PDS contract termination: Ghana loses $190 million

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On October 19, 2019, the Government of Ghana (GoG) informed the Millennium Challenge Corporation (MCC) in Washington, D.C. of its decision to terminate the concession agreement between Electricity Company of Ghana (ECG) and private operator Power Distribution Services Ghana Ltd (PDS).

The United States of America notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted.

As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available.

The United States underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth. In this spirit, the United States has worked with the Government of Ghana since the latter’s July 30 suspension of the concession in the hopes of finding a mutually acceptable solution that respected contract sanctity and the Government of Ghana’s interest in restructuring the concession.

Moving forward, the U.S. Government, through MCC, will continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA).

This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.

The U.S. Government is a committed partner and has full confidence in MiDA to lead the joint effort to deliver the projects funded through the $308 million remaining under the MCC Ghana Power Compact. The U.S. Government looks forward to continuing to work together with MiDA and the Government of Ghana to implement the remainder of the Power Compact.

The Genesis

On August 5, 2014, the government of Ghana executed the second Millennium Challenge Compact with the US government with the objective of, inter alia, increasing private sector investment and the productivity and profitability of micro, small, medium and large scale businesses.

Among the six projects within the second compact is the ECG Financial and Operational Turnaround Project (EFOT), which seeks to introduce a orivate sector oarticipant in the management and operations of ECG.

According to the statement, consequently, the GoG, under the auspices of the Millennium Development Authority, embarked upon a competitive procurement process which resulted in the selection of an acceptable partner to manage, operate and invest in ECG’s operations for 20 years.

The Meralco-led Consortium was declared the winning bidder on April 20, 2018.

Meralco has partnered AEnergia SA, an Angolan company, and three Ghanaian companies–TG Energy Solutions Ghana Limited, Santa Power Limited and GTS Power Limited to form Power Distribution Services Ghana Limited, the statement indicated.

PDS is 51 percent Ghanaian-owned as required by the government of Ghana.

The concessionaire, PDS, is expected to strengthen the governance, management and operations of ECG and improve the delivery of power to end users to support socio-economic growth in Ghana, according to the statement.

It added that “the general public and customers of ECG are, hereby, informed that effective 1st March, 2019, PDS will be the electricity service provider in all of ECG’s operational areas in the southern distribution zone of Ghana.

The ECG will continue to operate as a bulk energy trader and the asset owners.”

Source: Daily Mail GH