The Electricity Company of Ghana has officially announced that it has terminated the contract it established with the Power Distribution Services Limited under the Private Sector Participation agreement it had with the Millenium Development Authority.
The termination of the contract follows government findings that the PDS submitted an invalid insurance guarantee for the takeover of the assets of the country’s major power retailer.
A statement issued by ECG announced that the termination was done today, October 23, 2019.
“ECG has therefore assumed full operational and financial control of the electricity distribution business in
the Southern Zone of Ghana with immediate effect. Consequently, all activities which were hitherto undertaken by PDS have reverted to ECG,” the statement added.
The company announced that customers and stakeholders can engage the ECG in their normal activities including those previously handled by the erstwhile PDS.
Meanwhile, all assets currently in the name of PDS revert to ECG with immediate effect and will be rebranded in accordance with the decision over the next few weeks.
US government decision
The United States government which established the Millenium Challenge Corporation (MCC) the parent body that implements the Millenium Challenge Account under which Ghana was supposed to get some US$498 million to transform its energy sector announced that it will discontinue the agreement.
The US government through its embassy here cited government’s “unwarranted” decision to cancel the contract of PDS as its reason.
The Compact comprised of two tranches of funding; the first being US$308 million which was made available upon the official start of the current Compact, and the second tranche of $190 million, which was contingent on a successful concession agreement.
The agreement for a 20-year concession was approved on July 24, 2018, by Parliament leading to the private-sector participation in Ghana’s power distribution.
PDS is a consortium between Meralco, Angola-based firm Aenergia SA and three Ghanaian firms namely TG Energy Solution Ghana, GTS Engineering Ghana Ltd. and TBK Ghana Ltd.
Why the deal was terminated
PDS was in July 2019 found to have presented invalid insurance security for the takeover of ECG assets.
The company was initially supposed to furnish the ECG with payment securities in the form of either a demand guarantee or a letter of credit issued by a bank.
The insurance guarantee came about because of difficulties experienced with raising a bank guarantee.
PDS appealed to use a demand guarantee issued by an A-rated insurance company.
PDS thus submitted the Payment Securities in the form of demand guarantees issued by a Qatari insurance firm, Al Koot Insurance and Reinsurance, which eventually became the source fraud after it was discovered that there were fabricated letters and forged signatures.
The government also noted that Al Koot did not have the capacity to engage in such a transaction-based
on its net worth.
The company was also not authorized to issue demand guarantees.