Ghana cancels concession deal with Meralco-led consortium

MANILA, Philippines — The Government of Ghana cancelled the concession agreement with Manila Electric Co. (Meralco) and its partners nearly three months after it suspended the contract over material breaches.

In a disclosure to the Philippine Stock Exchange Tuesday, Meralco said it received information that the concession for the operation and maintenance of the assets of the Electricity Company of Ghana (ECG) had been terminated by the Government of Ghana.

The concession agreement was cancelled “due to alleged material breaches in the provision of the demand guarantees by the Power Distribution Services Ghana Ltd. (PDS).

“Based on the letter signed by Minister Ken Ofori-Atta of the Ministry of Finance of Ghana, the forensic audit by the auditors chosen by the Millenium Development Authority indicated that the purported demand guarantees were issued without due authorization and in excess of the mandate of Al Koot Insurance and Reinsurance, Qatari insurance firm and were therefore invalid,” Meralco said.

The demand guarantees were key prerequisites and condition precedent for the turnover of the assets and facilities of ECG to PDS.

PDS is the special purpose vehicle created by the 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).

Meralco, however, said the consortium fulfilled all the requirements prior to the take over of ECG assets.

“PDS has maintained that it procured the demand guarantees in good faith and that it has no knowledge of any issue with same until the suspension of the concession,” it said.

Ghana’s Information Ministry announced the suspension order on the ECG concession agreement, which took effect last July 31.

Meralco president and chief executive officer Ray Espinosa said the power distributor was considering pulling out its investment from Ghana’s power distribution utility as it was exposed to political risk following the suspension of its concession.

“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 constitution or the DNA for that kind of risk in Africa yet,” Espinosa had said.

The Meralco-led PDS signed the concession agreement with ECG on March 1, a year after the 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 will be leased to the PDS, while the ECG would become an asset holding company.

Meralco said the PDS consortium had 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.