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How much is ECG investor bringing?

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Sat, 10 Oct 2015 Source: B&FT

Although government has been emphatic that unlike the Aqua Vitens Rand arrangement in the water sector, the ECG concessionaire will be required to invest, it is yet to be stated how much money the investor is supposed to bring.

The concession arrangement is such that the chosen private entity will “manage, operate and invest” in the ECG for a period of between 20 and 30 years.

Speaking to the press on Wednesday in Accra, CEO of the Millennium Development Authority (MiDA) Owura Kwaku Sarfo said details of the investment will be structured in the tender document that will be used to select a concessionaire.

“So I do not want to pre-empt that, but we have done all the analysis; we know how much ECG requires over the next 20 years. The important thing is that they will have to bring in private capital.”

There are however concerns over whether, realistically speaking, the ECG will receive any significant level of investment from whichever company takes it over -- beyond what the ailing power distributor is to receive from the under US$500million Millennium Challenge Compact grant.

This is especially so when the government of Ghana is allegedly being pressured to pay off its indebtedness of about US$500million to the ECG.

“My question then is: if government is able to pay all its indebtedness to ECG, will ECG not be financially sound and be able to operate?” asked Benjamin Boakye, Deputy Executive Director of the African Centre for Energy Policy (ACEP).

“And government is not putting the issues out there for us to understand; if it wants to pay the government debt to a private man for him to use it and manage our assets, then there are questions. If government pays the debt of about US$500million to ECG, how much will the private entity be required to top-up so as to warrant handing ECG over to it? We need to interrogate all that,” Benjamin Boakye said.

MiDA insists, though, that the injection of private capital will be one of the key conditions precedent before the ECG is handed over to a concessionaire.

“The concessionaire, apart from managing, will have to put in investments; and once they put in investments, they have to ensure that the company is profitable. It is only when the company is profitable that they will be able to get their own returns back, and therefore this arrangement is a much better one than the management contract,” Ing. Sarfo told the B&FT.

The International Finance Corporation (IFC) of the World Bank Group, which has been chosen by MiDA as transaction advisor, has completed its initial due diligence activities in respect of the ECG and the report is under review.

“The transaction structuring report is expected within the next two weeks, and once it is approved IFC can proceed to produce the tender document, which we call the request for proposals document, and this will be released to all parties who have responded to the request for expression of interest,” Ing. Osarfo said.

According to MiDA, a concessionaire should be chosen by the end of 2016.

Source: B&FT