Interim Statement On The Termination Of The PDS Concession Deal
The government of Ghana announced the termination of the Private Sector Participation (PSP), the concession, in the Electricity Company of Ghana (ECG) between the country and the Power Distribution Services (PDS). This decision was arrived at after over a month’s delay in government’s commitment to communicate its decision to the public following the detections of defects on the guarantees submitted by PDS. ACEP is of the opinion that the decision to terminate the contract is a credible response to domestic technical appreciation of the challenges with the guarantees and the ultimate burden on the government to protect the assets of ECG. It does not necessarily absolve government of blame from the poor management of the PSP process.
Many Ghanaian experts agree that the structure of the insurance guarantees and the denial of Al Koot Insurance, the assumed reinsurer to have underwritten the insurance policy in line with established corporate guidelines, made the insurance invalid to protect the interest of Ghana in the transaction. This exposes significant weakness in duty of care to have ensured that MIDA, the transaction advisors, Donewell Insurance and Cal Bank were dealing with the right people in Al Koot Insurance. Government investigation also concludes that the insurance was invalid.
The FTI report which was commissioned by MIDA and endorsed by MCC differ in that opinion. In fact, MCC maintains that the guarantees were valid based on the FTI report. This, however, does not make the individual who came to Ghana to interview stakeholders for the FTI report a better expert than any Ghanaian we have heard commenting on the guarantees. Ghanaians are being told that the papers presented to MiDA as insurance are legitimate even though the individuals claimed to have signed them challenges the legitimacy and validity of the insurance. The
FTI report failed to answer a very fundamental question about how MiDA and the transaction advisors (IFC and Hunton Andrews Kurth (“Hunton”)) ascertained the validity of the insurance before the transfer date to give effect to their trumpeted advice for a cutthrough clause which would have allowed ECG to activate the insurance on default by PDS. If MiDA and the advisers were minded to check the established approval and authorization processes in Al Koot, they would have realized that the manager who worked with Jo Australia to consummate the transaction lacked the capacity to do so. What is even shocking is that a transaction of that scale could be negotiated with a junior employee of Al Koot and none of the advisors raised concerns. MiDA kept the original documents with no apparent focus on ensuring that the insurance was valid. It later took ECG, who were only given a photocopy of the insurance guarantees accepted by MiDA, to question the validity of the guarantee.
