Tsatsu Tsikata vrs the government

Fast Track Court awaits outcome of Tsatsu's motion

Tsikata's GNPC under scrutiny

Tsatsu Tsikata denies Dapaah’s charges

GNPC lost court case because of no representation - Tsikata

Tsatsu to be charged

Government did not chicken out of Tsikata saga - Agyepong

Fast Track Court awaits outcome of Tsatsu's motion

Accra (Greater Accra) 19 February 2002 - An Accra Fast Track Court (FTC) trying Tsatsu Tsikata, former Chief Executive of the Ghana National Petroleum Corporation (GNPC), for willfully causing financial loss to the State, on Monday stayed proceedings pending the determination of his motion at the Supreme Court.

Mr Tsatsu is challenging the legality of the FTC and since this is a matter that needs constitutional interpretation, it is only the Supreme Court that has the mandate to do so.

Mr Justice Julius Ansah, the trial judge, said it was a fundamental issue that needed constitutional interpretation. His court had no alternative than to stay proceedings to await the outcome of the motion pending before the Supreme Court and accordingly adjourned the case to Monday, March 4.

According to the former GNPC boss, the FTC was not recognised by the Constitution and, therefore, its existence was unconstitutional. At the court's first sitting on Tuesday, February 12, his counsel, Mr E.V.O. Dankwah raised a preliminary objection that the FTC had no jurisdiction to try his client.

Mr Justice Ansah entered a plea of not guilty for Tsatsu and admitted him to self-recognisance bail in the sum of 500 million cedis. Tsatsu allegedly circumvented laid-down corporate objectives of GNPC when he by-passed its Board and committed the corporation to guarantee a loan of 5.5 million French francs by a French aid agency, Caisse Francaise de Developpement.

The money went to Valley Farm, a private cocoa-growing company, in which GNPC held an initial equity share of 17.39 per cent.

Having found itself in distress, Valley Farm could not pay back the loan and without prior approval of the GNPC Board, Tsatsu paid the principal loan plus interest totalling 6,919,123.23 French francs out of the corporation's operational funds.

Tsatsu's action adversely affected the financial status of GNPC, hence a loss to the State, the Prosecution said.

GRi../

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Tsikata's GNPC under scrutiny

Accra (Greater Accra) 16 October 2001 - A painstaking forensic investigation into the affairs of Ghana National Petroleum Company (GNPC) is expected to expose a litany of monumental theft and abuse of office perpetuated under the leadership of Tsatsu Tsikata against the State-owned company, which is currently in so dire a financial state that its staff members have not been paid since July and are facing the prospect of heavy job cuts.

Interviews with staff and other key board members point to a shocking scale of corruption within GNPC in the ten years to 1997. Equally shocking is how this could have escaped scrutiny for so many years.

The forensic audit is being undertaken by the highly reputable international financial firm, Price Waterhouse Coopers (PWC) on behalf of the NPP government to confirm or refute, among others, allegations of substantial money transfers from GNPC made to personal accounts controlled by Tsatsu Tsikata, who was for 20 years at the head of GNPC.

The interviews suggest that funds were willfully directed from GNPC accounts with international banks in Switzerland, France and the USA, including the Union Bank of Switzerland (UBS), Credit Suisse, Societe Generale, Fleet National Bank and Texas Commerce Bank.

Tsikata apparently set up the above accounts for hedging activities. Hedging is a betting mechanism employed by companies as a means of protection or control by speculating on the derivatives market against the risk of inflation in the country or to bet upon both sides of the coin, thus, guarding ones business against great loss, what every may be the result. Except in GNPC's case, the accounts for purposes of hedging activities were said to be suspicious.

Before the government ordered the forensic audit, Tsikata was though to have recklessly used GNPC funds to bet in complex hedging transactions, starting in 1996. This meant GNPC being paid either a premium by the banks or GNPC paying the banks certain sums of money, depending on whether or not the market price of oil stayed below or above the predicted price. In effect, Mr. Tsikata was though to have been "gambling with our oil while the people of Ghana were queuing for petrol," the Energy Minister commented.

In August, the Energy Minister, Albert Kan Dapaah, cited Tsikata's gambling operation in the derivatives market as having set local and foreign creditors chasing our government for millions of dollars owed them.

But something more sinister appears to be emerging as investigators are told that the so-called hedging activities of GNPC may have been partly a front to transfer funds into private coffers.

Tsatsu Tsikata's mishandling of GNPC's affairs during his 20-year stewardship plunged the state corporation into a multi million-dollar financial mess. GNPC was said to be indebted to Paris-based Societe General Bank, to the massive tune of $47m, which a judgement was obtained, leading to the sale of Discoverer 511, GNPC's drill ship to offset the losses incurred by Tsikata in apparent hedging activities. Also, $17.21m was owed to Credit Suisse and $89m to UBS.

Tsikata refuted the allegations, in a press conference last month, that he willfully caused the corporation financial loss. The former GNPC boss also denies allegations that all the payments made by the banks were paid to him, adding, "The Corporation's accounts are open for everybody to check."

But the initial findings of the auditors paint rather oblique and opaque picture. The staff members of GNPC alleged that, in a cunning attempt to hide the scum, the sums transferred form the said accounts were disclosed in GNPC records as costs or losses of the company relating to hedging operations. Thus, suggesting, the risks involved with the speculative nature of hedging were unscrupulously exploited to give legitimacy to losses, which may never have occurred while the funds involved were safely siphoned from the enabling incognito account at UBS, etc, into personal accounts.

It is claimed that though the transactions were supposed to have been made on behalf of GNPC no original bank statements were ever made available to the finance department of the corporation. All attempts to obtain original bank statements by staff of the finance department on the accounts have been unsuccessful, the reports stated.

Indeed, in 1997, Deloitte & Touche, the corporation's external auditors had complained on their inability to access documentation relating to these cluster of suspicious accounts established for hedging activities. GNPC staff describes Tsatsu Tsikata as 'extremely sensitive' about any enquiries relating to these accounts. No bank reconciliation of these accounts has ever been carried out in the past to the knowledge of staff of the finance department.

The ongoing forensic investigation involves, contacting and interviewing relevant banks and other key third parties including present and former staff for information or confirmations and undertaking to reconcile GNPC generated documentation to originals of bank statements and other documentation obtained.

It is mind-boggling how activities of such a big state-owned corporation could be shrouded in secrecy and credulity for so long, as suggested by the staff. But a look at the corporation at the period tells how mega cephalous was the overreaching presence of Tsatsu Tsikata, which perhaps explains how matters were overshadowed.

Some of the shocking observations made by Price Water House Coopers are, for example, contrary to the provisions of PNDC Law 64, between 1998 and 1994 Tsikata exercised almost 'absolute authority' by combining the role of Chief Executive and that of Chairman. The Board, therefore lacked any inherent authority to govern and control management effectively.

Interviews and reviews conducted through the forensic investigation suggest that, between 1987 and 1997, GNPC spent $88 million (¢62.5bn) to buy seven oilrigs were frequently acquired at prices higher than fair market rates. This situation can only be explained by either the tortuous liability of gross managerial negligence or blatant fraudulent design, both answerable in the court of law. For example, the Chaparral rig was acquired at les than 50% of the alleged purchase of price of $1.51 million, implying, about $750,000 (¢2.4bn) went into somebody's pocket. For 10 years the seven rigs commanded monthly maintenance costs averaging the exorbitant amount of $250,000.

To throw more light on this, investigators were told, in 1997, two payments of $100,000 each lacking transparency, but entered in GNPC's books as relating to the purchase of the Chaparral rig, were made to Credit Swisse in Zurich and Avex Anstalt. According to Price Water House Coopers, the identity of the latter bank account is shrouded in obscurity.

Management review of the existing (or previous) organizational and management structures of the corporation have revealed that basic commercial procedures and normal corporate practices such as Board approvals and budgets were hardly followed for the purchase of the rigs.

