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62 firms apply to manage ECG

Sixty-two entities have expressed interest in taking over the Electricity Company of Ghana (ECG) as the country opens the doors of the company to private sector participation (PSP).

The entities have, consequently, received request for qualification documents from the Millennium Development Authority (MiDA).

The companies are expected to submit their interests by May 3, 2016 to pave the way for the selection of a company or a consortium to manage, operate and invest in the ECG for the next 25 years.

The duration is, however, subject to compliance with the terms of the concession agreement by the selected entity.

The entities which have expressed interest in the company are from Ghana, South Africa, the United States of America, Israel, Turkey, India, Ireland, the United Kingdom, France, the United Arab Emirates and Lebanon.

As part of the terms, the transaction will not involve the sale of assets, as the ECG will continue to be the owner of those assets and will be restructured as an asset-holding company.

Transform sector

Speaking at a road show on the concession for the management, operation and investment in electricity distribution in Accra yesterday, the CEO of MiDA, Owura K. Sarfo, said the PSP was “part of the process to positively transform Ghana’s power sector”.

Currently, the ECG requires not less than $200 million annually for investment in its network. While it has more than three million registered customers, the company sells 6,000 gigawatts per hour of electricity to 18 million people in six regions.

The road show, which brought together prospective investors and stakeholders in the power sector in Ghana, was to provide additional information on the transaction.

It gave the potential investors an opportunity to meet one another, form alliances and facilitate the promotion of local content which is a requirement of the PSP transaction.

Conditions

The transaction is expected to satisfy conditions, including the ability of the selected entity to leverage private sector capital to address operational and commercial competencies necessary for specific challenges facing ECG’s operation.

It must encourage local participation at both the ownership and operational levels, ensure equitable treatment of ECG staff and be sensitive to local customs and conditions.

The Compact Two of the Millennium Challenge Account (MCA) between the Government of Ghana and the Millennium Challenge Corporation (MCC) of the United States of America demands that the ECG PSP provider should have relevant technical experience and a proven track record of helping electricity distribution companies of similar size and scope for the ECG to become profitable.

Additionally, it must have adequate financial capacity to satisfy the minimum equity threshold to meet the requirements of the transaction.

No compromises

The Deputy Minister of Power, Mr John Jinapor, who launched the road show, said the government expected the selected entity to go beyond managing and operating the assets of the ECG.

“We expect the selected concessionaire to manage, operate and invest in the company. We do not want you to take over the ECG just to run the assets over the period. What we want you to do is invest in that company and improve its performance, so that Ghanaians will see wisdom in our decision to opt for the concession,” he said.

History to guide

This is not the first time Ghana is involving the private sector in the management of a utility company.

In 2006, the government signed a five-year management contract with Aqua Vitens Rand Limited (AVRL) on a World Bank advice to improve service delivery in the water sector.

But the contract was not renewed in May 2011 after pressure was put on the government not to renew the contract because the AVRL failed to deliver.

Probably with that in mind, Mr Jinapor said the government had history to guide it, for which reason it would hold the selected entity on its key performance indicators.

Mr Jinapor also insisted that the government would not compromise on the need for local content participation as the PSP transaction demanded.

The Managing Director of the ECG, Mr Robert Dwamena, for his part, gave an assurance that the company would work with the selected entity to transform the power sector and ensure value for money.

“We will monitor, evaluate and ensure that the investment made in the company helps improve electricity distribution,” he added.

MCA Compact Two

Under the Compact Two arrangement, the government has decided to give the ECG to a private entity on concession.

Under the move, the government will enter into a contract with the private sector partner which will have exclusive rights to operate, maintain and invest in the ECG for a stated number of years, beginning January 2017.

Compact Two of the MCA between the government and the MCC is a Power Compact aimed at transforming the ECG in terms of technology and efficiency in power distribution to become a stronger company able to meet the current and future needs of Ghanaian families and businesses.

The problems

Ghana’s power sector had been in crisis mode until late last year. With the crisis stretching back to 2011, the need for investment in the energy sector became crucial. Before then, there had been energy crisis in the 1980s, 1998 and 2007.

According to the Ghana Atomic Energy Commission (GAEC) figures, by 2020 the country would need 6,000MW of electricity to meet the demands of industry and for domestic use.

But with the ECG struggling, stakeholders believe that PSP is the way out to attract the much needed investment.

Over the years, the needs of the power sector, that is struggling to meet increasing demands, include the need to stabilise, expand and build a robust transmission network that will assure reliability of supply to customers.

The system also has to deal with obsolete equipment, some as old as 48 years.

Source: Daily Graphic

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