Manila Electric Co. said Tuesday the government of Ghana terminated the 20-year concession for the operation and maintenance of the assets of the Electricity Company of Ghana over alleged demand guarantee breaches.
Meralco said in a disclosure to the stock exchange it received information that the concession, which was suspended by the Ghana government on July 31, 2019 “had been terminated by the latter due to alleged material breaches in the provision of the demand guarantees by the Power Distribution Services Ghana Ltd., the special purpose vehicle created by the consortium that won the privatization bid”.
Meralco owns a 30-percent minority stake in PDS which was awarded the concession for the ECG in March 2019. Aside from Meralco through Meridian Power Ventures Ltd., other members of the PDS consortium are AEnergia SA, an Angolan company and Ghanaian companies TG Energy Solutions Ghana Limited, Santa Power Ltd. and GTS Power Ltd.
“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 Millennium 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 siad.
It said the demand guarantees were key prerequisites and condition precedent for the turn-over of the assets and facilities of ECG to PDS.
“The same report also mentioned that there was no information available to forensic auditors to suggest that PDS committed fraud in relation to the demand guarantees. 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,” Meralco said.
Meralco said it would update the PSE as soon as it receivef the official notification for the reported termination of concession.
Meralco president and chief executive Ray Espinosa said earlier the Ghana investment was “filled with politics.”
“We are just waiting. It’s a Ghana government issue. Personally, I’m losing interest. We’re exposed to political risk and it’s too far away,” Espinosa siad.
“Our 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. But that’s where it stands today,” Espinosa said.
Meralco and other members of the PDS consortium announced in March their planned investment of more than $580 million to strengthen the operations of ECG which serve 80 percent of the population of Ghana through three million accounts.
The PDS consortium was supposed to become the electricity service provider in all of ECG’s operational areas in the Southern Distribution Zone of Ghana, under a 20-year concession agreement approved by the government.