CHANGE OF FINANCIAL GUARANTEE TO INSURANCE GUARANTEE.
The condition precedent for financial guarantee by the Banks was PURC tariffs and the list of Power Purchase Agreements (PPA).
However, PURC refused to increase the tariffs as agreed.
ECG owns more than GHC4 Billion of debt from Power Producers.
So in the absence of any proper tariff, how can a banks provide the required Guarantee?
Therefore, PDS proposed insurance guarantee in order to meet the transaction timelines.
It was accepted on grounds that the PURC refused to increase tariffs to merit financial guarantee.
Also, the amount of $350 Demand Guarantee was only made aware to PDS in month of February.
Due to this PDS had to go for a more expensive Guarantee rather than the cheaper Standby Letter of Credit (SBLC).
Therefore, you cannot blame the private company for the change.
MiDA made this clear in its statement.
PDS FULFILLED ITS OBLIGATIONS BY PAYING CAL BANK
PDS made payments to CAL BANK.
Cal Bank relied on Donewell Insurance which also said it did its work with Joe Australia.
Joe Australia said it secured Al Koot.
MiDA said to ensure that the guarantees were valid, it made Al Koot to notarise the guarantees which has been done.
Mind you that MiDA is a govt agency.
Al Koot admits that Joe Australia is its agent but went beyond his limit.
If an employee of Al Koot working with them for more than 10 years has done something illegal, how do you blame PDS for that.
Legally, in any wrongdoing of any employee, the onus is still on the employer.
Since Al Koot has acknowledged that the said employee is under investigation, the company cannot run away from the liability arising from it.
Assuming that Joe Australia even duped Donewell, should PDS be punished through termination of the contract?
So as per transaction agreement, Govt should let PDS look for a new Guarantee and replace the old one.
Once the guarantee is secured, the $350m is safe and sound.
THE ARGUMENT OF USING PROCEEDS TO SETTLE LOAN IS NEITHER HERE NOR THERE
Please note that Power Distribution is a regulated business.
Everything that PDS spends has to be approved by the regulator i.e. PURC.
PDS had submitted the cost of raising the Demand Guarantee in their submission to PURC under Mandated Cost as per the Rate Setting Guidelines (RSG).
As per the RSG all mandated cost should be approved, so PDS used the revenue it was collecting to settle the loan as the revenue also include the cost of the Demand Guarantee.
Businesses are financed using equity or debt.
If the shareholders took loans from a bank to finance the guarantee and after take over use the proceeds to service the loan, it is a normal business process.
If you give me your car as work and pay and I take a loan to make half advance payment, you don’t complain when I use the money the car generates to pay the loan.
The FTI report said it did not find any fraud.
The contract stipulates that 30 days should be given to any party to address challenges that Mya arise.
Govt did not do this.
Therefore, what will be the basis to terminate PDS contract?
HOW MUCH MONEY PDS IS SUPPOSED TO INVEST IN THE UTILITY.
Based on the bid submission, PDS is expected to invest approximately $580 million for five years.
The bid submission also requires that 70% should be debt and 30% was from equity.
Based on the bid requirement, PDS shareholders have to invest approximately $34.8 million per year for next 5 years as equity contribution.
PDS has already submitted an investment plan with PURC and other stakeholders awaiting approval.
PDS can only start spending after PURC and other stakeholders approve the investment plan.
HOW MUCH MONEY PDS HAS COLLECTED?
Since PDS took over, PDS has collected about GHC2.4 Billion.
Out of this amount, PDS has paid about GHC1.3 Billion to ECG.
As of February 28, 2019, the total ECG debt was GHC3.3 Billion.
This amount has been reduced to GHC2 Billion.
Source: The Finder