Ghana loses $190 million in aid over deal involving Meralco

WASHINGTON-BASED Millennium Challenge Corp. (MCC) has reduced its financial aid to Ghana by $190 million following the termination of the concession agreement that was supposed to allow a consortium, which the Manila Electric Co. (Meralco) was part of, to take over the Electricity Co. of Ghana (ECG).

“On November 8, 2019, MCC’s Board of Directors approved the termination of $190 million of Compact funding,” it said in a letter to Ghana.

MCC was supposed to extend a total of $498.2 million to Ghana to help the latter create a self-sustaining power sector that will provide reliable and affordable power to nearly 10 million Ghanaians. A key component of this is the introduction of private-sector participation into Ghana’s power sector through a 20-year concession agreement to operate ECG, Ghana’s largest electricity distribution utility.

An amount of $28.9 million was already released to Ghana upon Compact signing. The Compact comprises of two tranches: $279.3 million and $190 million.

MCC said the balance is still intact and it will be managed and implemented by the Millennium Development Authority (MiDa).

MCC has repeatedly warned Ghana not to terminate the concession agreement despite the results of an independent audit conducted by MiDa.

In July, Ghana suspended the concession of ECG, claiming that part of the financial transaction underlying the concession had been fraudulently obtained. In contrast to this, the audit concluded there was no information to suggest fraud in the transaction.

MCC Chief Executive Officer Sean Cairncross said the suspension of the concession was “unfounded” and that “the rights of Power Distribution Services [PDS] as concessionaire should be restored.”

Still, Ghana proceeded to terminate the concession agreement last October.

“MCC has determined that by terminating the existing concession arrangement, the Government of Ghana materially breached an obligation under the Compact,” the MCC said.

Meralco was part of the consortium called PDS Ghana Ltd., which had been awarded a 20-year concession to take over the operation and management of ECG. It used to have a 30-percent stake in the consortium prior to the termination.

PDS is a consortium between Meralco through Meridian Power Ventures Ltd., AEnergia SA, an Angolan company, and three Ghanaian firms—TG Energy Solutions Ghana Ltd., Santa Power Ltd. and GTS Power Ltd.

Meralco said claims that the concession was terminated for alleged material breaches by PDS in the provision of the Demand Guarantees are invalid, because the Demand Guarantees were issued without due authorization and in excess of the mandate of Al Koot Insurance and Reinsurance, a Qatari insurance firm.

“Based on the letter signed by Minister Ken Ofori-Atta of the Ministry of Finance of Ghana, the forensic audit by the auditors chosen by the Millennium Development Authority indicated that the purported Demand Guarantees were issued without due authorization and in excess of the mandate of Al Koot Insurance and Reinsurance, a Qatari insurance firm and were, therefore, invalid,” the utility firm said.

The Demand Guarantees were key prerequisites and conditions precedent for the turnover of ECG’s assets and facilities to PDS.

“The same report also mentioned that there was no information available to forensic auditors to suggest that PDS committed fraud in relation to the Demand Guarantees. PDS has maintained that it procured the Demand Guarantees in good faith and that it has no knowledge of any issue with same until the suspension of the Concession,” said Meralco.