PDS saga: Government to select from 6 companies - Oppong Nkrumah

Minister for Information, Kojo Oppong-Nkrumah has disclosed that government will select from the six companies shortlisted in the previous bidding process as the new concessionaire to take up the private sector participation in the Electricity Company of Ghana (ECG) to replace Power Distribution Services (PDS) following the termination of the latter’s contract.

Dismissing concerns that using restrictive tender to select the new concessionaire would not ensure value for money, he said government was not going to introduce or select an entirely new entity for the concession.

According to him, government would use the restrictive tendering process to select one of the six pre-qualified companies which were initially shortlisted during the bidding process.

6 shortlisted companies

The companies are Manila Electric Company from the Philippines; CH Group/Edf Sa/Lmi Holdings/Veolia Sa with Ghanaian address; Engie Energie Services SA from France; BXC Company Ghana Ltd/Xiaocheng Technology Stock Company Limited, registered and operating in Ghana; Enel S.P.A. from Italy; and Tata Power Company Limited from India.

Up to this point, the successful concessionaire was to control 80 per cent stake while Ghanaians will take up 20 per cent shares.

However, when President Akufo-Addo assumed office he negotiated and amended the deal to give Ghanaians 51 per cent while the successful concessionaire take up 49 per cent shares.

Along the way, Tata Power Company Limited from India; Engie Energie Services SA from France; and Enel S.P.A. from Italy pulled out of the deal leaving three companies in the race.

Out of the three companies left in the race, CH Group, EDF and Veolia protested the amendments under the amended Request for Proposal (RfP) which introduced mandatory 51 per cent Ghanaian ownership to give ultimate legal and beneficial ownership to Ghanaian citizens.

In a letter dated February 12, 2018 and signed by Kevin Dadzie of CH Group, EDF and Veolia, the consortium protested against the new local content policy direction aimed at encouraging Ghanaian companies and entrepreneurs to be majority shareholders in the concession arrangement.

BXC Ghana and Manila Electric Company (MERALCO)

At the end of the day, two companies Manila Electric Company from the Philippines and BXC Company Ghana Ltd/Xiaocheng Technology Stock Company Limited submitted proposals for the concession for the management of, operation of, and investment in the electric distribution business of the ECG.

BXC Company Ghana disqualified

However, BXC Company Ghana Ltd/Xiaocheng Technology Stock Company Limited was disqualified paving way for Meralco, the only other company in the race, to be declared winner.

A letter written by Millennium Development Authority (MiDA) and addressed to BXC Company on April 12, 2018 said the company was disqualified for failing to make its existing contractual relationship with ECG known in its initial proposals.

It accused BXC Ghana of conflict of interest on the basis of its relationship with ECG – as a result, the company’s financial proposal was not opened for evaluation and was returned to the company.

BXC’s disqualification was premised on a number of contracts it signed with ECG to help the power distribution company reduce its losses in a number of operational areas.

While this relationship has been in the public and a number of documents submitted to MiDA by BXC confirmed this relationship, MiDA in its April 12 letter said: “Ghana is in possession of information concerning prior or existing contracts with ECG, including without limitation to the Distribution Losses and Associated Network Improvement contract between ECG and BXC dated September 2011, as amended on March 24, 2017 and August 11, 2017; and has determined on the basis of this information that:

One or more conflicts of interest or potential conflicts of interest exist:

- That the foregoing statement by the BXC Consortium is false and/or misleading; and

- That such false and/or misleading statement is material in nature.

In spite of the company admitting that its existing relationship with ECG puts it in better stead to manage the ECG on a full-scale, the company in its Technical Proposal stated: “We are not aware of any actual or potential conflict of interest arising from a prior or existing contract or relationship with Ghana, ECG, their affiliates, representatives, or advisors.

Govt committed to PSP for ECG

Minister for Information Oppong-Nkrumah told journalists that the government of Ghana has said it is committed to finding a new concessionaire to take up the private sector participation in ECG.

He said the government had been advised that the concessionaire that was properly selected-PDS failed to meet a material and fundamental term that is why government terminated the contract.

“We have been quite clear that government remains interested in private sector participation (PSP) because it has a number of benefits even beyond what the full complement of the concession was to provide,” Mr Oppong-Nkrumah added.

Ghana Stock Exchange listing question

The Information Minister declined to comment on whether or not government will consider listing on the Ghana Stock Exchange (GSE) to allow private participation in the country’s power distribution company.

Ofori-Atta to address Ghanaians on way forward

Mr Oppong-Nkrumah said the Finance Minister, Ken Ofori-Atta, was on official assignment (IMF Meetings) in Washington DC and would likely organise a briefing to inform Ghanaians on the way forward upon return.

“The Finance Minister will join us maybe by the end of this week or next week. He will explain how the government of Ghana has come to a conclusion on selecting a partner for private sector participation,” he said.

Mr Oppong-Nkrumah, together with a Deputy Energy Minister in Charge of Power, William Owuraku Aidoo briefed the media

$190m funding lost

The press briefing comes on the back of US Millennium Challenge Corporation’s (MCC) decision to withhold $190 million grant to Ghana, following the termination of the concession agreement between ECG and private operator PDS.

The move was necessitated by a forensic audit conducted by the MCC and Government of Ghana into the issuance of Demand Guarantees for the Concession Transaction, which revealed that the Payment Security for the Transaction was invalid.

The investigations re-affirmed the earlier report that, there was no approval by Competent Signatories to the Demand Guarantees issued by Al-Koot in Qatar, therefore, the Transaction lacked the required authorisation and approval of the Company.

More so Al-Koot has an underwriting policy and guidelines which required the approval of the Central Bank of Qatar, but no such approval was granted by the Central Bank of Qatar.

In view of that, President Nana Akufo-Addo and Chief Executive Officer of the MCC, Mr Caircross agreed that the existing Concession between PDS and ECG, which involved the transfer of the latter's assets worth three billion dollars should be discontinued, while a suitable replacement was sought before December 31, 2019.

The government in a detailed justification for the termination of the contract said a letter from Al-Koot to ECG indicated that it was not authorized to undertake the trade risks as it had done.

Secondly, it said the facts uncovered by the forensic audit justified the discontinuation of the current concession, but should not diminish government's commitment to private sector participation in the energy sector.

Investigations also revealed that the local shareholders of the PDS concession funded the $11.5 million of the $12.5 million payments it made to procure the Demand Guarantees using funds taken from operating accounts.

The statement further stated that the actual details of the purported insurance cover for the Transaction furnished by PDS showed gross deception and unprofessional conduct on the part of PDS.

It added that the termination of the Transaction Agreement between ECG and PDS was carried out in accordance with Article 2.6 and 5.1 of the Programme Implementation Agreement (PIA).

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