Is Meralco just a front for PDS? – ACEP quizzes
The Africa Centre for Energy Policy (ACEP) has questioned the role and contribution of the Philippine-based Meralco company in the whole Power Distribution Services (PDS) concession affair, especially as it has been silent in the consortium’s latest troubles.
“Is Meralco just a front in the PDS consortium, for which reason they are quiet in all the conversation on the guarantees,” the think-tank questioned, expressing surprise with the company’s mute stance on the whole issue, especially as Meralco featured critically in the Consortium as the technical and financial lead on the concession agreement.
Thus, if Meralco featured on the consortium as both its technical and financial lead on the transaction, how come it could not use its resources to produce the demand guarantees?
It further questioned the whereabouts of Meralco when the local companies were frantically struggling to pay premium for both advisory services and insurance guarantees – which have now been deemed fraudulent by government.
With a market capitalization of $7.4 billion in 2017, as reported by Millennium Development Authority (MiDA) in its press statement issued on August 8, 2019, Meralco seemed to have been quite laxed in the financial calls of the consortium.
ACEP reported in its latest statement that regarding issues of the financial capacity of PDS thus far, “the financial burden of raising the guarantees seem to be borne by only the 51 percent interest held Ghanaians as shown in the FTI report.
“What then is the role of the financial lead Meralco and the 19 percent shareholder AEnergia SA?” Benjamin Boakye, Executive Director of the Centre, asked.
Weak Financial Stance of PDS
According to ACEP, all evidences have proved that the PDS did not have the financial wherewithal to invest in the Electricity Company of Ghana (ECG). “It is evident that PDS does not have the financial muscle to invest as required by the LAA and the BSA,” Mr Boakye stressed.
ACEP asserted that the financial weakness of the PDS consortium to take over the assets of ECG could not have been unknown to MiDA and government, especially since it was a priority during the bid process, Parliamentary ratification, and negotiation of the agreement.
“As highlighted by the FTI report and previously by government and MiDA, PDS could not raise the Payment Securities in the form of either a demand guarantee or a letter of credit issued by a qualified bank. In spite of this glaring exhibition of weak financial muscle, the Advisors endorsed the variation for the demand guarantees instead of insisting on it,” ACEP explained.
Investigations that have been conducted since PDS’ suspension by the MiDA and the government into the procurement give strong indications that the entire process was significantly flawed, according to ACEP.
It said both reports tried to identify and establish the fundamental breaches of national interest. While the government team concluded emphatically that there were no valid demand guarantees from Al Koot Insurance, the FTI concluded that they did not have any information to suggest that PDS, Cal Bank, Donewell as well as personnel from MiDA had committed or conspired to commit fraud or other malfeasance in relation to the demand guarantees.
According to the think-tank, the investigation team contracted by MiDA, FTI had attempted to hide the failures of both MiDA and the transaction advisors. The report, it said, had rather substantiated ACEP’s position that the “exchange of bank guarantee for insurance guarantee was not in the interest of the people of Ghana, but those who kept their eyes on transaction deadlines to hand ECG over to PDS at all cost even if it meant bending the interest of the Ghanaian public.”
ACEP further raised questions on the validity of the demand guarantees, the involvement of AI Koot in the transactions, and also berated MiDA’s ignoring the legitimate concerns of the ECG which bordered on the procedure to change the bank guarantee to an insurance guarantee.
In light of all these events, ACEP did not in the least expect government to give green light for PDS to go ahead with the concession, in which case it would be a surprising turn of events. The think-tank already expressed its grave disappointment with the entire sequence of events that led to the private sector participation in the Financial and Operational Turnaround Project of the Electricity Company of Ghana.
Source: Energy Ghana