Akufo-Addo government has re-positioned Ghana favorably in ECG Privatization deal - Agyarko

While the Energy Minister did not directly reference the previous John Mahama government in his address on the privatization of the Electricity Company of Ghana, he did indicate that the agreement which the Akufo-Addo government has tabled before parliament is a far better improvement upon the terms the previous government negotiated by the time they left power, MyNewsGH.com can report.

Speaking to journalists about the ECG Private Sector Participation (PSP), Energy Minister Boakye Agyarko revealed that the foresight of the Akufo-Addo government through his Ministry saw a renegotiation of percentage of Ghanaian participation in the PSP from a mere 20% to now, a whooping 51%.

According to the Minister, the government has also shortened the term of the concession from 25 years to 20 years- a clear difference of five years, he waxed to media men who covered the presser.

Mr Agyarko also indicated that “NO employee of ECG will face any INVOLUNTARY redundancy during the term of the concession”, all emphasis is his, as he stressed to MyNewsGH.com’s Head of Business Kennedy Mornah.

“The employees will be transferred to the new company on terms and conditions that are equal to or better than those they are currently engaged by ECG.

The concession arrangements and the associated transaction agreements have been revised to reflect these decisions.”, he added.

He renewed to the Ghanaian public the commitment of his government to the private sector’s growth:

“The NPP Government is committed to developing the Ghanaian private sector businesses to enable them provide the necessary impetus to grow the national economy.”

Below is the full statement he read out:

PRESS CONFERENCE BY THE MINISTER FOR ENERGY ON THE ELECTRICITY COMPANY OF GHANA (ECG) PRIVATE SECTOR PARTICIPATION (PSP) ARRANGEMENTS 26TH JUNE 2018

1. Introduction

Ladies and Gentlemen of the Press, I have convened this Press Conference this morning to inform you and the good people of Ghana about the ECG PSP agreements which the government has submitted to Parliament for ratification and subsequent implementation. We are doing this because we believe the good people of Ghana have to be regularly appraised of very important decisions which government has taken with the view to enhancing increased transparency in the governance of the country.

We also believe that the successful implementation of the Compact II, which was signed by the previous administration, will inure to the benefits of all Ghanaians if it is properly executed with the Ghanaian interest as the paramount objective. This is the motivation of the Government of the New Patriotic Party (NPP) and we will ensure that it is fully achieved in the ECG PSP process.

We expect that the Minority in Parliament will work with the Majority to conclude quickly on the business of ratifying the various agreements we have submitted to Parliament on the ECG PSP Transaction arrangements.

The Government of Ghana has selected a consortium led by the Manila Electricity Company Limited (Meralco) as the Preferred Bidder to operate and manage the ECG Concession.

2. Background

2.1 MMC Compact II

In August 2014, the Republic of Ghana, acting through its government (the “Government”) signed the Millennium Challenge Compact II with the United States of America, acting through the Millennium Challenge Corporation (“MCC”) that focuses on funding the implementing a programme of activities in the electricity distribution sector which includes private sector participation in electricity distribution as part of the Power Sector Reform Programme (PSRP). The MCC is an independent United States Government foreign aid agency.

2.3 Implementation of Compact Programme

The Compact II is being implemented through the Millennium Development Authority (MiDA), a Government of Ghana (GoG) special vehicle agency, to specifically manage the implementation of the Compact II programme on behalf of the Government of Ghana. MiDA was created in 2006 by an Act of Parliament (Millennium Development Authority Act, 2006; Act 702) which was subsequently amended (Millennium Development Authority (Amendment), 2006; Act 709).

2.4 Goals and Objectives of the Compact II

The overall goal of the Compact is to reduce poverty through economic growth in Ghana through increased private sector investment and increased employment opportunities for men and women.

2.5 Key Activities under The Compact II Program

The Program consists of six (6) Projects namely:

i. ECG Financial and Operational Turnaround Project which embodies the ECGs PSP transaction;

ii. NEDCO Financial and Operational Turnaround Project;

iii. Regulatory Strengthening and Capacity Building Project;

iv. Access Project;

v. Power Generation Sector Improvement Project; and

vi. Energy Efficiency and Demand Side Management Project.

Substantial progress has been made in the implementation of all the key activities.

2.6 Funding for the Compact II

Under the Compact II, the United States Government is to disburse a grant funding of up to US$498,200,000.00 (Four Hundred and Ninety-Eight Million, Two Hundred Thousand United States Dollars) over a 5-year period. The funding from the US Government is to be disbursed in two tranches comprising US$297 million in Tranche I and US$190 million in Tranche II. Tranche II will be disbursed between the 3rd to 5th years subject to meeting all the Conditions Precedent (CP) including successful selection of an Acceptable PSP Provider to ECG.

The Government of Ghana is to provide direct counterpart funding of US$37.36 million being no less than seven and one half percent (7.5%) of the amount of MCC Funding provided under the Compact. In addition, it is estimated that tax exemptions over the 5-year Compact-term will be about US$133.9 million.

The Compact is governed by the principle of international law and allows for either Party to terminate the Compact without cause in its entirety by giving the other Party thirty (30) days prior written notice. It also allows The Parties to amend the Compact only by written agreement. They (The Parties) could make any modification of any Annex, or to any other provision of the Compact without need for further action by the GoG (including any parliamentary action), or satisfaction of any additional domestic requirement of Ghana.

3. Private Sector Participation (PSP) in ECG Project Activities

Private Sector Participation (PSP) in ECG is an activity being implemented under the ECG Financial and Operational Turnaround Project and seeks to identify and engage private sector entities in the power distribution sector to partner with the Government of Ghana to turnaround the fortunes of ECG in its operations and finances.

3.1 Objectives of ECG PSP

The primary objective of the ECG PSP is to improve the quality and reliability of electricity and ensure ECG can serve as a creditworthy and credible off-taker of electricity under power purchase agreements.

The PSP intends to achieve this objective by:

(i) reducing implicit subsidies (created by losses, under pricing and under billing);

(ii) ensuring cost recovery;

(iii) re-investment in the distribution subsector;

(iv) bringing private sector participation in the governance and management of ECG as well as infrastructure and foundational investments designed to reduce losses and improve service quality

Several stakeholder discussions were held regarding the appropriate PSP options for ECG following due diligence conducted by consultants engaged by MiDA. The due diligence review covered the following PSP options: (i) Service Contract; (ii) Management Contract; (iii) Lease; (iv) Concession; and (v) Privatization.

By a letter dated March 20, 2015, MIDA, the Ministry of Power and the Ministry of Finance was advised that an executive approval had been given by H.E. the President for the selection of the Concession as the preferred PSP option for the ECG PSP.