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French electricity conglomerate EDF, French transnational company Veolia and their local partner CH Group – who have put in a joint bid for the ECG Concession – have rejected the government policy that allocates 51 percent mandatory ownership of the concession to Ghanaian companies.
In a letter dated February 12, 2018 and signed by Kevin Dadzie of CH Group, EDF and Veolia are protesting against the latest local content policy direction under the amended Request for Proposal (RFP), aimed at encouraging Ghanaian companies and entrepreneurs to be majority shareholders in the concession arrangement.
In the letter, addressed to CEO of Millennium Development Authority (MiDA) Enson Benjamin, and copied to the Board Chair Prof. Yaa Ntiamoa-Baidu, EDF and Veolia said: “We are writing on behalf of the consortium comprising CH Group Ltd, EDF and Veolia Africa, to express our significant concerns regarding the Newco [ECG] structuring requirements as set out in the amended Request for Proposals, dated 29 November 2017 (the ‘Amended RFP’).
The latest amendments under the amended RFP introduced mandatory 51 percent Ghanaian ownership – ultimate legal and beneficial ownership by Ghanaian citizens.
It puts express restrictions on creating different categories or classes of shares in NewCo; and the requirement for this 51 percent threshold is to be maintained for the concession’s full duration; a potential company event of default would trigger the default buy-out-option if this 51 percent threshold is not maintained.
According to the consortium, the above requirements significantly impact the consortium’s ability to structure a workable solution. The consortium further stated its financiers have cautioned that such restrictions will ultimately impact the concession’s bankability.
It further stated in the letter on page 3 that: “As part of the security package, which will necessarily compromise any financing package, the 51 percent restriction is again problematic; severely restricting the enforcement right of the lenders, and negatively impacting on bankability of the concession as a whole”.
An energy expert who has been keenly following the deal noted that the stance being adopted by the French-led group is effectively a suicide-note, which is tantamount to self-exclusion from the bidding process.
“It is inexplicable why the group is seeking to withdraw from the process at this late stage, and one can only speculate that the vestiges of foreign domination and control of key infrastructure assets in developing countries or countries in transition could be at play,” the expert said.
The source continued that it is interesting to note that this same EDF/Veolia is under severe stress in Gabon for failing to perform according to the terms and conditions of a similar Electricity and Water concession it operates in that country, which has a population of less than three million.
“These challenges have forced the retrenchment of staff working under the concession, with the government of Gabon set to cancel the current concession arrangement. It may therefore be good riddance for them to exclude themselves from the concession process in Ghana, a country with a population of over 25million.”
In order not to jeopardise this US$500m deal, MIDA and GoG should stand firm and see the selection process through to its logical conclusion – and ensure that the 51 percent mandatory local content for the ECG concession is not compromised, the expert added.
Ghanaian entities, the source said, have the ability to raise local and international capital to meet the investment requirements for the concession; and to suggest otherwise in this modern world where capital is free-flowing and looking for a good home, is rather disingenuous.
The MiDA, MCC and the GoG, the source insisted, should push ahead with the selection process and award the concession to the most capable entities who are still left in the race and who are willing to play by the rules in the interest of the good people of Ghana.
“Those who wish to exert external influence on the process because of their pompous colonial antecedents should not be given air to fan the flames of their arrogance,” the source said.
“Local and international partnerships in developing, financing and operating strategic infrastructure assets in Ghana for the promotion of energy security and efficiency is very welcome; however, the ability to achieve this should not be the preserve of any specific foreign groups.
“We all should acclaim the ownership of key infrastructure assets in Ghana by Ghanaians as a sine qua non, and indeed throughout history no country has ever been developed by another country. So, it is imperative for us to take control, build capacity and manage our own affairs. This is in line with the local content policy introduced, and government must be commended for such a bold move.”
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