[ 2016-09-15 ]

Chief Executive Officer of the Millennium Development Authority (MiDA), Ing. Owura Kwaku Sarfo

Brouhaha over private participation in ECG ... No worker will lose job — MiDA CE

The Chief Executive Officer of the Millennium
Development Authority (MiDA), Ing. Owura Kwaku
Sarfo, has given an assurance that workers of the
Electricity Company of Ghana (ECG) will not lose
their jobs under the concession agreement to bring
on board private participation in the management
of the company.

Additionally, he said, the agreement would not
precipitate increases in electricity tariffs.

He said apart from the fact that there would be no
point in retrenching staff because 15 per cent
would go on retirement in the next five years, the
key elements of ECG’s private sector
participation (PSP) transactions guaranteed jobs
for five years.

Ing. Sarfo gave the assurance when he responded to
questions from editors at a media interaction
after presenting an update on the Compact II
programme implementation, also known as the
“Power Compact”, in Accra yesterday.

The theme for the power compact is: “Powering
Ghana for accelerated and sustainable growth”.

Touching on the PSP’s impact on tariffs, Ing.
Sarfo stressed that the Public Utilities
Regulatory Commission (PURC) would continue to set
tariffs as set by law and, therefore, assuaged
fears that the transaction would result in
automatic increases in tariffs.

He, however, cautioned that it did not mean that
if at the time of takeover by a concessionaire the
prevailing conditions necessitated tariff
adjustment it would not be done.

Background

On Friday, September 2 and Monday, September 5,
2016, the Public Utility Workers Union (PUWU)
directed workers of the ECG to embark on a
three-day nationwide demonstration to protest
against the privatisation of the ECG and demand
the review of the Millennium Challenge Corporation
(MCC) compact which they asserted had the road map
for massive lay-offs.

The exercise had all offices of the ECG across the
country closed down for three hours on both days,
a situation which left customers stranded.

But reacting to accusations by the staff of the
ECG and the PUWU that the government, through
MiDA, intended to privatise the company, a
development which would result in massive
lay-offs, Ing. Sarfo explained that the activity
was not a privatisation but rather private sector
participation.

He stated that “the compact offered two options
— partial privatisation and a concession — but
the government chose concession after further
analysis”.

According to him, the activity also entailed the
transfer of operational control to the private
sector, while ECG’s assets would remain 100 per
cent government-owned.

“The private partner will invest in, operate and
maintain the distribution network for a specified
period of 25 years, with reviews every five years
and a major review in 15 and 10 years of the
concession,” he said.

Why concession?

Outlining the advantages to be derived from the
concession option taken by the government, Ing.
Sarfo said it would bring in needed investments,
introduce efficiencies in ECG’s operations and
ensure that real tariff levels would reduce over
time for the power sector and allow the public
sector to concentrate on the monitoring and
regulation of obligations, among other gains.

He, however, admitted that the success of the
concession depended on extensive dialogue and
joint planning prior to entering into binding
contractual commitments and also required close
monitoring in terms of contracts and enforcement
of compliance and penalties.

“It is often renegotiated over the life of the
concession and this gives public perception that
the PSP is not working, which affects public
support,” he stated.

Current status

Ing. Sarfo said six foreign entities with Ghanaian
partners had been shortlisted out of 11 companies
that submitted applications for the ECG PSP and
the winner of the bid would be required to invest
a minimum of US$100 million every year for the
first five years and further investments
thereafter.

“It is from them that bids will be received from
early next year. By the third quarter of 2017
there should be a concessionaire managing ECG
operations,” he predicted.

Meanwhile, the projected project fund is US$535.6
million and it is divided into three — a
programme funding of US$469.3 million, a compact
implementation funding of US$28.9 million from the
United States grant of US$498.2 million and a
government of Ghana contribution of US$37.4
million.

ECG EFOT

The ECG PSP falls under one of the six projects
that make up the Compact II project labelled as
the ECG Financial and Operational Turnaround
(EFOT) and will attract a first tranche funding of
US$161.2 million.

The other components of the EFOT are the
modernisation of utility operations, reduction in
commercial losses, improvement of revenue
collection rates, technical loss reduction and
outage reduction.

The objectives of the EFOT project are to reduce
implicit subsidies, ensure that the ECG runs on
sound commercial principles to become credit
worthy and ensure it becomes a credible power
off-taker under power purchase agreements.

Other objectives include ensuring that the ECG
recovers its costs, including maintenance and
expansion costs, without the government’s
support, strengthening governance and management
by bringing in an acceptable PSP provider and
undertaking infrastructure and foundational
investments to reduce energy losses.

The Deputy Minister of Power, Mr John Jinapor,
stated that the agreement with the concessionaire
was not cast in stone and that if during the
reviews, as mandated under the contract, the
company was found wanting, the contract could be
terminated.

Source - graphic.com.gh

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