A review of the establishing and enabling legislation relating to the corporation shows that some of the Provision of PNDC Law regarding corporation membership was violated with impunity. Frequently, Board size extended beyond statutory provision of seven members. Guidelines existing for the conduct of the business of the Board appear to have been disregarded on several occasions. This may have led to fraud by either some directors, management or staff of the corporation. The scale of the corruption and mismanagement being unearthed gives clear indication that certain top officials of the corporation may have breached their judiciary duties under PNDC Law 64 and in 'some cases' acted for personal aggrandizement.

During the period reviewed, GNPC is alleged to have invested about ¢12 billion in various companies in which the corporation had no direct commercial reason to do so because their business interests were not related to that of GNPC's. The commercial decisions may have been influenced by political or personal considerations.

For example, former President Flt. Lt. JJ Rawlings is alleged to have played an influential role in securing investment for Valley Farms, resulting in substantial loss to GNPC. The corporation suffered a loss in excess of $1m as a result of recklessly and, perhaps, illegally assuming 100% of the risks relating to a loan taken by valley farms. The majority shareholder of Valley Farms Ltd, James Wilson is said to be a personal friend of the former President. Also in 1992, an amount of ¢32 million (worth about six times as much today), was invested in Valley Farms. Notably the business of the farms was not remotely related to GNPC's businesses.

PWC is also investigating charges of award of contracts to cronies at highly inflated values. Disclosures made by staff during interviews suggest that contract award procedures have been extensively abused in the past and may have involved fraud, including disturbing elements of serious conflict of interests of serious conflict of interests. Particular mention is made of Miss Esther Cobbah (a.k.a Mrs Esther Baah-Boakye), Public Affairs Manager of GNPC and Mr Tsikata, Firms connected to these executives of GNPC are said to have been awarded various contracts under highly suspicious conditions.

The large scale meticulous investigation of GNPC involving besides PWC, national agencies, such as the security services, Registrar of Companies and Bank of Ghana, is bound to net some big fish and hopefully lead to the tracing and recovery of millions of dollars of state funds alleged to have been willfully diverted into bank accounts and other assets of persons who certainly had not the interest of the nation at heart. - The Statesman.

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Tsatsu Tsikata denies Dapaah’s charges

Accra (Greater Accra) 06 September 2001 - The former Chief Executive of the Ghana National Petroleum Corporation (GNPC), Mr Tsatsu Tsikata on Thursday denied various allegations of financial impropriety, which the government said had resulted in huge financial loss to the state.

He told a press conference that the allegations were of no merit and were unfounded. The Energy Minister Albert Kan-Dapaah at a Press Conference on August 8 made various allegations of impropriety against Mr Tsikata, especially his dealings with Societe Generale (SG), a French commodities bank.

The Minister had alleged that Mr Tsikata misrepresented himself to SG as a financial expert in derivatives and recklessly hedged the country's allocation of crude oil, which resulted in the loss of 47 million dollars to the state.

The former GNPC Chief Executive was also said to have mortgaged the corporation's drill ship for 32 million dollars and received a net premium of eight million dollars.

Mr Tsikata, however, said the hedging transactions were part of normal industry practice in the commodity world and were a regular feature of commodity financing transactions.

He said the corporation's dealing with SG was purely in the development of the Tano Oil Fields and not in the sale of oil on the international market.

Mr Tsikata explained that SG's proposal of derivatives was undertaken because of the long term financing requirements of the corporation and to ensure that future oil price movements did not adversely affect the corporation's ability to repay debts incurred on the project.

"The basic strategy for the derivative transactions was recommended by Societe Generale and they provided the credit lines for the transactions and controlled what transactions were acceptable throughout the period."

Mr Tsikata said SG expressed its satisfaction with GNPC's compliance to the recommended strategy and increased its credit to the corporation to continue with the transaction. "These are complex transactions, but it is wrong to regard them as gambling," he emphasised.

He said it was in this direction that when SG presented a standard form agreement, in which it included a clause stating that GNPC had not depended on their advice, they rejected it and it was removed before the agreement was signed.

Mr Tsikata also denied allegations of selling crude oil in the international market instead of making the allocation available to Ghanaians, explaining that when the crude oil import process was liberalised in 1996 and a bidding process was introduced, the winning bidder was in no way dependent on GNPC’s standing agreement with the Nigerian National Petroleum Corporation (NNPC), which it renewed on an annual basis.

He said GNPC's contract with NNPC was still standing although the tender board could select another entity to supply crude to the refinery. In such circumstances, Mr Tsikata said, "the commercially responsible thing for GNPC to do was to sell the crude on the international market just as it sold such crude during the periods when the refinery did not require the cargo or was shut down for maintenance".

Mr Tsikata also declared that he had not been paid any money as was alleged, indicating that all payments made were to the corporation.

GRi../

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GNPC lost court case because of no representation - Tsikata

Accra (Greater Accra) 07 September 2001 - The Ghana National Petroleum Corporation lost its case to Societe Generale (SG), a French commodities bank, because of lack of legal representation, the corporation's former Chief Executive, Mr Tsatsu Tsikata said on Thursday.

Speaking at a press conference to respond to allegations levelled against him by the Energy Minister, Mr Albert Kan-Dapaa, Mr Tsikata said the instruction to the corporation's solicitors to stop and hand over the case to the Attorney General presented SG the opportunity to make amendments to their case and apply for judgment against GNPC.

He said important applications made to the court by the GNPC's solicitors were not pursued when the government decided to throw in the towel.

He said GNPC lawyers had contested the claims of SG since 1999 based on the fact that it was SG that gave "negligent advice" to the corporation to hedge its anticipated production of oil and gas from the Tano Fields.

Mr Tsikata said when statements of defence were filed at the London High Court it gave directives that the parties should exchange documents. The GNPC complied with the directive but SG blacked out sections of what they presented to GNPC because they claimed they did not have to disclose those passages.

Mr Tsikata said an application was consequently made to the court to order SG to disclose them. It was at that stage that the government decided to drop the case, even though, there was high probability that GNPC could win.

He came to this conclusion because, "before SG brought their claim in the London High Court, they had earlier in 1998 filed a suit in the United States - in the District Court in Houston - seeking an order to have the GNPC drill ship, D511, moved to the US and detained by them upon conclusion of its contract in Mexico.

"This suit was brought against the US company that had chartered the drill ship as well as GNPC. The case of SG was thrown out and when they appealed to the Court of Appeal in New Orleans, they were again unsuccessful.

"It emerged in those proceedings that SG had sought legal advice about taking action in Mexico, where the drill ship was operating, or in Panama, where the drill ship was registered, and they realised that they could not succeed in either jurisdiction if they filed a suit," Mr Tsikata said.

The former Chief Executive said it was regrettable that the Minister could rely on rejected allegations in the SG case to paint a picture to the public that was far from the truth.

He emphasised that SG dealt with the corporation as a commercial body throughout the transactions and there was no need for governmental interference. This, he said, explained why SG claims were pursued against the corporation and not the government.

GRi../

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Tsatsu to be charged

Accra (Greater Accra) 08 September 2001 - Government spokesperson, Kwabena Adjepong, has said in Accra that the government will not be stampeded into dragging Mr. Tsatsu Tsikata before court.

He was reacting to the public's concern over Tsatsu's denials to allegations leveled against him by the Energy Minister, Mr. Kan Dapaah.

Meanwhile there has been mixed reactions from the public following a press conference held last Thursday in Accra by the former day in Accra by the former Chief Executive of the Ghana National Petroleum Corporation (GNPC).

The public's general opinion when sampled was that they do no know whether to believe, the Minister for Energy Mr Kan Dapaah who leveled the accusations against Tastsu Tsikata last month or Mr. Tsikata, who has challenged the Minister.

Mr Kan Dapaah is said to have traveled outside the country on official duties at the time of the Tsatsu press conference.

A number of respondents sampled were of the view that they were getting frustrated by the accusations, and the denials from both sides, i.e. former government appointees and present government officials.

Respondents said government should haul Tsatsu Tsikata before the law courts if they had enough evidence against him.

