US halts transfer of $190m following termination of PDS deal

The government of the United States (US) of America has halted the transfer of $190 million granted to Ghana following the termination of the concession agreement with Power Distribution Services (PDS).

Describing the termination of the deal by the Ghanaian government as unwarranted, the US in a statement issued by its Embassy in Accra maintains that the agreement was valid.

The statement added that the US regrets the decision to terminate the contract.

“The United States of America notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted,” the statement said.

“As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available”.

However, the US says it will “continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA)” which will be used to support important improvements to the infrastructure of Ghana’s southern distribution network.

“This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana”.

On March 1, 2019, Ghana Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.

The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and the second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.

Read the entire statement below;

Statement Regarding the Termination of the Private Sector Concession by the Govt. of Ghana

Statement from the Embassy of the United States of America

Regarding the Termination of the Private Sector Concession by the Government of Ghana under the Millennium Challenge Corporation Power Investment

Accra, GHANA— On October 19, 2019, the Government of Ghana (GoG) informed the Millennium Challenge Corporation (MCC) in Washington, D.C. of its decision to terminate the concession agreement between Electricity Company of Ghana (ECG) and private operator Power Distribution Services Ghana Ltd (PDS).

The United States of America notes this decision with regret. Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted. As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available.

The United States underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth. In this spirit, the United States has worked with the Government of Ghana since the latter’s July 30 suspension of the concession in the hopes of finding a mutually acceptable solution that respected contract sanctity and the Government of Ghana’s interest in restructuring the concession.

Moving forward, the U.S. Government, through MCC, will continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA). This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.

The U.S. Government is a committed partner and has full confidence in MiDA to lead the joint effort to deliver the projects funded through the $308 million remaining under the MCC Ghana Power Compact. The U.S. Government looks forward to continuing to work together with MiDA and the Government of Ghana to implement the remainder of the Power Compact.

Background:

On March 1, 2019, Ghana Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.

The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and the second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.