Ghana loses $190M from USA after terminating PDS contract

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After the Government of Ghana abrogated its contract with Power Distribution Services, the government of the United States of America has stated that it is withdrawing their $190M support to Ghana.

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According to their press release from the US Embassy in Ghana, the cancellation of the Electricity Company of Ghana concession agreement with PDS was “unwarranted” since the contract was still valid.

This move has become necessary after irregularities in the operations of Power Distribution Service were discovered. It will be recalled that Power Distribution Services, Ltd (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) from March 1, 2019 under a 20-year concession agreement.

The agreement comprised two tranches of funding: $308 million made available after the start of the current Compact, and a second tranche of $190 million, which was available upon a successfully executed concession agreement.

However, a forensic audit conducted by the Millennium Challenge Corporation (MCC) and Government of Ghana into the issuance of Demand Guarantees for the Concession Transaction revealed that the Payment Security for the Transaction was invalid.

Read the Press Release below…

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.

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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.

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