In reaction to this deputy government spokesman, Kwabena Agyepong said government will not be stampeded into taking any such action.

The Energy Minister had accused Tsikata of grossly mismanaging the GNPC through guaranteed loans leading to accumulated debts of 47 million dollars from a gambling and hedging agreements with a Paris based commodity bank, Societe Generale.

He was also accused of diverting crude oil meant for Ghana to the international market and undertaking deal in non-core activities of the corporation.

Last Friday government had a dose of bad press when the Deputy Minister for Energy Mr K.T. Hammond chickened-out or failed to meet Mr Tsatsu Tsikata on the popular Joy FM Front Page programme hosted by Kwaku Sekyi Addo. Earlier at the press conference last Thursday, Mr K.T. Hammond the deputy Minister had reacted to Tsatsu's was off the mark and was far from speaking the truth.

Hammond had assured Joy FM that he would be on the radio station's Front-Page programme to meet Tsatsu face to face.

However he failed to turn up the next day. This fuelled a lot of public reaction against the government.

His failure to appear was condemned by many callers to the programme. The callers were divided between believing Mr Tsikata or condemning government's allegations against him. The callers noted that the presence of Mr Hammond would have put matters to rest.

After the two-hour programme, Mr Hammond called the host of the programme, Kwaku Sakyi-Addo on his mobile phone demanding to be put on-air to react to the concerns by the callers and certain allegations. Mr Sakyi-addo who was clearly upset could not hide his feelings about the deputy Ministers approach.

He noted that the behaviour of the Minister was a disgrace to government's public relations machinery since the public has been denied the opportunity to know the truth or otherwise of Mr Tsikata's response to the various allegations.

However more drama was to be played out before the day ended when the deputy minister also called a press conference where apologized to Ghanaians for his conduct in the morning.

He revealed that his ministry has 15 boxes of documents containing evidence against Mr. Tsikata. He asserted that Tsikata is GNPC and GNPC is Tsikata, because at one time he was the Chief Executive and the Board Chairman at the sametime.

As to when Tsatsu will be charged before a court of law to answer for his charges, Mr. Hammond said that is the Attorney General to decide.

"Efforts made by The Daily Guide to interview the former Government Adviser on Energy Dr. Charles Yves Wereko Brobby proved futile. – Daily Guide

GRi…/

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Government did not chicken out of Tsikata saga - Agyepong

Accra (Greater Accra) 08 September 2001 - Deputy Government Spokesperson, Kwabena Agyapong said the absence of a government's representative on a JOY FM programme on Friday was neither a defeatist posture nor inability to counter the claims of Tsatsu Tsikata.

The Government, he said, stood by the statement the Energy Minister, Albert Kan-Dapaah made in August on the state incurring huge financial losses because of Tsikata's unguided investment decisions as Ghana National Petroleum Corporation's Chief Executive.

Agyapong was speaking to journalists at the State House to react to Tsikata's postulations at a press conference on Thursday.

He claimed Tsikata only engaged in unnecessary verbiage to confuse the public and depart from the truth about the allegations, adding that he did not address in substance, the debts of over 17.2 million dollars owed to Credit Suisse nor that of 8.9 million dollars to Union Bank and the procurement of marine assets to the tune of 62 million dollars.

It was not true that the Drill Ship was sold because the Attorney General was unable to defend the case in the London High Court, he said, explaining that the Attorney General critically looked at the merits of the case and decided that GNPC had no chance in contesting the claims and, therefore, opted for a negotiated settlement.

Interestingly, he said, Tsikata since March 1998 was making advances to sell the Drill Ship after he had failed to use it as a collateral for loans from Societe General and Credit Suisse.

Agyapong said Tsikata's attempt to dwell on a personality was a red herring because all activities at the corporation revolved around him and no decision could be made without recourse to him, challenging Tsikata to substantiate his claims with documents. T

The Deputy Energy Minister, Kobina Hammond said the Tano Project was not the element of discussion and that Tsikata's decision to dwell extensively on it was to divert public attention.

He said the government would at an appropriate forum ensure that the public hears the truth and the proper action taken.

Hammond said Tsikata during his tenure of office took decisions without recourse to the Board and the law.

Tsikata at his press conference to react to an earlier one held by the Energy Minister Albert Kan-Dapaah, denied various allegations of financial impropriety, which the government said had resulted in huge financial loss to the state.

He described the allegations as lacking merit and unfounded. Last Friday, Hammond was scheduled to appear on Joy FM’s Front Page, hosted by Kweku Sekyi-Addo but failed to turn up after accepting the invitation and confirming his participation 30 minutes before the programme was to start.

GRi../

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Albert Kan Dapaah’s full statement

Sale of GNPC Oil Drill Ship "Dicoverer 511" and other related GNPC matters

Introduction

Ladies and Gentlemen, on Thursday 27^th July, the Government issued a statement on the sale of GNPC's oil drilling ship, "DISCOVERER 511", to pay for a $47 million loss incurred by Mr Tsatsu Tsikata, the former Chief Executive of the corporation in hedging dealings with Societe General, a French commodities bank. The statement promised a later press conference to give full details of the sale and other related matters.

Facts

Ladies and Gentlemen, the hard facts of this catastrophic financial loss to our nation are as follows. Around the middle of 1996, Mr Tsikata, presented himself to Societe Generale, in the words of the bank, as "a commercial, legally trained businessman, sophisticated in terms of his understanding of derivatives trading and the theory behind how derivatives work and how they can be used." He informed the bank that GNPC traded in derivatives and was keen to transact business with it.

Mr Tsikata's business was selling the crude oil, which had been allocated specifically by the Nigerian Government to be refined at the Tema Oil Refinery to supply our country's petroleum products needs. Mr Tsikata decided to sell our oil on the international market instead of making the allocation available to Ghanaians, and wanted to hedge his risks. Mr Tsikata also told the bank that GNPC's Tano oilfield was scheduled to start production within 12-18 months. This was also in 1996.

In a set of very complex hedging transactions which started in October 1996, Mr Tsikata was paid either a premium by the bank or he paid the bank certain sums of money depending on whether the market price of oil stayed below or above the predicted ('strike') price. In effect Mr Tsikata was gambling with our oil while the people of Ghana were queuing for petrol. Mr Tsikata was hoping to reap enormous profits by selling our oil in advance of delivering the product. What Mr Tsikata had not fully comprehended, was the very basic fact that he had no infallible disposition to predict oil prices with absolute certainly.

Like all who dabbled in the hedging business, Mr Tsikata's hedging sophistry was also subject to the extreme volatility of the oil market. Thus, when the oil prices started to decline, Mr Tsikata started to lose massive sums of money. Under the arrangement with the bank, the more money he lost, the more he had to fall on the bank to bail him out and increase his indebtedness to the bank. As matters got worse and his financial situation deteriorated, Mr Tsikata refused the bank's advice to cut his losses and run. Rather he decided to up the stakes in gambling our national assets. Mr Tsikata executed a mortage of GNPC's only viable asset, the oil drill ship "Discoverer 511", in favour of the bank in the sum of $32 million. The drill ship was purchased and refurbished by GNPC in 1992 at a total cost of $25.74 million.

The mortgage amount was to secure his outstanding losses to the bank, but more recklessly, also to enable him to carry on with the gambling of our Nigerian allocated crude oil and the anticipated yield from the Tano field. And so he carried on gambling in his own merry way such that by July 1998, Mr Tsikata had run up debts to the value of the mortgaged ship and the bank entangled in Mr Tsikata's high stake gambling of Ghana's precious assets. Quite apart from reaching the $32 million limit of the security on the drill ship, Mr Tsikata was also paid a net premium of $8 million by Societe Generale, which brought his total indebtedness to the bank to $40 million.

Mr Tsikata accepted the indebtedness to the bank and promised to settle the outstanding debt. Unfortunately, he failed to keep to his word for several months, with the result that in early 1999, Societe Generale instituted legal proceedings in the High Court in London to recover its money, including interest and the costs of the legal process. Meanwhile, an arrest order was granted to the bank for the arrest and detention of "Discoverer 511" which was by now laid up in the offshore waters of Oman.

