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51% Ghanaian ownership of ECG problematic — Consortium

51% Ghanaian ownership of ECG problematic — Consortium

One of the consortiums bidding to partner the government in the running of the Electricity Company of Ghana (ECG) has described as problematic the latest requirement that any company wishing to participate in the concession must have 51 per cent Ghanaian ownership.

The consortium, comprising CH Group Ltd, EDF and Veolia Africa, says the current arrangements significantly impact on the group’s ability to structure a workable solution under the concession.

In a letter signed by Mr Kevin Dadzie of CH Group and addressed to the Chief Executive Officer of the Millennium Development Authority (MiDA), Mr Esson Benjamin, the consortium said it had also been advised that “such restrictions will ultimately impact the bankability of the concession”.

It, therefore called on the government and MiDA to return to the initial arrangement, which required local participation in the concession to be 20 per cent.

Buy-out option

“We are writing on behalf of the consortium, comprising CH Group Ltd, EDF and Veolia Africa, to express our significant concerns regarding the Newco structuring requirements as set out in the amended request for proposals (RFPs) dated 29 November, 2017 (the Amended RFP),” the letter, copied to the Board Chairman of MiDA, said.

It said the latest amendments under the amended RFPs introduced mandatory 51 per cent Ghanaian ownership, with ultimate legal and beneficial ownership by Ghanaian citizens.

It also mentioned express restrictions on creating different categories or classes of shares in Newco, the requirement for the 51 per cent threshold to be maintained for the duration of the concession and a potential company, in the event of default, triggering the default buy-outoption if the 51 per cent threshold was not maintained.

The consortium, however, said “as part of the security package, which will necessarily compromise any financing package, the 51 per cent restriction is again problematic, severely restricting the enforcement right of the lenders and negatively impacting on the bankability of the concession as a whole”.

Impact

The stance being adopted by the French-led group is effectively a suicide note, which is tantamount to self-exclusion from the bidding process.

It is inexplicable why the group is seeking to withdraw from the process at this late stage. Checks indicate that EDF and Veolia are currently under severe stress in Gabon for failing to perform according to the terms and conditions of a similar electricity and water concession they operate in that country.

The challenges have forced the retrenchment of staff working under the concession, with the government of Gabon set to cancel the current concession arrangement.

It may, therefore, be good riddance for them to exclude themselves from the concession process in Ghana, a country with a population of more than 25 million.

In order not to jeopardise the $500m deal, MiDA and the government should stand firm and see the selection process through to its logical conclusion and ensure that the 51 per cent mandatory local content for the ECG concession was not compromised, an energy analyst observed.

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