An insurance expert has said the risks covering guarantees presented by Power Distribution Service (PDS) for the power concession agreement are in fact “solid as gold.”
Larry Kwesi Jiagge says the companies that fronted for PDS – the Qatari insurance company, Al Koot and Joe Australia – are both A-rated reinsurers who have operated in Ghana for a long time.
“This particular business, for all you know, is all over the world. And I am aware, I can tell you for a fact that even there is a Ghanaian company that is part of the retrocession. I am aware that there is a Ghanaian company which took part of the retrocession — not from Donewell, but from the brokers who placed the retrocession contract,” he said Saturday on Newsfile.
The government suspended the concession agreement last week after alleging fraud in the guarantee presented by insurance firm Al Koot to support the takeover of the Electricity Company of Ghana (ECG) by PDS.
Although the entity that supervised the agreement, the Millennium Development Authority (MiDA) maintains it followed due diligence throughout the process, local insurers, Donewell Insurance says Al Koot was not truthful in its communication to ECG.
Mr Jiagge said people are losing sight of the fact that it was CAL Bank, acting as a principal insurer, which approached Donewell Insurance to issue a counter-guarantee to them.
He said CAL Bank in a bid to limit its investment took a counter-guarantee from Donewell.
When asked by the host of Newsfile, Samson Lardy Anyenini, if it will be accurate to say that the risk covering the controversial guarantee has been so diversified that the protection is as solid as gold if PDS defaulted?
The insurance expert answered: “Yes. It’s as solid as gold. Because first, Al Koot is an A-rated re-insurer. They’ve been operating in Ghana and so is Jo Australia. Because they are not frontline insurers the general public may not know anything about them. It is only the insurers or insurance brokers who may have heard about them until this issue proper but they are known. And it [the risk] is widespread.”
He said guarantees are not insurance so if the guarantor pays the guarantor, he can proceed against the guaranteed for reimbursement.
“Insurance is a promise that if anything should happen I will pay and that ends it and you don’t have to go back to anybody.
“But with bonds, guarantees or surety contracts generally you are only guaranteeing performance. At the end of the day, if the guarantor pays he can fall back on the guaranteed,” the insurance expert explained.
According to him, using the ‘cut through clause’ which provides for the principal to contact the reinsurer in the event of a claim it cuts all the bureaucracy in claims payment.
“Donewell noting it has limitations so they also sought re-insurance. The re-insurance company may not be prepared to carry all the risk so they go to another set of insurers, retrocessions, who will also take a piece of the business,” he said.
Late Tuesday, July 30, the government announced the suspension of the PDS — barely six months after the company took over power distribution from the ECG.
In a statement signed by Information Minister, Kojo Oppong Nkrumah explained that “the decision follows the detection of fundamental and material breaches of PDS obligation in the provision of Payment Securities (Demand Guarantees) for the transaction which have been discovered upon further diligence. The Demand Guarantees were key prerequisites for the lease of assets on March 1, 2019, to secure the assets that were transferred to the concessionaire.”
The Minister also said that government has taken steps to look into the matter properly.
Subsequently, Energy Minister, John Peter Amewu, also said that PDS allegedly perpetrated a fraud on government in the transaction to take over management of ECG.
While Mr Amewu called the alleged breach by PDS a fraud, his deputy, William Owureku Aidoo, revealed that initial investigations into the botched power agreement point to a grand plan by PDS to deceive the state.
“It appears to be a grand scheme to hoodwink…we are not talking about just small boys trying to do something. This was a grand scheme that has been perpetrated and I am happy to say that we have found out,” he said on PM Express on Wednesday.
Al Koot has denied signing any such agreement with PDS, claiming that the signatory on the PDS document had no authority to sign it.
The insurance expert said under normal circumstances there should be no cause for alarm over the insurance guarantees presented by PDS, however, for the fact that “Al Koot is claiming there was no cover.”
“I have my contacts…I have indications that the gentleman they [Al Koot] are claiming as having no authority, there is a 2018 indication that he has authority to sign their technical document…We have all become panicky. I think we should relax because again through my contacts I think attempts are being made to pay back the premiums.”
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