ECG Sold; Meralco Consortium Takes Over On February 1

Manila Electric Company (Meralco) will officially take over running the Electricity Company of Ghana Limited (ECG) in February next year, under a 20-year concession agreement.

The move is expected to see the power distribution company receive some funds to expand its operations as well as build a new bulk station in Pokuase in the Greater Accra region.

Meralco Consortium, a Pilipino power company which won the bid to take over the operations of ECG is major shareholder in PDS.

The takeover follows renegotiation of the Millennium Challenge Compact II terms between the Republic of Ghana and United States of America, and the selection of a successful bidder through a competitive procurement process.

The negotiated Transaction Agreements – namely the Lease and Assignment Agreement, Bulk Supply Agreement, and Government Support Agreement – to secure the proposed Private Sector Participation (PSP) in ECG were approved by Cabinet and ratified by Parliament.

The Concessionaire, according to the agreement, is expected to inject an amount of US$580m into the distribution system during the agreement period’s first five years.

The Bulk Supply Agreement between ECG and the Concessionaire deals with the Concessionaire’s back-to-back purchase of the capacity and energy made available to ECG under the Power Purchase Agreements (PPAs).

The Concessionaire will do nominations and ECG will supply the power to be paid for by the Concessionaire.

ECG will sell all capacity and energy made available under the Portfolio PPAs to the Concessionaire, in exchange for payment by the company of all capacity and energy charges on a back-to-back basis.

ECG’s technical and commercial losses

The ECG experienced approximately 23 percent aggregate Technical and Commercial Losses in 2017.

This figure is high compared to the worldwide industry standards, which presently stand at about 8-9 percent.

ECG’s loss rate is also slightly above the average of 22 percent for sub-Saharan Africa countries.

Background

On August 5, 2014, the Republic of Ghana and United States of America – acting through the Millennium Challenge Corporation (MCC) – entered into a Millennium Challenge Compact.

The Compact provides for a grant of up to US$498,200,000 to advance economic growth and reduce poverty in Ghana; and commit Ghana and the MCC to a five-year economic development programme that will fund investments in the country’s power sector.

The programme consists of six projects: namely the ECG Financial and Operational Turnaround Project; NEDCO Financial and Operational Turnaround Project; Regulatory Strengthening and Capacity Building Project; Access Project; Power Generation Sector Improvement Project; and Energy Efficiency and Demand Side Management Project.