Ghana renegotiates power compact with MCC
The government is to renegotiate the power compact with the Millennium Challenge Corporation (MCC) of the United States to include majority Ghanaian ownership for the concession of the Electricity Company of Ghana (ECG).
Advertisement
This is to ensure that the wholly state-owned power company is largely managed by Ghanaians, with less foreign participation.
The Vice-President, Alhaji Dr Mahamudu Bawumia, in an interview with the Daily Graphic on the sidelines of the ongoing IMF/World Bank meeting in Washington, DC, in the USA, said part of the renegotiations would include an assurance of no job losses at the ECG when the management was ceded to a concession.
The Ghana Power Compact between the MCC and the government of Ghana was signed in August 2014 and disbursement was expected to begin in mid-2016 but was delayed due to protests by workers of the ECG over possible retrenchment and the government not meeting the terms of the agreement.
About US$350 million out of the US$498.2 million compact is expected to be channelled into the modernisation of the ECG and the reduction of commercial losses by the company.
Energy market
The money, which was to be disbursed in five years under the Ghana Power Compact, seeks to open the country’s energy market to private investment by supporting the transformation of the power sector.
“We have renegotiated the agreement in a sense to make sure there is majority Ghanaian ownership of the concession. Secondly, we insisted on an assurance that there would be no lay-offs,” Dr Bawumia added.
The Vice-President, who is leading a high-powered delegation of the Economic Management Team, which includes the Senior Minister, Mr Yaw Osafo-Maafo, and the Finance Minister, Mr Ken Ofori-Atta, said the terms of the renegotiation of the compact were good news for Ghana and all stakeholders in the energy sector.
“We have insisted on all these elements in the contract and we have received an assurance from the MCC. I think this is good news for Ghana and all the players in the industry,” he said.
Under the compact, six projects — ECG Financial and Operational Turnaround, NEDCo Financial and Operational Turnaround, Regulatory Strengthening and Capacity-building and Access — will be implemented.
The rest are the Power Generation Sector Improvement and the Energy Efficiency and Demand Side Management projects.
Controversy over concession
The power compact under the MCC had sparked controversy since its announcement in 2014.
A coalition of stakeholders on the ECG concession arrangement recently called on the new government to review the MCC Compact II.
The Vice-President of the policy think tank, IMANI Ghana, Mr Kofi Bentil, presenting the report of the legal team of the coalition, said although the team supported the MCC Compact II, Article 7.1, which states that when the ‘implementation process begins it shall not be subject to the laws of Ghana’, restricted the government and gave it the investors — the US government, through the Millennium Development Authority (MiDA) — powers to do anything.
“The article, which is a stabilisation clause, is normal with international agreements when someone is coming to invest. So on the face of it there is nothing wrong about that. However, it is dangerous for it to remain as it is.
“What we need is another clause to tie it down to specific areas where it is applicable and not leave it as an omnibus clause,” he said.
The agreement was expected to improve the governance and management of the ECG by bringing in a private sector operator and building infrastructure and foundational investments designed to reduce losses and improve service quality.