Below are some frequently asked questions (FAQs) about the PDS concession suspension and ECG’s take over.
1. What is the Millennium Challenge Compact II?
This is an agreement between governments and the United States of America to support Ghana in areas that need revamping in our development agenda. The first Compact focused on infrastructure development mainly roads and transportation sector to support agriculture for export. For example, is the six-lane George W. Bush Highway in Accra (N) is a product of Compact I. Based on Ghana’s successful implementation of Compact I Ghana qualified for Compact II. The purpose of Compact II is to significantly revamp the energy sector looking at six main areas one of which covers, Electricity Company of Ghana’s; Electricity, Financial and Operational Turnaround (EFOT.) A major component of this EFOT is Private Sector Participation PSP) in Ghana’s Power Distribution Sector (as per the agreed strategy by both Countries.
2. How will this PSP arrangement impact on Ghana’s development?
The overall benefit will be to accelerate national development through an improved power supply situation that will ultimately lead to economic growth and poverty eradication. An amount of money will be invested over the period in new and additional equipment’s to improve power supply and modernize electricity distribution. This will significantly reduce outrages and stabilize power for businesses and families leading to a boost in productivity and job creation for young people.
3.Why the need for a concessionaire?
A key condition under the Compact II is to introduce a private sector participant (Concessionaire) into the distribution sector who will manage, operate and invest in the distribution business of ECG.
4. Who are the Managers of this Compact in Ghana?
Millennium Development Authority (MIDA)
5. Who are the key Transactional Advisors to MIDA?
The two key advisors are the International Finance Corporation (IFC), an Agency of the World Bank and Hunton and Williams (Now Hunton Andrews Kurth) an International law firm based in New York and was appointed by Millennium Challenge Corporation (MCC)
6. What was the selection process for Choosing PDS as the Concessionaire?
It was an international competitive bidding process undertaken by the Millennium Development Authority (MIDA) in 2017 ?. (TBC). This entailed the issuance of an Expression of Interest, Request for Qualification (RFQ), and Request for Proposal (RFP), Bidders Conference, Evaluation and selection of a preferred bidder.
7. What role did the Government of Ghana play in the selection process?
MIDA acted on behalf of the Government and people of Ghana working in collaboration with officials from the Ministries of Finance and Energy and other stakeholders.
8. Who won the bid?
Manila Electric Corporation (Meralco) of Philippines was announced as the preferred bidder after this International competitive tender.
9. Who is PDS?
To satisfy the local content transaction requirement, a special purpose vehicle, that is a new company was established and legally registered between a Consortium of Ghanaian partners and Meralco under the name Power Distribution Services, Ghana Ltd (PDS) to be the operator.
10. What are roles and responsibilities of PDS under the contract?
PDS role was primarily to operate the distribution network of the assets (equipment and infrastructure) leased to them by ECG. This involved operation; management and investment in the distribution network, selling of energy and collection of sales revenue. ECG remained the owner of the infrastructure.
11. What are the details of the transaction agreement?
The Lease and Assignment Agreement (LAA), Bulk Supply Agreement (BSA) and Government Support Agreement (GSA). Explain the respective agreements briefly.
12. What were the key conditions for the contract to take effect?
(Conditions Precedents) There were 45 conditions precedents but the key ones included these 4:
– PURC approving tariffs based on the rate-setting guidelines.
– PDS providing the demand guarantees for the lease payment and bulk supply of energy
– ECG and PDS agreeing on monitoring schedules and protocols on the leased assets.
– Consent of Generation Companies (GENCOS) for PDS to be appointed as ECG ‘s agent to administer the Power Purchase Agreements (PPA’s) that ECG has signed with those GENCOS.
13. Were these conditions met?
As at the transfer date of March 1, 2019, 29 were met and the remaining 16 were converted into ‘Conditions Subsequent’ in accordance with the provisions of the transaction agreement to be fulfilled by September 1, 2019. Conditions Subsequent means these conditions can be met after the signing of the contract but by the stated date.
14. Were the Demand Guarantee Conditions met before the transfer date?
ECG was furnished with a scanned copy via email of a Demand Guarantee different in structure and form from the one contemplated by the transaction agreement.
15. Was this acceptable to ECG?
ECG had not received satisfactory confirmation of whether adequate due diligence had been done. As a result, ECG on its own initiative before the transfer date wrote to Al-Koot on 28th February 2019 for evidence and or confirmation of the due authorizations given to all the signatories of the Demand Guarantees
16. Did ECG carry out any due diligence?
It was expected that MIDA on the advice of its key advisors (IFC and Hunton and Williams) would have conducted appropriate due diligence before accepting the payment security on behalf of Government submitted by PDS on the 27th February 2019.
