[ 2016-09-09 ]

Finance Minister Seth Terkper (L), Dr. Bawumia (R)

Govt will have right to terminate ECG contract

The government will introduce clauses that will
guarantee Ghana’s right to terminate the
management contract of the concessionaire that
will be selected to transform the Electricity
Company of Ghana (ECG) in the event that it fails
to perform satisfactorily, the Millennium
Development Authority (MiDA) has said.


According to officials of MiDA, the decision to
introduce private sector participation into the
operations of ECG was to ensure proper
coordination of the programmes the company had
already put in place.

“The arrangement to have a concessionaire to
manage the assets of the company is just a way the
government is seeking to improve on the operations
of the ECG,” the Reform Unit Manager at MiDA, Mr
Mike Awuah, told the Daily Graphic in an interview
in Accra last Wednesday.

He expressed the view that the reforms to be
introduced by the concessionaire would also ensure
that tariffs paid by consumers were a true
reflection of what they consumed.

“ECG, on its own accord, has introduced private
sector participation into various aspects of its
operations, as officials of the company realised
that they cannot do the work alone. They have
engaged private people to do networking on their
behalf; there is also a Chinese firm that is in
charge of meter installation in coastal
communities within the Greater Accra Region, among
several other private agencies that perform
various tasks on their behalf.

“The government has only taken a cue from
ECG’s good lead to expand the private sector’s
involvement in the business of ECG, which would
continue to own the infrastructure. We are only
bringing in a company that would manage the
assets,” Mr Awuah said.

He indicated that while the government had
anticipated the concession to last for 25 years,
there were clauses that allowed MiDA to review the
process every five years.

“That notwithstanding, there would be an annual
review, and if, at any point, the government is
not satisfied, Ghana would exact some sort of
remedy which includes a termination of the
contract if the concessionaire does not fulfil its
part of the bargain,” Mr Awuah said.

He explained that some $350 million of the $498
million compact money would go directly into
investment into ECG while “the concessionaire,
as part of the requirements for the request for
proposal (RFP), would invest not less than $500
million in the first five years of the
concession”.

He hinted that the commitments of the
concessionaire were such that they would be
required to reduce tariffs in real term overtime,
and as such the reductions would be closely
monitored by the Public Utilities Regulatory
Commission (PURC) and the Energy Commission.

Compact II

Last Wednesday, the MiDA in a statement announced
the commencement of the Ghana Power Compact, under
the Compact II.

Under the compact, six projects, comprising ECG
financial and operational turnaround project,
Northern Electricity Company (NEDCo) financial and
operational turnaround project, regulatory
strengthening and capacity building, access
project, power generation sector improvement
project and the energy efficiency and demand side
management project would be implemented to address
the root causes of the unavailability and
unreliability of power in the country.

Options

Workers of ECG and the leadership of the Public
Utility Workers Union (PUWU) are resisting the
efforts by the MiDA and the government to allow a
private entity into the operations of the ECG, a
move the workers believe would lead to redundancy
of some of them.

While the workers had argued that they would
prefer that the company was listed on the Ghana
Stock Exchange if the government was truly
committed to ensuring reforms, Mr Awuah was of the
view that the government considered more than 20
options which included partial privatisation,
concession, management contract, leases,
franchising and stock listing.

Of the options, the concession arrangement, he
said, was deemed appropriate given the country’s
present circumstance, since concession did not
imply the company was up for sale.

“The fact that the listing on the stock
exchange option was not selected does not mean
anything. Where is AngloGold Ashanti which was
listed on the stock exchange for $25 per share?
Today, that company’s shares are worth $1 (one
dollar).”

“If you want to list ECG on the stock exchange,
you must look at the context, what the company
does, risk considerations are also assessed, and
when these were done, it was not considered a
viable option for now. Maybe in future it
would,” Mr Awuah added.

Requirements

While the workers of ECG had argued that the
general public would be made to pay higher
tariffs, Mr Awuah debunked the suggestion, saying
MiDA would be evaluating the proposals for tariff
by any of the bidders that would emerge as the
concessionaire.

“One of our basic requirements is for the
concessionaire to show us how progressively the
tariff consumers would be paying and would be
reducing over the years,” he stressed.

Mr Awuah further indicated that another
requirement mandated the concessionaire not to lay
off any ECG staff in the first five years, since
the period was for them to rationalise the
company.

He wondered why the leadership of PUWU was up in
arms against MiDA when the authority only
implemented policies formulated by the
government.

Demonstrations

“The workers must come clean on the reasons why
they are demonstrating. Nobody has even talked
about selling the company, since it is not part of
government’s policy,” he said

He accused the leadership of PUWU of not being
truthful with the rank and file of ECG workers
regarding the issues at stake.

It is better for PUWU to come to the negotiating
table and talk about the issues with us. We at
MiDA are Ghanaians as they are, if they love
Ghana, they must also understand we also love
Ghana and we want the best for Ghana.

Source - citibsinessnews.com

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