Meralco Plans To Pull Out Of ECG/PDS Concession Over Unhealthy Politics

Manila Electric Co. (Meralco) has hinted of plans to pull out its investment in Ghana’s power distribution sector if the political situation in the West African nation does not improve, a top official  of the company has told The Philippine Star.

“We’re still waiting for developments. It’s a Ghana government issue,” Meralco president and CEO Ray Espinosa said.

According to Espinosa, Meralco is exposed to political risk following the suspension of  Power Distribution Services Ghana Limited which has a concession agreement with Electricity Company of Ghana(ECG).

“The terms are good, but if we will be exposed to these types of uncertainties, we might as well pull out and just devote our attention to the country. And even in Asia, it’s more stable. Maybe we don’t have the DNA for that kind of risk in Africa yet,” The Philippine Star quoted Espinosa as saying in a story published on its website on September 23, 2019.

Last July 31, Ghana suspended the concession for the operation and maintenance of the assets and facilities of the Electricity Company of Ghana (ECG) awarded to the Power Distribution Services Ghana Ltd. (PDS).

PDS is a consortium between Meralco through Meridian Power Ventures Ltd. (30 percent), Angola-based firm AEnergia SA (19 percent), and three Ghanaian firms namely TG Energy Solution Ghana (18 percent); GTS Engineering Ghana Ltd.  (10 percent), and TBK Ghana Ltd. (10 percent).

The suspension order was due to alleged ‘fundamental and material’ breaches in the provision of the demand guarantees by PDS, which were key prerequisites for the turnover   of the assets and facilities.

But a week after the suspension, ECG and PDS agreed on an interim arrangement where the Meralco-led consortium would still continue activities related to the retail of electricity to ensure continued power supply and service to consumers.

These activities include meter reading, billing, distribution of bills, bill reconciliation, revenue collection and new service connections.

It would also still be responsible for disconnections and reconnections, faulty meter replacements, network faults and repairs, complaints and fault reporting to the call centers, and any other related service.

The Meralco-led PDS signed the concession agreement with ECG on March 1, a year after Millennium Development Authority (MiDA) chose Meralco as the preferred bidder for private-sector participation in ECG and the Parliament of Ghana approved the 20-year concession agreement.

Under the agreement, ECG’s assets would be leased to the PDS while the ECG would become an asset holding company.

Meralco said the PDS Consortium has planned to invest over $580 million for capital expenditures to strengthen the governance, management and operations of the ECG and improve the delivery of power to end users as well as support Ghana’s socio-economic growth.

After the end of the concession, all assets would be transferred back to ECG, it said