Subsequently, ECG also requested Al-Koot to confirm whether it was in compliance with any laws and regulations that it may be subject to comply with in relation to the large exposure in the amount of three hundred and thirty-two million, five hundred thousand United States dollars (USD 332,500,000.00) that the company was undertaking towards ECG.
ECG did not receive such authorizations and confirmation by the transfer date. ECG therefore only confirmed its acceptance to the form of the Demand Guarantee with the expectation that upon receipt of a satisfactory reply from Al-Koot, it will subsequently confirm the guarantee in substance and form. ECG continued to request for such confirmation until it received a confirmation letter on 13th March 2019 which was forwarded to ECG by MIDA on 20th June 2019.
ECG still not being satisfied with evidence provided by Al-koot, through MIDA on 24th June, 2019 requested for other relevant documents proving the due authorization given by the Company to Mr Al Nouri to execute the aforementioned Demand Guarantees on behalf of Alkoot.
ECG was therefore shocked and surprised when they received a letter from Al-Koot signed by The Chief Officer, Mr. Osman Hag Musa via registered mail dated 16th July 2019 and received by ECG on 24th July 2019 in which it categorically stated as follows:
– Al-Koot is not permitted by its constitutional documents to under write counter party and trade risks.
– These are not approved product lines
– The guarantees were not executed by authorized signatories of Al-Koot
– The signature on the response letter dated 13th March, 2019 was forged
– Al-Koot denied the existence of the said guarantees
– Al-Koot alleged that the guarantees was obtained by fraud as it was very apparent of the conduct of the issuer
– It was carrying out its own investigation which is being handled at the highest level of management
– Al-Koot will not accept any present of future legal obligations in connection with the guarantee
– Al-Koot will seek further legal recourse against personnel involved in the fraudulent issuance of the guarantees including action for criminal breach of trust.
ECG accordingly brought this information to the attention of the Minister of Energy, Minister of Finance and the Office of the President. Thereafter the Government through Ghana’s Ambassador to the Kingdom of Qatar on 30th July 2019 directed the Consular Officer of the Mission to proceed to the official premises of Al-Koot in Doha to establish the authenticity of the letter dated 16th July, 2019 signed by the Chief Officer, General Insurance, Mr. Osman Hag Musa.
The Officer successfully met Mr. Osman Hag Musa at Al-Koot during which he attested to the authenticity of the said letter and all its contents. Mr Musa confirmed that an employee of Al-Koot working under him had perpetrated fraud by forging his signature and the matter was under investigation and the officer has been suspended.
17. Why the suspension of the Concession agreement with PDS?
Having been apprised of these facts government acting through the Minister of Finance and ECG, wrote to PDS on July 31, 2019, suspending the Lease and Assignment Agreement and other transaction agreements pending the conduct of investigations into the matter.
Further to this the Energy Commission, suspended the electricity retail and sales license issued to PDS and transferred it to ECG as an interim operator to take charge of management of electricity sales.
The Energy Commission further notified PDS that if they fail to show cause with-in 30 days of receiving the notice, The Commission will suspend or cancel the distribution license issued to PDS.
18. Are the security Agencies aware of this development?
A formal complaint was accordingly made to the Director General, Criminal Investigation Division of the Ghana Police Service on 30th July 2019 on the matter.
19. What are the implications?
In accordance with the rules of natural justice, the suspension is to give PDS the opportunity to be heard and go through the due process of law to establish culpability or otherwise. However, under the Lease and Assignment Agreement, PDS accepts full responsibility for any statement, representation or warranty made by the company. And where such statement, representation or warranty proves to have been incorrect such an event will constitute an event of default by PDS, which shall give rise to the right of ECG to terminate the agreement.
20. How will the distribution system run during the suspension period?
During this period ECG, has been appointed as an interim operator by the Energy Commission to perform all the electricity sales and retail activity in the Southern Distribution Zone of Ghana which includes:
– Meter reading
– Billing
– Service connection
– Cash collection
– Faulty meter replacement
– Bills reconciliation
– Disconnection and reconnection and other related activities.
However, PDS will continue to operate and manage the distribution network involving operations, maintenance, fault repairs, network expansion and major connections.
21. Where will Customers pay for my electricity bills and buy power?
All electricity bills shall continue to be paid at:
– The existing Customer Service Centers and private pay points.
– District Offices of ECG that were transferred to PDS
– Licensed vending stations.
– Banks
– Bonded cashiers
22. Who /where do I report a fault to?
Faults must be reported to PDS Offices and call center no 0302611611 and all other social media handles operated by PDS.
Source: Myjoyonline.com
