PDS impasse: US withdraws $190m power compact support

The United States Government has withdrawn the second tranche of the power compact support for Ghana.

As a result, the second tranche of $190million meant to improve electricity operation and extension in Ghana has been cancelled, the US embassy in Ghana announced in a statement.

“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,” the statement said.

The statement, however, noted the US will continue to support Ghana’s power sector with the tranche one funds of $308million.

Below are details of the statement from US embassy

Accra, GHANA— 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.

Background

On March 1, 2019, Ghana Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.

The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and the second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.