Government has given the assurance that suspension of the concession agreement with Power Distribution Services (PDS) will not affect power supply to homes.
“Government has taken steps to ensure distribution, billing and payment services continue uninterrupted. The general public and customers are assured that this development will not interfere with the distribution of electricity services to customers,” the Information Ministry said in the statement that announced the suspension.
Government has brought back the Electricity Company of Ghana (ECG) to take full control of power distribution in the country.
According to Information Minister, Kojo Oppong Nkrumah, the decision was taken after government detected “fundamental and material breaches of PDS’s obligation in the provision of Payment Securities (Demand Guarantees) for the transaction which have been discovered upon further due diligence.”
Breaking the news on Joy News’ PM Express show Tuesday, he said the government wants to secure ECG’s assets that were handed to PDS as part of the concession agreement.
“We have through deep intelligence detected that they have issues with those guarantees that were provided...they were not valid and as a step, we have taken measure to secure the assets of the state by suspending the concession agreement,” he told host Evans Mensah.
The Ofoase Ayeribi MP also disclosed that the Energy Commission has moved to revoke PDS’ distribution license and allow ECG to go back to work while government undertakes a full-scale enquiry.
PDS became the first private company to manage ECG after Ghana won the Power Compact II that will inject some $900 million into power distribution.
ECG’s struggle to make profit over many years prompted the need for a private investor for the sector.
The following publication by energy think tank, Africa Centre on Energy Policy (ACEP), in 2018 provides a background to the concessionaire agreement.
- Is ECG becoming a secret giveaway?
The process to inject efficiency in the management of ECG through Private Sector Participation (PSP) which recently crystalised into the contested outcome of Meralco as the eventual winner of the bid is more than three years old.
The process, which began with some reasonable transparency at the initial stages (deeper engagement with stakeholders by MCC and MiDA), suddenly became an epitome of controversy with many sides to simple questions about the process, local content and stakeholder participation. The discussion remained among government, MCC, MiDA and IFC.
MiDA shortlisted six applicants for the concession arrangement from the list of applicants who submitted intents to take over ECG. Four of the six dropped out of the process for reasons unexplained to date. Therefore, other stakeholders have had to rely on speculative reasons picked up in the grapevine, among which are the demands by those bidders for accurate data on the financial position of ECG and 51% local content prescription by government. One out of the remaining two was disqualified a few days before the final decision on the eventual winner (we won't comment on this further because the matter is in court).
But the bottom line is that if one connects the dots of unexplained events, one would conclude that there was no competition for ECG takeover because transparency collapsed along the way.
ACEP does not doubt the competency of Meralco to manage the ECG; neither do we believe that Meralco is an altruistic company looking out for the best interest of the Ghanaian public. Ghanaians have to focus on and fight for their interest in the deal through shared understanding of the risks, expected gains, and the processes. This cannot be achieved through the almost apostolic representation by MiDA and Government on behalf of the broader society. MiDA and government have simply failed to engage the public on the most crucial aspects of the concession.
One thorny aspect of the concession was the injection of 51% local content demands. This is a government policy which resonates with many people who are apprehensive of the concession arrangement in the hands of foreign companies. Interestingly, the companies who openly exhibited their local partners dropped out of the race. The eventual winner, Meralco, has not indicated who its local partner(s) is/are, as MiDA has not disclosed anywhere that the 51% local participation in the approved bid has been taken up by a local entity. This fuels the speculation that Meralco is still looking for the local partner. If it is true that the winner of the bid did not have 51% local content prior to winning the bid, how fair then was the process to those companies who dropped off because of the local content demands? If all the companies had been told that they could go through the process and look for a local partner after winning the bid, that would have been enough to change the competition entirely.
Having won the bid is just one part of the process. Government now has to negotiate the details of the agreement. This crucially must not happen without proper stakeholder engagement on the key deliverables, the structure of reporting throughout concession's lifespan, and monitoring tools built into the agreement to support open tracking of the performance of the concessionaire. ACEP is interested in broader engagement on the deliverables to ensure that:
1. They are crisp and concise targets that are easy to track and measure;
2. Data on performance is available to the public. We need to know how the company is achieving its targets as may be agreed. This has to be published to allow independent analysis of the data and how it translates into savings for the public as intended;
3. Sanctions for nonperformance are dear and known to the public. Let the public know what sanctions apply to any missed deliverable.
At this stage of the PSP process, ACEP would like to remind MiDA and government that there will be a mountain of resistance if stakeholders are not dear that the psi) represents the best interest of the Ghanaians.