Is PDS Capable Of Transforming The Energy Sector?

On 5^th August 2014, the Government of Ghana signed the second Millennium Challenge Corporation Compact (MCC) with the US Government under the theme “Powering Ghana for Accelerated and Sustainable Growth”.

A major project in the Compact II is the ECG Financial and Operational Turnaround (EFOT) Project which seeks to strengthen the governance and management of ECG by bringing in an acceptable ECG Private Sector Participant (PSP). I followed the takeover of ECG on March 2019 by this single purpose vehicle called PDS with keen interest because to me it’s a wish that the laxities and the weaknesses in the state distribution entity was going to be addressed in due course, especially the financial challenges in the entire electricity supply matrix which hinges on ECG’s financial/revenue efficiency.

Therefore, the brouhaha about some alleged breaches with PDS’ bond guarantee in taking over the assets and management of ECG came as a surprise to me. However, analyzing the entire narratives, my initial shock turned into inquisition. Indeed, my probing paid off. I intercepted a progress report on PDS for the last four months of their coming into force, which was being submitted to authorities, and I found it very interesting. This has motivated me to share my thoughts with fellow Ghanaians.

I have identified two pivotal events I wish to bring to the notice of Ghanaians. In satisfying all the requirements before taking over the assets and management of ECG as agreed by MiDA and GOG, PDS undertook the following:

PDS engaged local financial entities; Cal Bank and Donewell Insurance Company Limited, in undertaking the bond guarantees on their behalf. This, I think is very significant, a positive sign of the PDS’ commitment to our own and the realization of our local content mantra.

PDS’ improvement in the system as I understand was achieved with the same workforce of the previous entity (ECG). This cannot be overlooked.

Kudos to the government of Ghana and the President in securing workers employment till the end of the 20 years concession period.

As I write this article, I am aware of the government’s investigations that will determine PDS’ continued existence as the concessionaire or otherwise. However, the report I have read on PDS’ progress within the four (4) months of their takeover tells very significant and positive stories which cannot be ignored.

As a student in the energy industry, I can pick a few and draw attention to what I seriously think we should neither gloss over nor take for granted as a government and as a people.

I have read that within four months, revenue to sales collection of PDS has increased to 95.92% from a region of not more than 90%, at the time of their takeover, and this is remarkable. Though it is work in progress, it implies a reduced level of debt stock of the Company, which translates into high liquidity, leading to timely payment of suppliers of the Company, especially the Independent Power Producers (IPPs).

The second observation I made from the report is the fact that PDS met a system loss level of 27.3%, but through various technical and commercial interventions, has been able to reduce the figure to 18.6% as at the end of June 2019, as shown in table 1 below. I know it will continue to fluctuate because the real figures can be ascertained at the end of the year. Nevertheless, it is a remarkable achievement, because anytime losses go down, it translates into revenue, which is the bloodline of the industry. If you take the performance of Meralco, the leading Company within the PDS shareholders, they have a single-digit losses level of less than 6% in the Philippines, and I believe they are highly capable of transferring the knowledge and technology in bringing ours further down, when they are given the opportunity to operate in our country. This will translate into higher revenue, and the benefits are enormous.

For example, reduced system losses translate into revenue, which has a significant effect on electricity pricing. The more PDS brings the system losses down to a level even lower than what I am told PURC has pegged (21%), it helps bring stability in the electricity tariff. When we have such price stability in the tariffs, it helps both industry and consumers to plan their lives better. It is therefore critical to consider the expertise of Meralco as the lead shareholder in the PDS consortium in reducing system losses, which will inure to the benefit of the power industry and the entire citizenry.

Table 1

One other performance indicator which interested me is the high level of debt collection. I gather that about 60% of the Company’s billing is in the credit system. The report indicates that accumulated debt by the previous entity of GH₵3.365billion has been reduced to GH₵2.6billion within the past four months. Such effective revenue collection means adequate availability of funds to fuel the entire electricity matrix loop. If PDS have put in place such an efficient running system, especially with the same personnel they inherited, it shows that they have put in place certain structures and monitoring systems which are yielding positive results.

Last but not the least of what I came across is on reduced outages by PDS. The table below indicates an initial number of outages of 665 per week which they were confronted with in March, 2019. Currently, PDS has reduce it to 219 outages per week. Technically records indicate that, the system average interruption duration index of 24.87hours in the previous year has been reduced to 17.26hours as of June 2019. That is about 30.6% improvement as compared to the same period last year, this translates into stable power supply.

TOTAL NUMBER OF OUTAGES (ALL OUTAGES – UNPLANNED, PLANNED, EMMERGENCIES.)

If you monitor social media handles, some customers have even testified that for the first time, they have come to realise that availability of power is highly possible even when it rains. Prior to this, it was the general thinking that when the weather turns cloudy, or whenever it rains power should automatically go off. PDS is doing something right.

In totality, PDS as a new company, has shown that they have the leadership, transformational strategy and team-oriented focus to bring improvement within the system. If within 4 months all indicators point to a positive change, then why not give them a chance to continue.

It is in this vein that I thank the President for the boldness in bringing private participation into the energy distribution system. When all things become equal, what is required of the sector agencies and regulators is to up their game in monitoring and evaluating whatever we have agreed with the PDS to deliver for the benefit of the citizenry and the Government of Ghana

Source:  Kofi Brako (Energy Analyst)