Business Hilights
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Ghana sacks Discos over poor performance, financial irregularity

At a time the Nigerian government is playing hide and sick with electricity Distribution Companies (Discos) upon sustained poor quality of services in more than five years of concession; the Government of Ghana has terminated the Concession Agreement with the Power Distribution Services (PDS) Limited.

Analysts say the latest announcement by the Discos to invest almost a trillion naira to upgrade distribution infrastructure may be a farce to divert attention considering their inability to do it in the last six years of their takeover.

However, the move in Ghana, Business Hilights learnt, was over the take-over of the assets of the Electricity Company of Ghana (ECG) for distribution of electricity in the southern sector of the country.

Report from a forensic audit conducted by the Millennium Challenge Corporation (MCC) and Government of Ghana’s investigations into the issuance of Demand Guarantees for the Concession Transaction, revealed that the Payment Security for the Transaction was invalid.

Besides, the findings re-affirmed the earlier report that, there was no approval by Competent Signatories to the Demand Guarantees issued by Al-Koot in Qatar, therefore, the Transaction lacked the required authorisation and approval of the Company.

More so Al-Koot has an underwriting policy and guidelines which required the approval of the Central Bank of Qatar, but no such approval was granted by the Central Bank of Qatar.

Ghana News Agency reports that “In view of that, President Nana Akufo-Addo and Chief Executive Officer of the MCC, Mr Caircross agreed that the existing Concession between PDS and ECG, which involved the transfer of the latter’s assets worth three billion dollars should be discontinued, while a suitable replacement was sought before December 31,2019.

A statement issued and signed by Mr Ken Ofori-Atta, the Minister of Finance, in Accra, said the Government of Ghana remained strongly committed to the Ghana Power Compact and the Private Sector Participation (PSP) of the country’s energy sector.

“We also wish to reiterate the position communicated to the CEO of the MCC by the President of Ghana during their meeting on the sidelines of the United Nations General Assembly in New York on September 23rd to the effect that, the current concession had to be terminated in view of the facts uncovered regarding the failure by PDS to satisfy conditions precedent under the relevant transaction documents.

“However, every effort would be employed to ensure a suitable replacement within the relevant timelines in order to complete the Compact,” it said.

It said the Government’s decision to terminate the PDS Concessions was based on two key points, thus the meeting between the CEO of MCC and President Akufo-Addo on September 23, in New York, USA, produced an understanding that the existing concession would be discontinued and a concession restoration and restructuring plan would be executed within existing timelines before December 31, 2019.

Secondly, the facts uncovered by the forensic audit justified the discontinuation of the current concession, but should not diminish Government’s commitment to private sector participation in the energy sector.

Investigations also revealed that the local shareholders of the PDS concession funded the $11.5 million of the $12.5 million payments it made to procure the Demand Guarantees using funds taken from operating accounts.

The statement further stated that the actual details of the purported insurance cover for the Transaction furnished by PDS showed gross deception and unprofessional conduct on the part of PDS.

Therefore, the termination of the Transaction Agreement between ECG and PDS was carried out in accordance with Article 2.6 and 5.1 of the Programme Implementation Agreement (PIA).

The Millennium Challenge Compact was signed on 4th August, 2014 between the Millennium Challenge Corporation (MCC) acting on behalf of the Government of the United States and the Government of Ghana acting through the Minister for Finance, which had the object of achieving lasting economic growth and reducing poverty through increased private sector investment.

The Programme Implementation Agreement (PIA) was entered into by the parties to the Compact, which provided further details on the implementation of the Compact.

There was also a Lease and Assignment Agreement (LAA) and the Bulk Supply Agreement (BSA) entered into between the Electricity Company of Ghana (ECG) and Power Distribution Services Ghana Limited (PDS) and the Government Support Agreement (GSA) entered into between the Republic of Ghana and PDS.

The private sector arrangement was to introduce a Concessionaire into the power distribution sector, who would inject private capital into the operations of the ECG.