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ECG privatisation in limbo

ECG Against Privatisation Electricity Company of Ghana (ECG)

Wed, 3 May 2017 Source: dailyguideafrica.com

Even though President Nana Addo Dankwa Akufo-Addo announced at the May Day celebrations that his administration had renegotiated for a 51 percent stake in the Electricity Company of Ghana (ECG) under Ghana’s Power Compact II with the United States of America (USA), it appears Ghana may not be able to meet the timelines.

Should this happen, Ghana risks losing about $498 million agreed to be disbursed for the implementation of the project under the MCA Compact II because it may not be released.

Ghana is already behind time for about six months, and this is causing anxiety among the proponents of the deal.

Under the arrangement, the previous NDC administration allowed for 80 percent private sector control in ECG with 20 percent for government.

The President recently told workers at the May Day celebration in Accra maintained that government wants more than the 20 percent control agreed by the previous administration to protect ECG workers from being sacked.

“Government has amended the terms of the concession agreement to require that one; Ghanaians own at least 51 percent of the concession.

“Two, there should be no involuntary layoffs as a result of the concession,” he stressed, adding that “the term of the concession will be reduced from 25 years to 20 years”

Urgent bidders’ conference

It is for this reason that a bidders’ conference should be held this month to meet the schedule.

By next year, all the funds should be disbursed, but if this does not materialize, they would be returned to the US coffers.

The six foreign bidders with their Ghanaian partners- Manila Electric Company of the Phillipines; CH Group/ EDF SA/LMI Holdings/Veolia SA, Ghana; Engie Energie Services, SA, France; BXC Company Ghana Ltd/ Xiaocheng Technology Stock Company Limited; ENEL S.P.A, Italy and The Tata Power Company Limited/CDC Group Plc, India are expected to take part in the conference.

The winner of the bid is required to invest a minimum of $100 million every year for the first five years and make further investments thereafter.

Compact in force

The Ghana Power Compact, also referred to as Compact II, entered into force on 6th September, 2016 following the MCC’s confirmation that government had met all requirements.

Thus, the treaty signed on August 5, 2014 between the Republic of Ghana and the United States of America, represented by the Millennium Challenge Corporation (MCC) has become effective and Ghana now has access to the programme funds.

Terms

Originally, the terms of the ECG concession agreement was that there should be 20 percent local ownership and 80 percent for the investor.

But given the latest pronouncement by the President on the deal, it is not likely that any investor (whether a consortium or individual investors) would want to be short-circuited especially when they come to invest such colossal sums of money only to be told later that they would be entitled to 49 percent stake which deprives them of a controlling stake in the business.

Also, any investor would want more years to recoup their investment compared to the 25 years originally arranged.

Again, should the investor invest within the next five years and expect to recoup returns in a matter of 15 years, this is likely to affect them because tariffs, most certainly, would have to be hiked to recover investment even though the Public Utilities & Regulatory Commission (PURC) has been put in charge of that now.

Prediction

Ing Owura Safo, CEO of MCC, last year said bids would be received from the foreign entities from early this year.

“By the third quarter of 2017, there should be a concessionaire managing ECG operations,” he declared.

The project fund of US$535.6 million has been divided into three — a programme funding of US$469.3 million; a compact implementation funding of US$28.9 million from the United States grant of US$498.2 million and a government of Ghana contribution of US$37.4 million.

Projects

The Ghana Power Compact is expected to directly support the energy sector strategic objectives to achieve power supply sufficiency, including exports to neighboring countries and also supply power for new oil and gas based industries.

Various projects and programmes to be implemented include the ECG Financial and Operational Turnaround Project, NEDCo Financial and Operational Turnaround Project, Regulatory Strengthening and Capacity Building Project, Access Project, Power Generation Sector Improvement Project, Energy Efficiency and Demand side Management Project, Monitoring and Evaluation and Economics (M&EE), Environmental and Social Performance, as well as Social and Gender Integration.

Source: dailyguideafrica.com