On 6^th June this year, the London High Court ruled in favour of Societe for the full $40 million sum, together with interest and costs totaling a further $7 million bringing Mr. Tsikata's total indebtedness to the bank to $47 million. In order to get its money, the bank decided to sell the drill ship and to pursue the GNPC for any balance, should the proceeds of the sale not be able to cover the full amount of indebtedness. Faced with the imminent loss of the drill ship, the government dispatched the Deputy Minister of Energy, on June 13, to London and Paris to try and reach a negotiated settlement with the bank. The Deputy Minister was also to ensure an orderly sale of the ship to obtain proper market price, if it became inevitable that it had to be sold.

After almost six weeks of intensive negotiations Societe Generale agreed to accept $19.5 million in full and final settlement of Mr Tsikata's indebtedness to the bank. The bank however, would not release the ship from arrest until the settlement figure was paid in full and immediately. Under the circumstances, the Government directed the Deputy Minister to sell the drill ship at the best price that could be obtained on the international market. Consequently, the ship was sold to frontier Drilling of Norway for $24 million, with the formal transaction for the sale being concluded on 17^th July 2001.

Related Matters

The massive loss to the nation of Mr. Tsikata's gambling with our Nigerian crude oil allocation and the future produce from the Tano fields is grave enough. Unfortunately, it is not only disaster which has been bequeathed to our nation by Mr. Tsikata. There are after disastrous of adventures by Mr Tsikata, many undertaken without the consent of GNPC's Board and often in contravention of the laws of the land.

Ladies and Gentlemen, the Societe Generale debt was not the only ling operations. He also incurred losses of $17.21 million to Credit Suisse and $8.9 million to the Union Bank of Switzerland (UBS). Credit Suisse has served notice on GNPC of its intention to go to court and we should expect UBS to follow suit in due course.

Mr. Tsikata spent a staggering amount of $62.49 million to acquire and refurbish six other old and dilapidated rigs and marine assets which are littered all over the world from America through Angola to Gabon. Remarkably, none of these rigs has ever worked or earned one pesewa. And yet, our nation is saddled with the problem of maintaining these rigs at the staggering cost of $138,430 per month. Current valuation of these rigs indicates that selling the rigs will fetch far less than the price they were bought for.

GNPC's financial misadventures were not confined to foreign exploits. Here in Ghana, creditors continue to pursue the repayments of a legacy of massive debts. As at July 2001, a Mrs Boohene had obtained judgement for the sum of ¢307.63 million. A sum of ¢1.064 billion was also entered in judgement for Total Ghana Ltd. on 13^th July 2001. The company has now served notice of its intention to go into execution by auctioning assets of GNPC.

In September 1998, Mr Tsikata arranged for a loan of ¢7.2 billion from Consolidated Discount House. This was to be repaid with the proceeds from the sale of GNPC's shares in Ecobank (GH) Ltd. Mr Tsikata however, diverted the Ecobank proceeds for other purposes without paying the loan. As at the 4^th of June 2001, the debt to Ecobank (including interest) had soared to ¢13.8 billion. In addition, Ecobank is claiming legal costs of over ¢5 billion. It is worth nothing that the loan was taken by Mr Tsikata without Board approval and in a blatant defiance of GNPC's enabling Act, PNDC Law 64.

Even though the GNPC was set up to explore the petroleum potential of the country, Mr Tsikata decided to go into cocoa farming. To this end, in 1990, he acquired shares in two plantations owned by a company called Valley Farms Ltd. at Nyankoman and Assin Nsuta. A staggering sum of about $1 million was sunk into this venture. Quite incredibly and astonishingly, not a single soul at GNPC, knows where exactly these farms are located.

Next Steps

Ladies and Gentlemen, we have put before you today, some of the major facts which have led to enormous financial crises bequeathed to the NPP government by Mr. Tsatsu Tsikata's stewardship of GNPC for nearly twenty years. We believe that the people of Ghana need to be told of some of the principal reasons for the seemingly harsh but necessary decisions which the government is having to take to pay off the gambling and other related debts arising from the imprudent handling of the activities of GNPC.

The Government has commissioned a forensic audit into the activities of GNPC which have resulted in this monumental loss to the state. This investigation will be carried out within the framework and the processes of the law of the land.

Ladies and gentlemen, I assure you that the government would get to the bottom of GNPC's financial activities with fair but firm hands. Thank you for coming and for your attention.

GRi../

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Tsatsu Tsikata’s full statement

Ladies and Gentlemen of the media,

Thank you for making time for me this morning and also for allowing me the use of your Press Centre for this media conference.

You recall that on August 8, the Honourable Minister of Energy made a statement to you in which he made many accusations against me. This followed a statement issued by the Government Spokesperson on July 27 to the effect that the GNPC drillship, Discoverer 511 (D511) had been sold to pay for losses incurred by me in derivatives transactions with Societe Generale, a bank headquartered in Paris which had obtained a judgement against GNPC in the total sum of US $47million.

THE SOCIETE GENERALE CASE

Ladies and Gentlemen, in his statement, the Honourable Minister gave what he called “the hard facts,” starting with the claim that I presented myself to Societe Generale ‘in the words of the bank, as “a commercial, legally trained businessman, sophisticated in terms of his understanding of derivatives trading and the theory behind how derivatives work and how they can be used.”’ This is not true. That is just not me.

Societe Generale rather presented themselves to me in my capacity as Chief Executive of GNPC as being able to assist the Corporation with financing for our various activities, particularly the Tano Fields development which I indicated to them was our priority. I invited them to make presentations to other staff of GNPC.

I did not inform them that GNPC traded in derivatives and was keen to transact business with them. Societe Generale’s expertise in relation to derivatives was one of their selling points and they provided relevant corporate information to back this.

There were also ready credit lines for these transactions to be undertaken, expressly in relation to the Tano fields development and not in relation to the sale of oil on the international market. Societe Generale made it clear that financing of the sort required by GNPC would require undertaking derivatives transactions to ensure that future oil price movements do not adversely affect the ability of the Corporation to repay debts incurred on the project.

From the onset, I emphasised to them the need for their technical assistance in enabling GNPC achieve the objective of managing the risks involved. I specifically made requests for the training of GNPC personnel involved in these transactions and asked Societe Generale to make relevant software tools for assessing and managing the positions GNPC held.

Societe Generale agreed to provide this help and actually trained some GNPC personnel and assisted with software and other material. Ladies and gentlemen, how then can a person who made such requests that were acceded to by Societe Generale be accused of presenting himself to Societe General as being sophisticated in terms of understanding of derivatives trading and the theory behind how derivatives work?

Yet, as in so many parts of his statement, the Honourable Minister chooses to quote copiously from Societe General’s self-serving statements without giving the public the benefit of knowing that these were disputed and that there was testimony in the court proceedings which contradicted these statements of Societe Generale.

The basic strategy for the derivative transactions was recommended by Societe Generale and they provided the credit lines for the transactions and controlled what transactions were acceptable throughout the period. At various points, they expressed satisfaction with our compliance with their recommended strategy by increasing their credit to GNPC to continue these transactions.

When there were delays in respect of project implementation, they were notified but that did not prevent them from giving increased credit for the transactions. It was not on the basis of any claim to infallibility about oil prices that these transactions were entered into. Rather, recognising both my own fallibility and limitations as well as those of the Corporation I was heading, I sought help and guidance from Societe Generale.

As the Honourable Minister noted, these are complex transactions, but it is wrong to regard them as gambling. They are part of normal industry practice in the commodity world and are a regular feature of commodity financing transactions. The need to develop national expertise is clear, and we asked Societe Generale to help GNPC build this capacity, especially as it related to raising finance for a major project like the Tano Fields development. It was the failure of the strategy recommended by Societe Generale which formed the basis of GNPC’s defence and counterclaim.

