ECG concessionaire selected amid controversy

Adnan Adams Mohammed

In spite of the announcement by the Millennium Development Authority (MiDA) that, Meralco Consortium, has been selected to manage the Electricity Company of Ghana [ECG]for the next two decades, under the Power Compact II Agreement, some experts still doubt the concession will solve the primary challenges facing the company.

The former Chief Executive Officer of Ghana National Petroleum Corporation (GNPC), Alexander Mould is of the view that, it is the same aspects of their scope of work (ECG) being concessioned out.

Although, he admitted he is yet to get to know of the full details of the scope of the concession and the Key Performance Indicators (KPIs) that aim to improve the distribution of power, he thinks if the concessionaire will be successful, then strong, resilient and adaptive KPIs must be introduced.

Mr Mould believes, the concession was not necessary if ECG management could increase revenue and implement effective loss and risk management strategies to change the current management culture.

“If government puts in the dedicated ECG collection account – with a cash waterfall to ensure appropriate distribution of the revenue from power generation across the entire value chain from fuel suppliers to generation capacity to bulk transport and to distribution – this should bring in some credibility to the collection system.

“What ECG should be focusing on is: improving uptime of transformers and substations; reducing cost by improving efficiency (a lot of duplications and unengaged staff); put in KPIs to improve staff engagement and institute performance and process improvements; as well as institute performance management systems to have a remuneration incentive scheme that promotes high performance; and ensuring all MMDAs and public institutions make payments on a timely basis or get smart pay as you go meters.”

With these strategies in place, “ECG could have been a high performing organisation and would not have needed any concessionaire”, he said.

But, he thinks, this is where ECG management and its government shareholder have failed to make ECG prudent and so the new concessionaire must institute more resilient, dynamic and adaptive KPIs to succeed.

MiDA, last week, announced Meralco Consortium, known to have the highest combined technical and financial score, as the preferred bidder among the six companies previously shortlisted.

The company is said to have a distribution network which covers a third of the Philippines and serves a customer population in excess of six million. It will be recalled that CH Group recently pulled out of the list of bidders leaving BXC Company Limited and Meralco Consortium.

Negotiations will soon commence to finalize all the agreements related to the implementation of the ECG PSP Transaction.

The Compact

Per the compact, the Millennium Challenge Corporation is expected to inject about US$418 million into ECG, whiles Meralco will invest about US$500 million.

About US$350 million of the grant is being invested in ECG to make the country’s power distributor operationally and financially more efficient.

Under the Power Compact, six projects will be implemented to address the root causes of the unavailability and unreliability of power in Ghana

The projects include: ECG Financial and Operational Turnaround Project; NEDCo Financial and Operational Turnaround Project; Regulatory Strengthening and Capacity Building Project; and Access Project.

The rest are Power Generation Sector Improvement Project; and Energy Efficiency, and Demand Side Management Project.

The Government of Ghana signed the Ghana Power Compact with the Millennium Challenge Corporation (MCC), an independent United States government agency, on the sidelines of the US Africa Leaders’ Summit in Washington on August 5, 2014.

The Compact is being implemented by the Government of Ghana through the Millennium Development Authority (MiDA).

Already, ECG has invested US$21 million in the supply of power distribution materials for Ashanti Region. The amount is part of a $70million loan agreement for the company to implement various projects to improve operational efficiency.

The scope of the $21million project includes the procurement of 600 distribution transformers, 15,000 poles and 8,800kms of conductors under the Ghana Energy Development and Access project.

As part of the loan agreement, ECG is to ensure these distribution materials are installed to improve on the network capacity and reliability in Ashanti Region.

Seven out of the 15 Business Centres in Ashanti are to benefit from this project.

The centres, which are mainly in the Kumasi metropolis, are Danyame, Asokwa, Abuakwa, Ayigya, Manhyia, Suame and Kwabre Business Centres.

“Our customers in the Ashanti Region can attest to the improvements in the delivery of power supply and other customer service activities. This is primarily due to the completion of major sub-transmission projects targ

eted at network expansion and capacity building.

“These projects have been commissioned and fully integrated into ECG network thereby improving the level of network reliability,” Samuel Boakye Appiah, Managing Director of ECG said.

Some of the projects include the rehabilitation of the Barekese Dam site substation and the construction of the Offinso primary substation complete with 33kv interconnecting circuit from the Agona Switching Station.

Others are the construction of 20km Double Circuit Tower line from Kaase to the Kuntenase Switching station and another line from Ridge to Neoplan station.

Addressing the project launch in Kumasi, Mr. Boakye Appiah, said the investment would help reduce distribution system loss and improve operational efficiency.

He said the company has signed various contracts targeted at clearing the bottlenecks within the sub-transmission network to enable for further expansion of the distribution network.

“These contracts, which are estimated to cost about GBP 30million and to be funded using ECG internally generated funds is an addition to the US$120 million already injected in the network to address various operational deficiencies,” he said.

This is a step needed long ago to help make ECG vibrant and efficient far better than it is today which has necessitated the government intervention of conceding part of the operations of the state-owned company.