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Official: Govt chooses replacement of PDS, opts for termination of contract with ECG

PThe government has asked the Millennium  Challenge Corporation  (MCC) and its agency, the Millennium Development Authority (MiDA) to determine a suitable private sector entity to replace the Power Distribution Service (PDS) through a “restrictive tendering” process.

This followed the intention to abrogate the existing agreement between the Electricity Company of Ghana (ECG) on one hand, and the PDS (the concessionaire) on the other hand, over what had been described as the breach of the condition precedent in the agreement by government.

The choice of restrictive tender for selecting a new entity to participate in the country’s energy sector, according to government was to fast-track the processes in view of the limited time left for the expiration of the Compact II Programme.

In a statement issued in Accra on Friday and signed by the Minister of Finance, Mr Ken Ofori-Atta, he said government recognised the challenges that the privatisation of ECG had faced, however, the challenges did not in any way diminish its commitment to working with the MCC on private sector participation in the country’s energy sector.

He explained that the government’s decision to terminate the PDS concession and find a replacement in a timely manner to successfully conclude the compact was based on two key points.

The first was that there was an understanding between the Chief Executive Officer (CEO) of MCC and President Nana Addo Dankwa Akufo-Addo that the existing concession would be discontinued and a concession restoration and restructuring plan executed within existing timelines in any event before December 31, 2019.

Secondly, there was enough evidence to support the abrogation of the existing concession agreement between PDS and the ECG since Al Koot was not authorised by its constitutional documents to underwrite counter party and trade risk.

Mr Ofori-Atta explained that in a seven-point response to a letter dated June 16,2019 issued by Al Koot, it stated that the guarantees purportedly issued in respect of the Transaction was not an approved product line.

In addition, the Demand Guarantees were not executed by authorised signatories of Al Koot as well as the letter dated March 13 forwarded by MiDA to the ECG purporting to confirm the issuance of the Demand Guarantee was part of the misrepresentation in respect of the purported issuance of Demand Guarantees to secure assets of ECG to PDS as the signature was forged.

Futhermore, Al Koot denied the existence of the Guarantees; refused to accept any present or future legal obligations in connection with the purported Guarantees and also no criminal action could be instituted by Al Koot against personnel and reinsurers who might have aided and abetted the fraudulent issuance of the unlawful guarantees.

He said on the strength of all the information gathered about the purported Demand Guarantees provided by PDS as security for the transfer, the government of Ghana was of the firm opinion that there was no valid Payment Security.

The Minister said Al Koot which was the Insurance company selected by the PDS to issue the Demands Guarantee on its behalf had clearly denounced and repudiated the instruments and expressed a clear intention not to be bound by any present or future obligation arising out of same.

“It is quite apparent that the alleged signatory of the purported Demand Guarantees, Yahaya Al Nouri, was not duly authorised by Al Koot to execute same according to the company’s delegation of Authority instrument. The product was also not one of the company’s product lines,” he said.

He explained that the actual details of the purported insurance cover for the transaction furnished by PDS disclosed further deception and unprofessional conduct on the part of PDS.

“Whereas Al Koot was produced by PDS as the primary insurer, the reality of t he scheme deployed by PDS in the procurement of the invalid Demand Guarantees suggests that Al Koot was only put forward by PDS as a “front” with the actual obligation retroceded to a number of unknown and obscure insurance firms from unfamiliar jurisdictions around the world,” he added.

Furthermore, he said “This at best, betrayed a trivialisation of or a lack of appreciation by PDS of the seriousness of the Transaction in which about $3billion of the assets of Ghana was at stake.”

 Mr Ofori-Atta, however, noted that in spite of the setback, government was desirous of ensuring completion of Compact II, adding that “Whilst recognising the prerogative of the MCC in the determination of a particular procurement method in the selection of a PSP, in view of the limited time until expiration of the Compact II Programme, Ghana hereby recommends the adoption by the MCC/MiDA of a restricted tender process to replace PDS.”

By Cliff Ekuful

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