On a regular basis, personnel of GNPC, including myself, were in contact with the Societe Generale personnel seeking advice and information. Indeed, for this reason, when Societe Generale, after the start of the transactions, presented for signature the standard form agreement and included a clause stating that GNPC had not depended on their advice in connection with these transactions, I specifically objected to it.

The lawyer from Societe Generale to whom I made the objection noted it and said she would discuss it with her colleagues and revert. Subsequently, Societe Generale took out that clause before the agreement was signed. This is all in the documents provided to the High Court in London even from the Societe Generale side.

In respect of the mortgage that was entered into on the drillship, the mortgage document was executed expressly at the request of Societe Generale on the basis that it would enable the parties the opportunity to discuss how best to handle the situation without resort to litigation. I expressed a preference for avoiding litigation, but also made it clear that the mortgage document could not have certain provisions that Societe Generale’s lawyers proposed which would have stated certain sums to be “due and payable” to Societe Generale.

These provisions were again omitted because of the mutual understanding about the document. All these background facts, which featured in the court proceedings in both the US and UK, are conveniently omitted from the account of this mortgage.

The circumstances in which judgement was obtained by Societe Generale against GNPC in the High Court in London were not disclosed by the Honourable Minister.

The “hard facts” are as follows. GNPC had been contesting the claims of Societe Generale since the Bank instituted their action in 1999. A statement of defence and counterclaim was filed on behalf of GNPC. These were based on the fact that Societe Generale had provided negligent advice to the Corporation with regard to the strategy it recommended for the Corporation to hedge its anticipated production of oil and gas from the Tano Fields.

An important element of the GNPC case was the testimony of an expert on derivatives based in Chicago, Dr. Culp, who wrote a report showing that Societe Generale had acted negligently in its advice to GNPC. After the GNPC statement of defence and counterclaim papers were filed, Societe Generale requested further and better particulars and detailed answers were given in response.

The High Court in London held a sitting sometime last year in which it gave directions regarding the conduct of the case, especially on the exchange of documents between the parties. GNPC and its lawyers took steps to comply with the directions of the Court and, among other things, filed witness statements from relevant personnel of GNPC, including myself, regarding these transactions. Again, as required by the judicial process, GNPC and Societe Generale disclosed to each other records in the possession of each regarding the transactions. Societe Generale even demanded records on derivative transactions with two other banks, CSFB and UBS Warburg Dillon Read and these were provided.

Ladies and Gentlemen, in some of the documents disclosed by Societe Generale to the GNPC lawyers, certain passages had been blacked out because Societe Generale claimed they did not have to disclose those passages. An application was made to the court on behalf of GNPC seeking to have disclosures of some of those passages which GNPC’s lawyers considered were relevant to proving GNPC’s case. An application was also made to have tape recordings made by Societe Generale in connection with transactions disclosed. Societe Generale were claiming that almost all the tape recordings had been deleted except for a few; this did not appear satisfactory to GNPC’s lawyers, hence the application to the court for Societe Generale to disclose them.

WITHDRAWAL OF GNPC SOLICITORS AND JUDGEMENT AGAINST GNPC

These applications were pending before the court, affidavits had been filed in support, including one by me. Subsequently, GNPC was instructed by Government to notify the Solicitors that the case would no longer be handled by them but by the Attorney General’s Department in Ghana.

Though GNPC had some payment arrears in respect of the Solicitor’s fees, efforts were being made to settle these and the Solicitors continued to represent the Corporation’s interest until they received instructions to stop and hand over to the Attorney-General.

The Solicitors for GNPC therefore obtained permission from the Court to withdraw from acting for the Corporation. The important applications they had made to the court were therefore not pursued. Obviously taking advantage of this situation, Societe General applied to the Court to make certain amendments to their case and then, thereafter, applied for judgement against GNPC. There was no representation by or on behalf of GNPC, and judgment was entered against the Corporation.

PREVIOUS LAWSUIT BY SOCIETE GENERALE IN THE US

Before Societe Generale brought their claim in the London High Court, they had earlier in 1998 filed a suit in the United States-in the District Court in Houston-seeking an order to have the GNPC drillship, D511, moved to the US and detained by them upon conclusion of its contract in Mexico.

This suit was brought against the US company that had chartered the drillship as well as GNPC. The case of Societe Generale was thrown out and when they appealed to the Court of Appeal in New Orleans, they were again unsuccessful. It emerged in those proceedings that Societe Generale had sought legal advice about taking action in Mexico, where the drillship was operating, or in Panama where the drillship was registered, and they realised that they could not succeed in either jurisdiction if they filed a suit.

CORPORATE TRANSACTIONS

Ladies and Gentlemen, it must be emphasised that throughout the transactions with GNPC, Societe Generale had accepted that they were dealing with GNPC as a commercial body and that there was no Governmental responsibility they could fall back on. That is why the claims they were pursuing were against GNPC solely and not the Government. It appears strange to me that the Honourable Minister now completely disregards that accepted basis which Societe General has never disputed and, worse still, is accepting the claims when the Corporation detailed reasons for contesting them, and resisted the claims brought in the UK High Court.

Together with other personnel of GNPC, I provided the GNPC Solicitors evidence on the basis of which the defence and counter claim were filed. It is regrettable that the Honourable Minister relies on rejected allegations in Societe Generale’s case to paint a picture to the public that is far from the truth. The Honourable Minister also fails to refer to a documented acknowledgement by the Chief Executive of Societe Generale himself that the delays in the implementation of the Tano Project had created the difficulties that GNPC faced.

ALLEGED PAYMENTS TO ME

Ladies and Gentlemen, again, certain statements made by the Honourable Minister in respect of the transactions are also not true. For example, “Mr. Tsikata was paid either a premium by the Bank or he paid the Bank certain sums of money,” and “Mr. Tsikata was also paid a net premium of $8million.”

All payments made by Societe Generale in respect of these transactions were payments to GNPC and are reflected in the accounts of GNPC as well as in the transfer instructions of Societe Generale. Anyone can go through the bank accounts of GNPC any day and see the payments from and to Societe Generale. No doubt, the forensic audit that the Honourable Minister says has been commissioned will show these funds movements which the Minister tries to portray as personal funds movements when he knows this is not the case at all.

What emerges from these records is that, by December 1997, prior to the sharp price movements affecting the positions held by the Corporation, GNPC had positive cash flows from the transactions with Societe Generale of about US$10 million, part of which was used for expenditures on the Tano Project and part for investments in telecommunications assets for the Corporation. I may point out that similar cashflow gains were made in the transactions with CSFB and UBS and the claims of these banks were also being negotiated with a view to a settlement. The Honourable Minister portrays the cashflow gains of the Corporation in the case of Societe Generale as “a net premium of US$8million” paid to me. This is not true.

PERSONALISATION

Ladies and Gentlemen, it is unfortunate that the Honourable Minister seeks to personalise completely these transactions. If the Honourable Minister really believes, however, that I just acted by myself, or that these transactions were just gambling, wouldn’t that have been the more reason to resist the claims of Societe Generale against GNPC instead of allowing them to go uncontested for judgement to be entered against the Corporation, and an asset of the Corporation arrested?

There is no question that as Chief Executive of the Corporation, I played a leading role in respect of these transactions, but the records, including the tape recordings which GNPC’s Solicitors were asking for, indicate clearly that these were not activities that I undertook single-handed or for myself as is being claimed. Among other records made available to the Court are, for instance, records of meetings of the Risk Management Committee in GNPC, which regularly reviewed and monitored the positions arising from the derivatives transactions.

SETTLEMENT DISCUSSIONS

Let me also point out that discussions regarding settlement of the claims of Societe Generale had gone on both before their court actions and after. Indeed, after they started the action in London, one of their management personnel who visited Ghana as part of a French commercial delegation called on me at GNPC with the indication of their willingness to discuss settlement. I communicated this to the GNPC solicitors who began to have discussions on possible settlement. These discussions had not reached a conclusion. Societe Generale’s settlement proposal was for US$20million. This led to a counterproposal from the GNPC lawyers for a US$12million settlement payable in instalments from the expected commencement date of production from the Tano fields. Societe Generale lawyers asked for certain clarifications on this proposal and that is where things stood.

