Fraudulent payment guarantees presented by Power Distribution Services (PDS) to ECG and the lack of both technical and financial muscle of some partners in the consortium that forms the PDS were the main issues that led to suspension of operations for the power distributor on Tuesday, July 30, 2019 by government.
Paa Kwasi Anamua Sakyi, Executive Director of the Institute for Energy Security (IES), in an interview with the B&FT said: “According to government, they found anomalies in the payment securities presented by PDS to the ECG. These anomalies, according to briefing we have received from the Ministry of Energy as well as our own Intel, suggest that PDS presented a fraudulent payment guarantee – aside from the fact some partners in the consortium lack both technical and financial muscle”.
Later, in a statement to the media, the IES called on government to disclose fully details of the beneficial ownership of these Ghanaian companies which have proven to be financially not-fit-for-purpose.
“We also wish to call for a full enquiry into the circumstances that led government functionaries to ‘bend the rules’ to favour PDS Ghana by waiving some ‘Conditions Precedent’ before the takeover to ‘Condition Subsequent’ – which was a serious breach of the LAA. Had the ministry of Energy et al done their own basic ‘due diligence’ based on ‘Conditions Precedent’, we wouldn’t have come to a point where the concession stands suspended over a dubious insurance guarantee that should have come before the takeover,” the statement said.
ECG received a letter from Al Koot, the supposed partner of Dunwell Insurance, that the officer who executed the guarantees from Al Koot is not authorised to do so; and the type of products the officer submitted as payment securities are not part of Al Koot’s products.
Following the announcement, government has succeeded in securing all assets of ECG that were under PDS, apart from freezing the accounts of PDS through the collaboration of the IFS.
In the interim, government has tasked the Electricity Company of Ghana (ECG) – which the PDS took over from on March 1, 2019 – to take full control of power distribution in the country.
The situation, Mr. Sakyi believes, will ensure that “ECG will be able to meet its obligations when they fall due. In that situation, we don’t foresee ECG’s operation being hampered for reason of the suspension.
“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 Minister, Kojo Oppong Nkrumah, said in a statement announcing the suspension.
Quizzed on what the suspension of PDS’ operation mean Mr. Sakyi said: “We are unable to state that ECG will take over completely until conclusion of the investigation, as announced by the Energy Ministry. The issue is quite a fluid one, and only time and space can determine the next course of action”.
Potential judgement debt?
Addressing the question of whether the suspension of such an arrangement could lead to judgement debts, he said: “Definitely, there are cost implications. If the suspension leads to wholesale cancellation of the agreement, then progress has been retarded and time would have been wasted. If Ghana can’t establish any case against PDS, then judgement is in the offing. We equally risk losing out on the MIDA free cash flow if we don’t respond on time.
“You know MIDA through the Millennium Challenge Account (MCA) is giving Ghana or ECG close to half of a billion dollars under the concessionaire agreement to retool the distribution sector and increase efficiency levels.”
To smoothen the process, Mr. Sakyi advised that government should engage a lot of stakeholders at such a time to ensure a smooth transition.
Meanwhile, the PDS in statement reaction to government’s decision said it will go through due process by complying with the terms of the transaction agreements executed between it and ECG on one hand and government on the other hand.
“PDS also wish wishes to assure the Ghanaian public that it will not rush to put out any information until it has been sufficiently substantiated, in the interest of safeguarding the transaction and image of Ghana,” the statement further read.
While Ghana’s installed power capacity exceeds its consumption, stable and regular supply remains a dream for a country that is looking to bolster its manufacturing sector.
Current installed capacity from the Volta River Authority and Independent Power Producers (IPP) stands at 4,420MW, out of which the country consumes about 2,500MW at peak hours.
The distribution sector has always been a major concern for local manufacturers, who have complained of paying high electricity tariffs for inefficient power supply.
The US$90million capital that PDS is expected to inject into the power sector was therefore viewed as a major cause relief for businesses.