Government 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: Daily Graphic