There is no doubt that once Societe Generale obtained judgement in the absence of GNPC, it became more difficult to obtain the best price for the drillship.

Ladies and Gentlemen, the Honourable Minister also made reference to the High Court judgement in favour of Societe Generale for the full $40million together with interest and costs “bringing,” as he put it, “Mr. Tsikata’s indebtedness to the bank to $47million.” As I pointed out earlier, if it was my personal debt there is no reason for it to be recovered from GNPC or for a GNPC asset to be seized or sold in connection with the debt. I do not accept the Societe Generale claims as legitimate. Yet, based on my alleged indebtedness, he goes on to say that, “the government despatched the Deputy Minister of Energy to London and Paris to try and reach a negotiated settlement with the bank.” Was the Deputy Minister negotiating on my behalf? The Honourable Minister states that a figure of US$19.5million in “full and final settlement of Mr. Tsikata’s indebtedness to the bank” was reached with Societe Generale by the Deputy Minister of Energy.

DRILLSHIP VALUE

He also states that, the drillship was sold for US$24million. According to reports in oil industry circles, it was sold for US$24million plus transaction costs. To obtain the full picture, these transaction costs must be disclosed and added, especially in making comparisons with the purchase price. It would also be important to know to whom payments have been made in respect of these transaction costs. The Honourable Minister states that “the D511 had been purchased and refurbished by GNPC in 1992 at a total cost of $25.74million” He does not say that the drillship earned income of over US$15million from operating in Mexico. The drillship was acquired for US$12million. It was used by GNPC to drill a number of wells in the Tano basin and for conducting an extended well-test for the South Tano field for some nine months during which oil was produced.

Even if the total cost of refurbishing the rig was US$13.74 million (taking out the purchase price from the Minister’s figure), the earnings of over US$15million from the rig’s operations in Mexico cannot be disregarded in the computations. Nor can the “earnings” attributable to work done for GNPC be ignored in presenting the statement of affairs on the drillship.

OTHER RIGS

Ladies and Gentlemen, it needs also to be pointed out that in respect of the two rigs that were to have been used to service requirements of the Angolan national oil company, Sonangol, there was a project mobilisation payment to GNPC of some US$11million.Yet, they are among the rigs which are said never to have earned one pesewa. Nor is there acknowledgement of the US$10million insurance payment in favour of GNPC in respect of one of the rigs, which was purchased for about US$3million and which had an accident in the course of being moved to a drilling location.

It is a pity that the Honourable Minister seeks to dismiss these assets as “old and dilapidated” without an appreciation of the value attached to these assets, particularly in the current market. For even as old a rig as that on the Saltpond field, a value of US$500,000 was obtained by GNPC in negotiations which led to financing becoming available for the rehabilitation of the field. What does not help in the achievement of value is the kind of asset downgrade indulged in by the Honourable Minister.

The original purpose of acquiring these items was for projects that the Corporation was undertaking or providing services for, particularly, the Tano Project. In the case of the project in Angola, in conjunction with a U.S.-based company, we were providing equipment and services to the Angolan national oil company, Sonangol. Unfortunately, the civil war in Angola disrupted the execution of the contract and equipment of the Corporation is still in an area where it is feared there may be mines.

In the case of the Tano Project, unexpected delays in implementation have occurred. It has been necessary to keep the equipment maintained so as to derive value from them in future use. This is still a realistic prospect. There has been interest expressed in purchase of these various assets over the years, but the uncertainties concerning the projects for which they were acquired had not made a distress disposal the best option to adopt. Market conditions for such offshore equipment have improved tremendously because of high oil prices and there are many industry projects for which these items of equipment are very suitable, and can realise significant value.

SALE OF CRUDE OIL ON THE INTERNATIONAL MARKET WHILST

GHANAIANS QUEUED

Ladies and Gentlemen, among the other charges levelled by the Honourable Minister is that I decided to sell “our oil on the international market instead of making the allocation available to Ghanaians.” I did no such thing. What are the facts? Since the establishment of GNPC in 1985, one of the functions that it performed, taking over from the old Petroleum Department was that of importing crude oil to the country, and having it refined at the Tema Oil Refinery (or, occasionally, in other refineries such as the Abidjan Refinery).

GNPC then sold the petroleum products to the oil marketing companies. Residual fuel, surplus to national requirements, was sold on the international market. There is no question about the success of GNPC in satisfying the needs of Ghanaians even through difficult periods in the nation’s history and on the international oil markets.

Despite the fact that the Corporation had not been capitalised to undertake either this or any other activities it was mandated to carry out, the Corporation was able to sustain the availability of petroleum products through the eighties and the 1990s until in August 1996, when a “liberalisation” of the crude oil import process was initiated, apparently at the instance of the World Bank and the IMF.

Instead of GNPC being the sole supplier to the refinery, a Tender Board was established at the Refinery, which periodically called upon registered oil traders to submit bids to supply crude oil to the Refinery. It was thought that this could cut the cost of imports through competition. Indeed, there had been representations made on behalf of the foreign oil marketing companies about their ability to supply crude oil to the Refinery cheaper than through direct imports from Nigeria.

Within the new arrangement, GNPC, which still had its contract with the Nigerian National Petroleum Corporation (NNPC) renewed on an annual basis, would bid like any other bidder for supply to the Refinery. The winning bidder was not dependent in any way on GNPC’s contract with NNPC. Meanwhile, GNPC had obligations to lift oil under the contract. Once the Tender Board selected another entity from the tender process to supply crude to the Refinery, the commercially responsible thing for GNPC to do was to sell the crude on the international market just as it previously sold such crude during periods when the Refinery did not require the cargo or was shut down for maintenance. The logic of this was obvious to the Marketing Division of the Corporation and did not even require my intervention for steps to be taken in that regard. GNPC thus fulfilled its obligations under the NNPC contract. The impression that has been created about the “diversion” on the high seas of oil meant for Ghana is something that needs to be corrected.

The Honourable Minister should substantiate his claims of Ghanaians queuing for petrol whilst oil was sold by me on the international market by providing one instance when this occurred. It never happened once.

GNPC CRUDE OIL IMPORT ROLE

Ladies and Gentlemen, over the period from 1985 to August 1996 when GNPC had the sole responsibility to supply crude oil for refining at TOR, we managed this function with exemplary competence. I am proud of the work done by the staff of GNPC in difficult circumstances. About US$2billion worth of crude oil and petroleum products was handled by the Corporation in this period and even in the most difficult of times, such as during the Gulf War, with the escalation of international prices, we managed to keep the oil flowing with hardly any disruptions.

All this good work is now forgotten. Even after GNPC ceased to have the sole responsibility, GNPC personnel not only assisted TOR personnel initially to handle the new system that had been instituted but also continued to discuss a variety of ways of co-operating with the Refinery in meeting national requirements.

Significantly, Government has now reverted for crude oil supply to the old method of direct imports from Nigeria instead of the tender system, but the Honourable Minister insists on excluding GNPC (even without Tsatsu Tsikata) from playing the role that had been effectively played by the Corporation in the past with attacks on the competence of the Corporation. He uses one instance of a dispute with GNPC’s Nigerian counterpart, NNPC, about one lifting, resulting in a claim against the Corporation as the basis for these attacks. Yet, the Corporation had successfully effected over 300 liftings of crude oil cargoes previously, involving more than 100 million barrels and was regularly acknowledged by NNPC as having an excellent track record.

GNPC’s CORE BUSINESS

Ladies and Gentlemen, the Honourable Minister has often been heard to say that he is getting GNPC to focus on its core business. Crude oil imports and marketing have been hardcore functions of the Corporation from its inception. The impression being created that exploration is the only core function and that the Corporation has neglected that in pursuit of other activities is also not justified. Even a cursory look at the Law that set up GNPC shows that as with all other national oil companies, exploration is not the only core function of the Corporation. Development and production as well as marketing and efficient disposal of any discovered oil and/or natural gas are all part of the core activities.

