An independent audit by Millennium Challenge Corp., a US government aid agency, found that the suspension of the concession of Manila Electric Co. to operate and maintain the assets of the Electricity Company of Ghana had no basis.
The government of Ghana suspended on July 30 the concession of ECG, alleging that part of the financial transaction underlying the concession (a demand guarantee backed by reinsurance) was fraudulently obtained.
MCC conducted an independent audit of the transaction by a forensic auditing firm hired by the government of Ghana’s designated entity for compact implementation”•the Millennium Development Authority.
MCC’s $498-million Ghana Power Compact funding aims to fight poverty by transforming the country’s energy sector. The compact is the largest US government transaction under Power Africa and is expected to stimulate billions of dollars in private energy investment.
“In contrast to the findings of the government of Ghana’s investigation of the matter, the independent audit concluded that there was no information to suggest fraud in the transaction. Based on the independent audit findings, MCC concluded that the government of Ghana’s suspension of the concession was unfounded and that the rights of Power Distribution Services as concessionaire should be restored,” MCC said.
MCC informed the government of Ghana of its finding and said that a failure to restore the concession would likely lead to reduction of funding by $190 million, as the private sector participation in the ECG was a central basis for the funding.
MCC said by terminating the existing concession arrangement, the government of Ghana materially breached an obligation and the board approved the termination of $190 million of compact funding, although other parts of the program funding would continue.
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 firms TG Energy Solutions Ghana Limited, Santa Power Limited and GTS Power Ltd.
Meralco president and chief executive Ray Espinosa said earlier that 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 said.
“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 supplies 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.