The government’s decision to abrogate the power concession agreement with Power Distribution Services (PDS) has elicited strong reactions from some energy sector think tanks and political actors.
The Institute of Energy Security (IES) and the biggest opposition party, the National Democratic Congress (NDC), have welcomed the cancellation of the “stinky” contract but said the decision raises critical questions for the government and the Millennium Development Authority (MiDA) to answer.
Some of the questions raised were the appropriateness of the government’s decision to use restrictive tender to select a replacement for PDS and its reluctance to prosecute persons involved in the “fraudulent” PDS deal.
The Africa Centre for Energy Policy (ACEP), which had earlier questioned the propriety of the agreement, however, did not want to comment on the abrogation of the contract, saying it was yet to study the document announcing the government’s decision to cancel the contract with PDS.
The Trades Union Congress (TUC) and the Public Utilities Workers Union (PUWU) would not comment when the Daily Graphic contacted them yesterday.
The IES, in a 14-point statement it issued, said: “The discontinuance of the current stinking and awful PDS concessionaire agreement by the Government of Ghana comes as a great relief to the IES and to many Ghanaians who see the agreement as cooked from the very onset for some persons, judging from the manner in which processes were circumvented, with some key conditions precedent converted to conditions subsequent to allow the takeover.”
Signed by its Executive Director, Mr Paa Kwasi Anamua Sakyi, the IES statement said MiDA, the supervising agency of the Millennium Challenge Compact (MCC), which embarked upon a competitive procurement process, resulting in the selection of Manila Electric Co. (Meralco) and the group of Ghanaian investors to manage, operate and invest in ECG’s operations for 20 years, was negligent in the award of the concession agreement, as it failed to do adequate due diligence, resulting in the botched deal.
“It has also been proved that apart from Meralco, the other parties in the consortium were not known to have both the technical and the financial capacity to assume the business with a cash flow of close to US$4 billion; failing to inject private capital into the operations of the ECG as required, and to the extent that the local shareholders of PDS used proceeds of the ECG to fund $11.5 million of the $12.5 million payments it made to procure the demand guarantees, the Ghanaian was shortchanged.
“Based on all the information gathered about the purported demand guarantees provided by PDS as security for the transfer, the GoG is concluding that there is no valid payment security, and that it is unable to consider that a valid and enforceable payment security was furnished by PDS in fulfilment of an essential condition precedent for the transfer of ECG’s asset to PDS,” it said.
It said although the government had indicated that it was dedicated to the ECG private-sector participation (PSP) transaction and intended to conclude the PSP transaction within the remaining term of the Compact II programme, it must reconsider the proposal presented to the MCC/MiDA for the adoption of a restricted tender process to fast-track some of the processes to replace PDS.
“Restrictive tender promotes corruption and cronyism, kills transparency, leads to high cost of services arrangement, does not provide value for money and does not give wider alternatives to choose the best company to perform,” it argued.
It pointed out that the “Concession Restoration and Restructuring Plan” which was agreed between the Government of Ghana and the MCC, which is intended to be executed before December 31, 2019, must be reviewed.
It said any attempt to rush the process of restoration was likely to produce a worse outcome than the initial one.
It urged the government to explore other means of getting capital injection into the operations of the ECG “and not be overly fixated on the second MCC, which has the government always negotiating from a much weaker position”.
It reminded the Minister of Energy, Mr Peter Amewu, “to honour his word and proceed to prosecute all those involved in the concession agreement with PDS, as it has been established that there was fraud”.
The energy think-tank, ACEP, declined comment on the matter, as it was yet to study the document announcing the government’s intention to cancel the PDS contract.
It had, however, in a press statement issued in September this year, explained that it would be a surprising move if PDS was allowed to proceed with the concession agreement for power distribution in the country.
The statement, which was issued following the suspension of the PDS contract by the government, said conflicting reports from the investigations by both the government and the MiDA-backed independent consultant had helped in identifying fundamental breaches of national interest about how the demand guarantees were procured for the concession.
NDC press conference
Yesterday, the NDC, at a news conference, called for the dismissal of the Minister of Finance, Mr Ken Ofori-Atta, and the Minister of Energy, Mr Amewu, as well as the prosecution of all officials found culpable in the PDS concession agreement.
It accused them of “wilfully causing financial loss to the state”.
Addressing the media, the General Secretary of the NDC, Mr Johnson Asiedu-Nketia, said: “Their shady and negligent conduct in the handling of the PDS concession agreement has created this mess.”
He accused the government of failing to conduct the necessary due diligence on the insurance guarantee provided by PDS before handing over the GH¢22 billion assets of the ECG to it.
“We know from Ken Ofori-Atta’s termination letter that even though the ECG did not receive the requested confirmation and proof of due authorisation by Al Koot by the transfer date, the ECG was compelled to confirm acceptance of the demand guarantee, despite the advice by Hunton and Williams LLP, transaction advisors to the deal,” he said.
He also questioned the rationale behind the government authorising the Minister of Finance to write the PDS concession termination letter, saying: “The only person with the capacity to do so is the Chairperson of the Millennium Development Authority.”
Restrictive tendering proposal
Mr Nketia described the Finance Minister’s proposal to use a restrictive tendering process to select a replacement for PDS as a “well-calculated scheme to allow the government to cook the ECG concession for themselves”.
“This is a no-no,” he stated.
He demanded from the government a full disclosure on the PDS deal, saying “it has generated mistrust between the United States government and Ghana”.
Mr Nketia said government’s account of what transpired at the meeting between President Akufo-Addo and the CEO of the Millennium Challenge Corporation should be taken “with a pinch of salt”.
He said the party was also demanding the immediate dissolution of the MiDA Board and the Keli Gadzekpo-led ECG Board, saying: “They have failed the nation and proved to be undeserving of the critical mandate which has been entrusted into their care by Ghanaians.”
“We demand an immediate forensic audit of the accounts of PDS by an internationally reputable audit firm and the total refund of all money which has accrued to or been collected by them from power consumers since March 1, 2019, when they took over the power distribution business of the ECG. We need our money now,” Mr Nketia said.