Meralco terminates venture in Ghana

Published October 22, 2019, 12:00 AM

by manilabulletin_admin

By Myrna M. Velasco

Power utility giant Manila Electric Company (Meralco) has terminated its $40 million venture in Ghana due to “alleged material breaches in the provision of the demand guarantees” by its partner-power utility in that country.

MERALCO logo
MERALCO logo

In a disclosure to the Philippine Stock Exchange (PSE), Meralco indicated that the reported breaches had been committed on the part of Power Distribution Services Ghana Ltd. (PDS), which is its partner and awardee of the operation and maintenance (O&M) concession for the assets and facilities of Electricity Company of Ghana (ECG).

Meralco has 30 percent stake in PDS and should have warranted it to cough up investments of roughly $40 million. The deal was targeted to be concluded second half of this year –had not been for this latest report on the deal’s termination.

The power utility firm has apprised the PSE that “Based on the letter signed by Minister Ken Ofori-Atta of the Ministry of Finance of Ghana, the forensic audit by the auditors chosen by the Millennium Development Authority indicated that the purported demand guarantees were issued without due authorization and in excess of the mandate of Al Koot Insurance and Reinsurance, Qatari insurance firm and were therefore invalid.”

Meralco emphasized that “The demand guarantees were key prerequisites for the turnover of the assets and facilities of ECG to PDS.”

The utility firm further indicated that “there was no information available to forensic auditors to suggest that PDS committed fraud in relation to the demand guarantees,” and the Ghana power distribution firm “maintained that it procured the demand guarantees in good faith and that it has no knowledge of any issue with same until the suspension of the concession.”

In the equity take in the Ghana firm that it has been sorting out since last year, the option given to Meralco will be acquisition of up to 30-percent shareholdings in the joint venture (JV) firm that won the O&M concession with ECG; but it has eventual prerogative to bring that down to 19-percent.

The $40 million investment, it was qualified, would have to be spread over time – prospectively over five years depending on the cash call of their co-venturers. Meralco’s entry into the Ghana power sector was done via Millennium Development Authority (MiDA) and the ECG.

Last year, Meralco sent its legal team in Ghana to complete the documentation processes prior to the signing of the targeted shareholder agreements or joint development agreements as well as the eventual firming up of financial agreements – with deal conclusion eyed this year.

This is already the second investment foray of Meralco in the African continent – the first one was for it being a technical partner to Ibadan Electricity Distribution Company of Nigeria.

 
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