As regards exploration, the truth is that the last five years have seen the most intensive period in the history of oil exploration in the country, with about US$200million spent by a number of companies in gathering new data and drilling wells, including wells in deep water areas which had previously not been the focus of the companies. Out of all this activity, there has been not only valuable new information about Ghana’s potential for oil production but also an oil discovery was made last year, the West Tano discovery. GNPC has provided a detailed technical review of this discovery to the Ministry, showing the potential for it to be appraised and developed in association with the other Tano fields. GNPC has proved to be an effective partner to all the companies that have been involved, assisting them to ensure smooth operations. Even more important, GNPC has also developed national capacity in these activities. I must commend again the hard work of the staff of GNPC in connection with these exploration activities.

TANO PROJECT AND POWER GENERATION

Ladies and Gentlemen, the drawing up by GNPC of plans to develop and produce the Tano fields and use the natural gas for power generation to complement hydro-power in Ghana, and the steps that have been taken to implement these plans are a testimony to the capacity that has been created for the benefit of the country. Whilst foreign companies that undertook exploration activities in Tano Basin previously saw no use for the natural gas reserves and declared the fields non-commercial for oil production, GNPC concluded that by combining the oil production with using the gas for electrical power, there was a viable project. This was after reviewing the existing data and undertaking a new programme of activities, including drilling additional wells and, in conjunction with internationally reputable consultants, undertaking reservoir engineering studies which showed that the natural gas reserves were sufficient for establishing gas-fired power generation in the Western Region.

Ladies and Gentlemen, I may point out here that these plans began to be developed by GNPC even before October 1988 when I became Chief Executive, in an acting capacity initially. As far back as 1986, these plans had been submitted by GNPC for Government approval and were approved and embodied in the 1986- 1988 Public Investment Programme of the Government and in subsequent updates of the Public Investment Programme.

Approaches began to be made for financing, including to the Japanese Government through the Ministry of Foreign Affairs, to build a gas-fired power plant. A feasibility study was undertaken by the Japan Consulting Institute (JCI) and eventually a loan agreement was signed between the Japanese Government agency and the Government of Ghana represented by Ghana’s Ambassador to Japan in September 1995. The amount of the loan was about 12 billion yen (equivalent to about US$100 million at the time.) The terms of the loan were extremely favourable and well-suited for such infrastructure development. The agreement between the Japanese Government and the Government provided for the funds to be onlent to GNPC on the same terms and this was done by the Minister of Finance.

US EXIMBANK

In respect of the development of the Tano fields for the production of oil and the supply of gas to the power plant also, a lot of effort was put into raising finance. GNPC eventually applied to the US EXIMBANK through the Ministry of Finance in 1994 for the required funds. The US EXIMBANK also took time to review the project after feasibility studies done on the project and engineering reports were made available to them. In March 1996, the Board of the US EXIMBANK also gave approval for a loan of US$294 million for the Tano Project. The terms of this loan were also favourable. Because of the amount involved, this loan had to go before a US Congressional Committee for approval and this was also done. The loan agreement was eventually signed between the US EXIMBANK and GNPC with the Government of Ghana, represented by the Minister of Finance, being guarantor. Before the Government agreed to provide the guarantee for the loan, a detailed review of the project was undertaken by a working team consisting of World Bank experts, representatives of the then Ministry of Mines and Energy as well as the Volta River Authority and staff of GNPC.

In the last working draft of the report of this team that I had access to, the clear merits and urgency of the project were highlighted. The US EXIMBANK loan covered purchases of US goods and services for the project dating back to November, 1995. GNPC is due to be reimbursed almost US$25million, which it has already spent since November 1995 on U.S. goods and services on the project once the loan is reactivated. The delay in obtaining this reimbursement as well as the delay in the project have been the principal sources of the financial pressures on the Corporation.

PARLIAMENTARY APPROVAL

Ladies and Gentlemen, both the Japanese and US EXIMBANK loans were also put before Parliament here in Ghana and approved. In addition, a US$5 million bridge loan provided by Standard Chartered Bank for some equipment purchases and initial work was also approved by Parliament. Several presentations on the project had been made to Parliamentary Committees since 1994. Both sides of the House were always involved in the presentations that GNPC made to the Parliamentary Committees prior to these loan agreements and in the approval processes. The project was acknowledged to be a key development project for the nation.

INDIGENOUS NATURAL GAS DEVELOPMENT

Ladies and Gentlemen, there are just two points I would like to underline about the merits of the Tano Project. Firstly, it is utilising indigenous gas resources to generate electricity at a price that is lower than either using any liquid fuel or any imported gas alternative. Even gas from the West African Gas Pipeline Project is not going to be cheaper. In any event, we will be lucky if this pipeline is in operation by the end of 2005, and it was our view in GNPC that the country could not continue to purchase high priced oil for power generation and wait for gas from Nigeria through the West African Gas Pipeline Project when there are indigenous reserves.

The whole point of GNPC’s approach was to see imported gas as complementary to indigenous gas. This would also avoid the foreign companies trying to sell gas into Ghana having the absolute ability to call any price. These issues of indigenous energy development and national energy security are having to be tackled all over the world and the data that form the basis of GNPC’s approach need to be carefully evaluated before throwing out the baby with the bathwater.

The second point to underline today about the Tano Project is that GNPC had obtained extremely favourable financing which, again, made the project the most cost effective for the country’s increasing power needs. Both of these points and many other merits of the project were acknowledged in the report of the working team that I referred to earlier, involving representatives of the World Bank, the Ministry, VRA as well as staff of GNPC.

Despite these merits, the project remains uncompleted especially as regards the offshore development and production aspects. The delay is not for want of effort and hard work on the part of GNPC. The Government guarantee provided in support of the US EXIMBANK loan became an issue with the IMF. Recommendations for private sector participation in the project were made and GNPC was able to secure such participation. The US EXIMBANK expressed its willingness to make adjustments to the loan that would improve it further in the light of project implementation delays. They sought assurances that the Government was committed to the execution of the project.

After thorough reviews undertaken by the then Honourable Minister of Mines and Energy, including his visit to the site of the power barge between the villages of Effasu and Mangyea, the then Honourable Minister wrote to confirm his support for the project and his view on the need for utilising the US EXIMBANK funding. These are all matters of record and I provided the current Honourable Minister with copies of these records soon after his appointment, emphasising to him the value of the project.

As at now, through the project, new transmission lines have been constructed, linking the southwestern coastal area of Ghana to the national grid for the first time. Two new electricity substations have also been constructed at Elubo and Essiama. The Japanese Government last year provided additional funding for work on the site of the power barge to be completed. All these constitute valuable assets of the Corporation, but their full value will be realized when the offshore oil and gas development is also undertaken and the barge brought into operation.

GNPC MANDATE

Unfortunately, Ladies and Gentlemen, the implementation of this project has been dogged by misrepresentations and erroneous positions that some have taken about the mandate of GNPC. Both the oil and gas development as well as the power generation and transmission aspects of the project fall squarely within the mandate of GNPC. Industry experience also confirms this with the establishment of power subsidiaries by many oil companies. The subsidiary company, Western Power is the entity that GNPC created to operate the power generation and transmission aspects of the project. Utilising the funding from the Japanese Government, GNPC trained a corps of key personnel to operate and maintain what is expected to be the first natural gas-fired power plant in the country.

It is, of course, the prerogative of a new Government to adopt its own policy regarding previous initiatives, and to restructure existing institutions as it deems fit, but it would be unfortunate if the merits of an organization and its projects are drowned in the total personalization manifested in the statement of the Honourable Minister.

ALLEGED NON-CORE ACTIVITIES OF GNPC

Among the activities of GNPC that have been regarded by some as outside the mandate of the corporation are the involvement in the Ada Songor Lagoon Salt Project. I would like to emphasise that the investments GNPC made in this project were unrelated to the activities of the Task Force that Government appointed to take charge of salt-mining operations after the abrogation of certain leases in the area.

