Parliament approves takeover of ECG

Chief Executive Officer of Millennium Development Authority (MiDA), Martin Esson Benjamin said the processes involved in the ECG privatization.

Parliament has approved the proposed Electricity Company of Ghana (ECG) concession by Melraco Consortium.
This was after Cabinet okayed the concession after scrutinizing documents covering the takeover.

Chief Executive Officer of Millennium Development Authority (MiDA), Martin Esson Benjamin said the processes involved in the ECG privatization.

Under this compact, six projects will be implemented to address the root causes of the unavailability and unreliability of power in Ghana which are ECG Financial and Operational Turnaround Project, NEDCo Financial and Operational Turnaround Project, Regulatory Strengthening and Capacity Building Project, and Access Project.

READ MORE: Electricity tariff reduction will commence after second purchase in April

Others include Power Generation Sector Improvement Project and Energy Efficiency, and Demand Side Management Project.

Presenting the joint committee’s report on the floor of Parliament, Tuesday, July 24, 2018, the Chairman of the Committee on Mines & Energy, Hon. Emmanuel K. Gyamfi told Members that the Committee is hopeful that the private sector participation in the ECG by means of a concession would help to turn around the fortunes of the utility service provider and return the company to financial and operational viability.

The deal, he noted, is advantageous to the government partly because the Concessionaire is responsible for all major new investments that will help to minimize the impacts of such investments on the national budget.

Local content

MiDA, earlier confirmed receiving a letter from one of the Consortia shortlisted for the ECG Concession.

“MiDA confirms that it has received such a letter on a Bidder’s concern about the Government of Ghana’s Policy to have 51% Ghanaian ownership in the structure of the Concession,” a press release from MiDA stated.

French electricity conglomerate EDF, French transnational company Veolia and their local partner CH Group – who have put in a joint bid for the ECG Concession – rejected the government policy that allocates 51 percent mandatory ownership of the concession to Ghanaian companies.

In a letter dated February 12, 2018 and signed by Kevin Dadzie of CH Group, EDF and Veolia are protesting against the latest local content policy direction under the amended Request for Proposal (RFP), aimed at encouraging Ghanaian companies and entrepreneurs to be majority shareholders in the concession arrangement.

In the letter, addressed to CEO of Millennium Development Authority (MiDA) Enson Benjamin, and copied to the Board Chair Prof. Yaa Ntiamoa-Baidu, EDF and Veolia said: “We are writing on behalf of the consortium comprising CH Group Ltd, EDF and Veolia Africa, to express our significant concerns regarding the Newco [ECG] structuring requirements as set out in the amended Request for Proposals, dated 29 November 2017 (the ‘Amended RFP’).

The latest amendments under the amended RFP introduced mandatory 51 percent Ghanaian ownership – ultimate legal and beneficial ownership by Ghanaian citizens.

It puts express restrictions on creating different categories or classes of shares in NewCo; and the requirement for this 51 percent threshold is to be maintained for the concession’s full duration; a potential company event of default would trigger the default buy-out-option if this 51 percent threshold is not maintained.

According to the consortium, the above requirements significantly impact the consortium’s ability to structure a workable solution.

The consortium further stated its financiers have cautioned that such restrictions will ultimately impact the concession’s bankability.

It further stated in the letter on page 3 that: “As part of the security package, which will necessarily compromise any financing package, the 51 percent restriction is again problematic; severely restricting the enforcement right of the lenders, and negatively impacting on bankability of the concession as a whole.”