Ghana loses US$190m as MCC truncates ECG concession agreement

The Millenium Challenge Corporation (MCC) of the United States of America has truncated the Ghana’s Power Compact following the decision by the Ghanaian government to terminate the contract of the  (PDS) over certain fundamental breaches.

A statement issued by the US Embassy in said the “United States of America notes this decision [termination of the PDS contract] with regret.

The statement continues that, based on the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of ECG to the PDS on March 1, 2019, was valid, and therefore the termination is unwarranted.

“As such, MCC has confirmed that the $190 million funds granted to Ghana at the March 1 transfer to the 20-year concession from ECG to PDS are no longer available,” the statement added.

Further justifying its decision to withold the undisbursed $190 million as part US$498 million Ghana Power Compact, the US Embassy said its government underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth.

 

“In this spirit, the United States has worked with the Government of Ghana since the latter’s July 30 suspension of the concession in the hopes of finding a mutually acceptable solution that respected contract sanctity and the Government of Ghana’s interest in restructuring the concession,” the Embassy’s statement said.

Nevertheless, the US government said it remains committed to implementing the first part of the Ghana Power Compact which involves the use of $308 million through the Millennium Development Authority (MiDA) to support important improvements to the infrastructure of ECG, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.

The U.S. Government reiterated its faith in MiDA adding that it looks forward to continuing to work together with the Government of Ghana to implement the remainder of the Power Compact.

Background:

On March 1, 2019, Power Distribution Services, Ltd. (PDS) assumed operation and management of the staff and assets of the Electricity Company of Ghana (ECG) under a 20-year concession agreement. Private sector participation is a central reform under MCC’s Ghana Power Compact. This is critical to the long-term sustainability of related infrastructure investments and the financial recovery of the energy sector in Ghana.

The Compact comprised two tranches of funding: $308 million available upon the official start of the current Compact, and a second tranche of $190 million, which was available upon a successfully executed concession agreement, which the United States maintains occurred on March 1, 2019.