Don’t use restricted tendering to replace PDS – Minority
The Minority in Parliament has kicked against the government’s proposal for the use of restricted tendering to replace the Power Distribution Services(PDS) in the ECG concession agreement.
The Minister of Finance, Ken Ofori Atta in a letter to the US government which is funding the concession recommended the selection of a new private-sector be done through restricted tendering to meet the Compact Two deadline.
But the former Deputy Minister John Jinapor under the Mahama administration is warning government against another ECG concession agreement without due diligence.
He told Starr News the proposal for restricted tendering must be ignored
“Even more disturbing is the fact that government wants to short circuit the process by going through what it describes as restricted tender. There’s everything wrong with that because if you went through an open tender, went through a whole process and ended up in such mess what is the guarantee that if you short-circuit it with restricted tendering within three months you can achieve anything better. We don’t trust this government as far as this whole ECG debacle is concerned.
“The interest of Ghana should override everything including so-called limited time. You don’t put yourself into a box, create a mess and say that because you have so-called limited time…I think that the limited time issue it has to be with the people of Ghana and not what any other person calls limited time. It is this government that created the mess, it is this government that decided to use unorthodox, unauthorized, illegal means that has brought us to this far and that is what has brought us this embarrassment of monumental international proportion and so I think they should rather learn from this embarrassment and then exercise caution. Because any attempt to short-circuit the process will create a major problem for this country,” Hon. Jinapor added.
The Millennium Challenge Compact (the Compact) was signed on August 4, 2019 between the MCC acting on behalf of the Government of the United States and the Government of Ghana acting through the Finance Minister.A key condition under the private sector arrangement was to introduce a concessionaire into the distribution sector, who would inject private capital into the operations of the Electricity Company of Ghana.
The two key advisors to the managers of the Compact, the Millennium Development Authority (MiDA), were the International Finance Corporation (IFC) and Hunton and Williams, an international law firm based in New York.
Through an international competitive tender, Meralco of the Philippines was selected as the concessionaire, the document recounts.
In order to satisfy the local content requirement under the transaction, a special purpose vehicle, Power Distribution Services, was incorporated in Ghana to be the operator, with PDS shareholding being Meralco (Philippines) 30 percent shares; AEnergia S.A. (Angola) 19 percent shares; GTS Engineering Services of Ghana, Santa Baron Ventures of Ghana and TG Energy of Ghana – together 51 percent shares.
Over 40 conditions precedent, five considered critical were required to be fulfilled by PDS under the LAA and BSA.
Two of the essential and critical conditions precedent, according to the document, were the provision of a BSA Payment Security and an LAA Payment Security (Conditions Precedent 24 and 31 respectively.)
They were preconditions to the occurrence of the Transfer Date and the exercise of the rights and obligations of the parties, and in terms of the Transaction Agreements, constituted security for PDS’ obligations under the BSA and LAA, according to the document.
Conditions Precedent 24 and 31 required PDS to furnish to ECG payment securities in the form of either a Demand Guarantee or a Letter of Credit issued by a Qualified Bank, it noted.
Owing to difficulties experienced with raising a bank guarantee, PDS formally requested MiDA to accept a demand guarantee issued by an A-rated insurance company, it said.
Upon the advice of IFC and Hunton and Williams, the MiDA Board accepted the request of PDS, it added.
Consequently, PDS submitted the Payment Securities in the form of Demand Guarantees issued by a Qatari insurance firm, Al Koot Insurance and Reinsurance (Al Koot) on 27th February, 2019, two days before the Transfer Date of 1st March, 2019.
Following failure to receive satisfactory confirmation by IFC and Hutton and Williams of whether adequate due diligence had been performed on the validity of the Demand Guarantees purportedly issued by Al Koot, by a letter dated 28th February, 2019, ECG took the initiative to ascertain from Al Koot itself proof of or confirmation of the due authorisation for the execution of the Demand Guarantees by that firm.
ECG also requested Al Koot to confirm compliance with relevant laws and regulations to which the Demand Guarantees would be subject, in relation to the substantial exposure in the total sum of $350, 000, 000.00) that Al Koot had undertaken in favour of ECG, it said.
ECG did not receive the requested confirmation and proof of due authorisation from Al Koot by the Transfer Date, it added.