PDS ‘Milks’ ECG To Pay $12m Demand Guarantee

William Hutton Mensah – PDS Boss and Ing Samuel Boakye Appiah – ECG Boss It appears the new managers of the Electricity Company of Ghana’s (ECG) assets‒ Power Distribution Services (PDS) Limited‒ is relying heavily on cash flow from the sale of electricity to meet its financial obligations under the power concession agreement.

According to a consulting firm, FTI Consulting, which was engaged to probe the recent brouhaha over the botched PDS demand guarantees submitted for the management of ECG assets under the Millennium Development Authority (MiDA) concessionaire agreement, PDS lacks adequate capital to undertake US$350million investment for the protection of the ECG assets.

“PDS is not having a certain level of capital required for the issuance of a cash-backed letters of credit, which was an option offered by some financial institutions that PDS had approached. We were informed during interviews that PDS was offered the opportunity to secure cash-backed letters of credit if it could deposit US$350 million in its bank account,” FTI stated in its report.

In lieu of that, PDS engaged its bankers (Cal Bank) to facilitate the insurance cover as payment security for the Lease Assignment Agreement (LAA) and Bulk Supply Agreement (BSA) before the transfer of ECG assets.

Cal Bank therefore contacted its business partner, Donewell Insurance, which also engaged Jordanian insurance brokers, Jo Australia Reinsurance Brokers, to seal a reinsurance deal with Al-Koot, a Qatar-based insurance firm.

However, the whole transaction could not stand because the Qatar based insurance company has ruled out capacity to underwrite the US$350million insurance cover, throwing the PDS takeover of ECG assets into disarray.

Ghanaians are awaiting pronouncements from the government, after it was established that the reinsurance deal with Al-Koot did not go through, having recognised that US$12.25millon Demand Guarantees posted by PDS was not valid

No Cash

The FTI report quoted that PDS could not secure the Demand Guarantees or Letters of Credit as per the requirements of the LAA and the BSA from a bank because of not having a certain level of capital required for the issuance of cash-backed payment security.

The FTI, commissioned by MiDA to look into the confusion generated by the suspension of the PDS deal because of lack of financial security, in its report indicated that of the US$12.25 million raised for the Demand Guarantees as charged by Cal Bank to PDS as fees for raising the payment securities, only one million dollars (8%) was funded by […]

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