US aid agency says Meralco losing Ghana deal a downer

Washington had wanted to keep a Manila Electric Co. (Meralco)-initiated consortium to take over Ghana’s biggest power distribution business, but the West African government disagreed and accepted the loss of $190 million in aid by terminating the concession agreement.

Meralco won the bidding for the contract to assume the assets of Electricity Co. of Ghana (ECG) and operate and maintain the distribution system through what became as the Power Distribution Services Ghana Ltd. or PDS.

Meralco has the biggest stake in PDS at 30 percent, but the concession was designed such that local partners would hold a majority of 51 percent.

Amid allegations of irregularities in the transfer of ECG assets to PDS, the government of Ghana last July 30 suspended the 20-year concession, which started last March 1.

This was done in parallel with an independent investigation on whether PDS failed to provide payment guarantees for the transfer of ECG’s assets, as critics of the concession alleged.

Last week, the government of Ghana announced the termination of the agreement with PDS.

The Washington-based Millennium Challenge Corp. (MCC), which is providing help to address problems in electricity services through a $498-million grant, described Ghana’s decision as “disappointing.”

MCC noted a private-sector operator, by way of concession, was a necessary condition for an aid package.

“The United States of America notes this decision [termination of contract] with regret,” MCC said in a statement dated Oct. 23.

“Based upon the conclusions of the independent forensic investigation, the US position is that the transfer of operations, maintenance, and management of the [ECG network] to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted,” MCC added.

Also, MCC confirmed the $190-million funds granted to Ghana during the March 1 transfer were no longer available. However, the $308-million portion was still good.

In a separate statement, Ghana’s minister of information Kojo Oppong Nkrumah said Ghana was not able to compromise with the US “because we are advised, and we believe the same to be true, that the concessionaire failed as initially suspected to meet a material and fundamental term of the concession agreement—which was to deliver and maintain valid payment securities for the transfer of assets.”

The minister denied allegations the government had a hand in what critics described as an anomalous privatization process.

He also described Meralco as a “properly selected” concessionaire for the private sector participation in the turnaround of ECG, which has been bleeding financially while service areas were beset with supply interruptions.