Ghana: US Gov’t Withdraws $190m Funding Towards Power Efficiency Over ‘Unwarranted’ PDS Termination

The US government has withdrawn a $190 million it granted to the West African nation, Republic of Ghana, due to what it described as the unwarranted termination of the concession agreement between the Power Distribution Services (PDS) Ghana Limited and Electricity Company of Ghana (ECG).

A statement from the US Embassy on Tuesday, October 22, 2019, said the Millennium Challenge Corporation (MCC) has confirmed that the money is no longer available after Ghana decided to terminate the concession agreement with the PDS.

The money was available upon a successfully executed concession agreement, the statement said.

“Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid and, therefore, the termination is unwarranted,” the US said.

However, the Government of Ghana, decided to terminate the agreement over material and fundamental breaches from the PDS.

Al-Koot, a Qatari company which the PDS submitted as the ones who issued the demand guarantees, denied doing so, thus, raising concerns of fraud.

After an initial suspension of PDS, the government, in a letter to the MCC, said it had decided to terminate the agreement with the PDS.

Ghana’s Finance Minister, Ken Ofori Atta, however, told the MCC Ghana would want to replace the PDS by a restrictive tendering.

Statement from the Embassy of the United States of America
Regarding the Termination of the Private Sector Concession by the Government of Ghana under the Millennium Challenge Corporation Power Investment

Accra, GHANA— On October 19, 2019, the Government of Ghana (GoG) informed the Millennium Challenge Corporation (MCC) in Washington, D.C. of its decision to terminate the concession agreement between Electricity Company of Ghana (ECG) and private operator Power Distribution Services Ghana Ltd (PDS).

The United States of America notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted. As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available.

The United States underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth. In this spirit, the United States has worked with the Government of Ghana since the latter’s July 30 suspension of the concession in the hopes of finding a mutually acceptable solution that respected contract sanctity and the Government of Ghana’s interest in restructuring the concession.

Moving forward, the U.S. Government, through MCC, will continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA). This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.

The U.S. Government is a committed partner and has full confidence in MiDA to lead the joint effort to deliver the projects funded through the $308 million remaining under the MCC Ghana Power Compact. The U.S. Government looks forward to continuing to work together with MiDA and the Government of Ghana to implement the remainder of the Power Compact.

Background:

On March 1, 2019, Ghana Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.
The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and a second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.