The United States’ Millennium Challenge Corporation (MCC) has withdrawn $190m of grant funding to Ghana after the government cancelled a concession agreement between the state-owned Electricity Company of Ghana and Power Distribution Services Ghana Ltd (PDS). The cancellation follows controversy over the validity of payment securities provided by PDS as part of the transaction (AE 398/15).
In a statement on 23 October, the United States embassy in Accra said that it was informed of the Ghanaian government’s decision on 19 October and “notes this decision with regret”. It said that “based on the conclusions of the independent forensic investigation, the US position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on 1 March 2019 was valid, and therefore the termination is unwarranted.”
The award of the concession followed a long and tortuous process managed by the Millennium Development Authority (Mida) which was complicated by sudden changes in government policy, particularly regarding the imposition of a minimum local ownership of 51%. Several bidders dropped out before the final submission of bids leaving only two bidders, a consortium led by the Manila Electric Company (Meralco), which was awarded the concession, and China’s BXC Company. BXC was disqualified for failing to disclose contracts with ECG in a decision it disputed (AE 371/10).
The Meralco consortium – which also initially included Angola’s Aenergia, TG Energy Solutions, Santa Baron Ventures Ghana, GTS Engineering Ghana, and TBK Ghana – faced some criticism for its choice of local partners and claims that they had not been properly assessed in the bid process (AE 387/1, 384/5, 374/8). PDS robustly defended its partners in a series of media articles following the suspension of its concession at the end of July.
The United States has confirmed that it will not be withdrawing the first tranche of funding, worth $308m, which is supporting infrastructure upgrades to the southern network. The embassy added that it “has full confidence in Mida to lead the joint effort to deliver the projects funded through the $308m remaining under the MCC Ghana Power Compact. The US government looks forward to continuing to work together with Mida and the Government of Ghana to implement the remainder of the power compact”.
Meralco president and chief executive Ray Espinosa was already being quoted in September that the company was considering pulling out of the country. The Philippine Star quoted him as saying that “we’re still waiting for developments. It’s a Ghana government issue”, adding that “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 DNA for that kind of risk in Africa yet.” Aenergia had been brought in to help manage the African elements of the business but has been suffering turnarounds of its own, after several of its contracts in Angola were recently cancelled (AE 399/10).
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