GNPC was tasked by Government to get involved in discussions with the Nigerian National Petroleum Corporation regarding the requirement they had for salt for their petrochemical industry development.

Nigeria was having to import salt all the way from Australia. Meanwhile, Ghana’s oil imports from Nigeria created a large trade imbalance. At a bilateral meeting which I remember the then Nigerian High Commissioner described as the SALT talks, it was agreed that Ghana should consider ways of meeting Nigeria’s salt requirements as a way of beginning a major export drive to Nigeria. GNPC and the Minerals Commission made an initial assessment of the Nigerian requirements and it became clear that a major expansion in production in Ghana would be needed.

GNPC was therefore given the responsibility to finance feasibility studies by experts approved by the Minerals Commission and, thereafter, to promote a company to undertake the infrastructure developments required for the new production system if this was found to be feasible. The studies indeed showed that it was feasible to increase the production of the Ada Songor Lagoon from less than 50,000 tonnes a year to about a million tonnes a year so as to meet the Nigerian requirement.

NNPC emphasised from the beginning that their petrochemical industry required an assured supply of at least 300,000 tonnes a year from the beginning. With the development of the West African Gas Pipeline Project, there also began to be considerations of Ghana itself developing a petrochemical industry with the increased salt production from the Ada Songor Lagoon as one of the inputs.

Potential investors identified by GNPC for the project expressed interest in this possibility. GNPC’s role as promoter of the Ada Songor salt Company never involved any management of salt mining activities, and no revenues accrued to GNPC. I have never been a signatory, much less a sole signatory, to any account into which payments have been made by the Task Force.

The importance of increased foreign exchange generation from salt exports on the scale developed in the Master Plan produced by the experts is clear and GNPC’s role in establishing a market in Nigeria resulted directly from the long-standing relationship with NNPC, a potential major buyer of the salt. The work of the Ada Songor Salt Company provides a solid basis for attracting investment in a project whose potential has been acknowledged both by His Excellency, the President and the Honourable Minister himself.

Foreign exchange-earning potential was also the basis for GNPC teaming up with an affiliate of an oil trading company which GNPC did business with to undertake the Prestea Sankofa Gold project. It was also the basis for the investment referred to by the Honourable Minister – a cocoa farming project which I would like to provide a background to.

Personnel of the Investment Holdings Ltd. (IHL), a subsidiary of Merchant Bank (Ghana) Ltd. responsible for managing investments on behalf of clients, brought to my notice as Chief Executive of GNPC an opportunity to collaborate with Proparco, the investment arm of the French Government agency, then known as Caisse Francaise de Development, in a project designed to export a special species of cocoa.

The IHL personnel were aware of our interest in getting Caisse Francaise and Proparco involved in some GNPC projects, especially the Tano Project. Caisse Francaise had already funded a feasibility study on the Tano Project, covering the offshore oil and gas development as well as the power plant. The proposal from IHL was for GNPC to provide a guarantee to Caisse Francaise, which was lending to the company undertaking the cocoa project, Valley Farms, in which Proparco had also invested equity funds.

In return for providing the guarantee to Caisse Francaise, GNPC would have an equity stake in the project. IHL acted throughout as advisers and agents of GNPC, and attended relevant meetings on the project on behalf of GNPC. All over the world, there are millions of investors who act in a similar manner and never set foot on the location of the investment, so it is not strange that no one from GNPC ever set foot on the location of the project.

That project was not successful and the loan guarantee was called. GNPC paid up the US$1million loan to avoid Caisse Francaise’s overall programme in Ghana from being adversely affected by the default. Other investments by GNPC have been extremely successful. But I will not bore you with details. For example, an investment of about US$200,000 that was initially made in ECOBANK (Ghana) Ltd. ended up realizing for the Corporation over US$11million when the stake was sold.

Dividends had also been paid to GNPC as a shareholder. Investments in TOTAL (Ghana) Ltd. as well as the Tema Lube Oil Company also yielded very high returns. The investment in UNIPETROL also yielded good returns. All these are reflected in the books of the Corporation and were crucial to the survival of the Corporation without capitalisation. I need to point out also that these investment activities did not involve GNPC directly managing any of the companies it invested in, as has been imagined by some.

GNPC TELECOMS INVESTMENT

Another activity that has been claimed to be outside GNPC’s mandate is the involvement in telecommunications. The telecommunications investments were necessary investments initially focused on facilitating the operation of the power plant at Effasu-Mangyea, a part of the country that had no telecommunications infrastructure. With the decision of the Government to license another national telecommunications network, an opportunity arose to use the capacity of these assets for the national network. A memorandum of understanding was entered into by GNPC with two US companies to establish an alliance for the second national telecommunications network license, leading to the creation of Westel.

However, when it became clear that the US partners, for a variety of reasons, were neither advancing the understandings reached in the memorandum of understanding nor working to meet the commitments in the licence, but were rather seeking to sell their interests and exit the project, amicable discussions were held with them to bring their involvement to an end in a smooth and mutually agreeable manner and to bring in a more committed technical partner. Agreement in principle was reached and final negotiations were going on. Financing had also been obtained by GNPC for the transaction. However, Western Wireless, the US technical partner, decided to change its tune after the December elections.

They claimed that they could use the influence of someone they described as a lobbyist for them to turn things in their favour so that they could be left off the hook regarding license obligations. The resulting impasse has certainly not benefited telecommunications development in the country as was intended.

The provision and management of telecommunications facilities by GNPC are explicitly mentioned in the GNPC Law among the things that GNPC is authorized to do and there is significant commercial value in the stake that GNPC has acquired in Westel. The Honourable Minister’s approach is to take away from GNPC these valuable assets. It appears his general strategy is to take away from GNPC whatever he sees as good projects. That is how GNPC participation in the West African Gas Pipeline Project, obviously part of the core business of GNPC, is taken away and handed over to an Authority whose mandate is the Volta River!

FINANCIAL PRESSURES

References in the Honourable Minister’s statement to court actions being taken by creditors against the Corporation reflect not only financial pressures I mentioned earlier but also the current inability of the Corporation to access any resources without the authorisation of the Minster. It is also not surprising that with the current uncertainties on the Corporation, creditors should be reluctant to maintain credit to the Corporation.

The Consolidated Discount House (CDH) facility referred to by the Honourable Minister was originally an advance against receivables from the sale of shares in ECOBANK. This was later changed by mutual agreement to a loan backed by certain assets of the Corporation. A paper was put before the Board on this and when, as a result of emergency requirements, the loan was drawn down before approval was finalized, the Acting Head of Finance and Administration of GNPC wrote an explanatory note to the Board about the circumstances and gave his apology. Let me emphasise that there was never any deliberate effort either on my part or, to my knowledge, on the part of other management staff to bypass the Board of the Corporation.

CONCLUDING REMARKS

The Honourable Minister announced that the Government was conducting a forensic audit into GNPC. But he chose not to wait for the outcome of the audit before making his highly damaging and prejudicial statement. Again, that appears to be how he is handling matters concerning GNPC. He announced that GNPC would be reduced to about 70 staff even before the Committee that he said was to undertake the restructuring had begun its work. That Committee was reported to have completed its work and we are yet to hear whether the Minister’s number is what the Committee found to be appropriate.

In any event, I am confident that an objective forensic audit will confirm the points I have made to you. Ladies and Gentlemen of the media, of all the investments made by GNPC over the years I would say the highest return on investment that we achieved was in respect of the human resources that have been developed by the Corporation, in all aspects of its activities.

This quality of human resources has been acknowledged by the various investor partners that GNPC has been involved with, and is a tribute to our country. There are many countries on our continent that have also benefited from this. But GNPC is a young organization and has been far from perfect. I am also a mere mortal with my fair share of shortcomings. But what the Honourable Minister portrayed me as is totally off the mark and I need to set the records straight. I thank you very much for your presence today and for your patience.

Thank you.

GRi../

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