Meralco deal abroad hits a snag

By: Ronnel W. Domingo - 05:16 AM August 01, 2019

https://business.inquirer.net/275852/meralco-deal-abroad-hits-a-snag

The government of Ghana yesterday announced it had suspended the concession agreement with an international consortium led by Manila Electric Co., claiming the group was found to have violated its payment obligations.

Meralco has the biggest stake at 30 percent in Power Distribution Services (PDS) Ghana Ltd., which started on March 1 a 20-year concession to take over the operation and management of state firm Electricity Co. of Ghana (ECG).

ECG, the biggest power distributor in the West African country serving the Ghanaian capital of Accra and nearby areas, resumes control of the business immediately.

Based on the terms of the concession, the consortium was expected to invest a total of $581 million during the first five years of the contract period.

In a statement, Meralco senior vice president William Pamintuan said they were “really surprised” about the suspension order considering that the issue on the demand guarantee “is new to us.”

“We are currently coordinating with our local partners in PDS to obtain more information and clarification on this matter and we will fully cooperate with the government of Ghana to address any issue affecting the same, and ensure that distribution of electricity service to the public in the ECG Concession continue uninterrupted,” Pamintuan told the Inquirer.

“The decision [to suspend the concession agreement] follows the detection of fundamental and material breaches of PDS’ obligation in the provision of payment securities (demand guarantees) for the transaction, which have been discovered upon further due diligence,” Ghana’s Ministry of Information said in a statement.

“The demand guarantees were key prerequisites for the lease of the assets on March 1, 2019, to secure the assets that were transferred to the concessionaire,” the ministry said.

The Ghanaian agency added that its government was conducting a full inquiry into the matter, the outcome of which would shape their next steps.

Earlier this year, the transfer of assets to PDS was postponed by a month—the concession was supposed to start on Feb. 1.

The concerned agency, Millennium Development Authority of Ghana, said preparations for privatization were extended to allow the parties involved—the government of Ghana, ECG and PDS—“to conclude their consultations and finalize work on some critical aspects of the transaction in order to facilitate a smooth transfer.”