financial obligations under the power concession agreement. <\/p>\n

According to a consulting firm, FTI Consulting, which was engaged to
\nprobe the recent brouhaha over the botched PDS demand guarantees submitted for the
\nmanagement of ECG assets under the Millennium Development Authority (MiDA)
\nconcessionaire agreement, PDS lacks adequate capital to undertake US$350million
\ninvestment for the protection of the ECG assets. <\/p>\n

\u201cPDS is not having a certain level of capital required for the
\nissuance of a cash-backed letters of credit, which was an option offered by
\nsome financial institutions that PDS had approached. We were informed during
\ninterviews that PDS was offered the opportunity to secure cash-backed letters
\nof credit if it could deposit US$350 million in its bank account,\u201d FTI stated
\nin its report.<\/p>\n

In lieu of that, PDS engaged its bankers (Cal Bank) to facilitate
\nthe insurance cover as payment security for the Lease Assignment Agreement
\n(LAA) and Bulk Supply Agreement (BSA) before the transfer of ECG assets.<\/p>\n

Cal Bank therefore contacted its business partner, Donewell
\nInsurance, which also engaged Jordanian insurance brokers, Jo Australia Reinsurance Brokers, to seal a
\nreinsurance deal with Al-Koot, a Qatar-based insurance firm.<\/p>\n

However, the whole transaction could not stand because the Qatar
\nbased insurance company has ruled out capacity to underwrite the US$350million
\ninsurance cover, throwing the PDS takeover of ECG assets into disarray.<\/p>\n

Ghanaians are awaiting pronouncements from the government, after
\nit was established that the reinsurance deal with Al-Koot did not go through, having
\nrecognised that US$12.25millon Demand
\nGuarantees posted by PDS was not valid<\/p>\n

No Cash<\/strong><\/p>\n

The FTI report quoted that PDS could not secure the Demand
\nGuarantees or Letters of Credit as per the requirements of the LAA and the BSA
\nfrom a bank because of not having a certain level of capital required for the
\nissuance of cash-backed payment security. <\/p>\n

The FTI, commissioned by MiDA to look into the confusion generated
\nby the suspension of the PDS deal because of lack of financial security, in its
\nreport indicated that of the US$12.25 million raised for the Demand Guarantees
\nas charged by Cal Bank to PDS as fees for raising the payment securities, only one
\nmillion dollars (8%) was funded by an equity contribution by a PDS shareholder.
\n\u00a0The rest of the money totalling US$11.25million
\nwas paid using money paid by ECG customers.<\/p>\n

The report said, \u201cUS$7 million (57%) was funded by a loan that was
\nadvanced by Cal Bank to another PDS shareholder. This loan was repaid from
\noperating cash flows generated by PDS after the transfer date. The balance of US$4.25
\nmillion (35%) was also paid directly from operating cash flows generated by PDS
\nafter the transfer date.\u201d<\/p>\n

This indicates that only one million dollars had been paid by the
\nnew mangers of ECG\u2019s GH\u00a222 billion assets to take control of
\npower distribution in the ECG enclave, raising questions about the financial
\ncapability of the new operators.<\/p>\n

Meralco, the Filipino, 49 per cent owner of PDS, was not mentioned
\nas having contributed a dime in the transaction even though the company has
\nbeen given a mouthwatering consulting job by PDS. <\/p>\n

The report also established the sharing formula of the US$12.25
\nmillion, with seven million dollars paid to Donewell for the cost of the
\ninsurance premium, while US$5.25 million was retained by Cal Bank. <\/p>\n

\u201cThe total insurance premium of seven million dollars was posted to
\nDonewell\u2019s Cal Bank account on February 27, 2019. As reported by Donewell, a
\nportion of this amount was distributed to four local Ghanaian reinsurers and Jo
\nAustralia (the reinsurance broker),\u201d the report stated, without mentioning
\nwhether Al-Koot got its share of the proceeds.<\/p>\n

No Fraud<\/strong><\/p>\n

The consultant ruled out underhand dealings in its investigations. \u00a0<\/p>\n

\u201cWe have not identified any information to suggest that either PDS,
\nCal Bank, and\/or Donewell committed or conspired to commit fraud or other
\nmalfeasance in relation to the Demand Guarantees.\u201d<\/p>\n

Invalid Deal<\/strong><\/p>\n

A delegation sent by government to Qatar to authenticate the US$12.25millon
\nDemand Guarantees posted by PDS indicated in its report that the guarantee was
\nnot valid as it was fraudulently procured by Yahaya Al-Nouri, a staff of Al
\nKoot Insurance and Reinsurance Company in Doha. <\/p>\n

PDS, a local and foreign consortium, in March 2019 took over power
\ndistribution functions of ECG under a concession agreement which ran into
\ntrouble four months into the agreement over insurance security.<\/p>\n

Government of Ghana in July suspended the transaction following the
\n\u201cdetection of fundamental and material breaches of PDS\u2019 obligation in the
\nprovision of Payment Securities (Demand Guarantees) for the transaction which
\nhas been discovered upon further due diligence.\u201d<\/p>\n

According to the delegation, there was no valid guarantee issued by
\nAl Koot in the name of PDS as the documents purported to be coming from the
\nQatari insurance company was forged by a staff, Yahaya Al-Nouri, who until
\nrecently was manager of reinsurance. <\/p>\n

Al-Koot has indicated that the company was not in a capacity to
\nunderwrite PDS guarantee valued at US$350million when its total net worth is
\nabout US$170million.<\/p>\n

The company explained that Al-Nouri\u2019s capacity to commit the company to any deal does not exceed US$15,000 as a manager and can only recommend a similar amount for approval.<\/p>\n

By Fortune Alimi<\/strong><\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

William Hutton Mensah \u2013 PDS Boss and Ing Samuel Boakye Appiah \u2013 ECG Boss It appears the new managers of the Electricity Company of Ghana\u2019s (ECG) assets\u2012 Power Distribution Services (PDS) Limited\u2012 is relying heavily on cash flow from the sale of electricity to meet its financial obligations under the power concession agreement. According to […]<\/p>\n","protected":false},"author":1,"featured_media":701743,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-701742","post","type-post","status-publish","format-standard","has-post-thumbnail","category-politics"],"yoast_head":"\nPDS \u2018Milks\u2019 ECG To Pay $12m Guarantee - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2019\/09\/09\/pds-milks-ecg-to-pay-12m-guarantee\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"PDS \u2018Milks\u2019 ECG To Pay $12m Guarantee - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"William Hutton Mensah \u2013 PDS Boss and Ing Samuel Boakye Appiah \u2013 ECG Boss It appears the new managers of the Electricity Company of Ghana\u2019s (ECG) assets\u2012 Power Distribution Services (PDS) Limited\u2012 is relying heavily on cash flow from the sale of electricity to meet its financial obligations under the power concession agreement. 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