United States revokes $190 million grant to Ghana 23 Oct 2019, 03:14 pm

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The United States of America has cancelled a $190 million grant, which was available to Ghana following the successful execution of a power concession agreement between Electricity Company of Ghana (ECG) and Power Distribution Services Ghana Ltd (PDS). The 20-year concession agreement, executed on March 1, 2019, was for the operation and maintenance of the assets and facilities of the ECG by PDS – a consortium comprising some Ghanaian investors and Philippines-based Manila Electric Co.’s (Meralco). The agreement was reached under the U.S. Millennium Challenge Corporation (MCC) Ghana Power Compact programme.

But last Friday, the Ghanaian government informed the MCC about its decision to terminate the agreement over allegations of some breaches by PDS. The MCC is an American foreign aid agency established to support the fight against global poverty. Its compact programme with Ghana, aimed at supporting the Ghanaian energy sector, comprised of two tranches of funding: $308 million available upon the commencement of the current compact, and a second tranche of $190 million, which Ghana was to have access to upon the execution of the concession agreement with PDS. The Millennium Development Authority (MiDA) was established to manage and implement the programme on behalf of the American and Ghanaian governments.

The Ghanaian government initially suspended the agreement in July to enable it investigate alleged breaches in the payment guarantees presented by PDS to secure the assets. The government has since terminated the agreement with PDS and has informed MCC that it would look for new investors.

The U.S. Embassy in Ghana, in a statement released on its website, expressed regret over Ghana’s decision. It argued that the transfer of the Ghanaian power assets to PDS was valid, and therefore disagreed with the termination of the agreement. The American government further underscored the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth.

“Based upon the conclusions of the independent forensic investigation, the U.S. position is that the transfer of operations, maintenance, and management of the Southern Distribution Network to the private concessionaire on March 1, 2019, was valid, and therefore the termination is unwarranted,” the U.S. government said. “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 U.S. government, however, said MCC and MiDA will continue to work with the Ghanaian government to implement the part of the power compact, which has already been funded through the initial grant of $308 million.

“Moving forward, the U.S. Government, through MCC, will continue to implement the Tranche I funds of $308 million with the Millennium Development Authority (MiDA),” according to the U.S. Embassy statement. “This funding will continue to support important improvements to the infrastructure of Ghana’s southern distribution network, increase reliability and power access to key markets, and advance energy efficiency programs directly benefiting the people of Ghana.”

According to Business Mirror, a Philippines-based publication, PDS had planned to invest over $580 million for capital expenditures and to strengthen the governance, management and operations of the ECG, which supplies electricity to 80 percent of Ghana’s population.

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