U.S. cuts funding for Ghana’s electricity sector as power deal collapses

Photo credit: Bloomberg

The U.S. cut the funding of a support program for Ghana’s energy sector after the West African nation terminated a private venture’s deal to operate the country’s power-distribution network.

Foreign aid agency Millennium Challenge Corp. reduced its compact for $498 million in grants with Ghana by $190 million, the U.S. Embassy in Accra said in a statement on its website.

The $190 million became available in March after the government-appointed Power Distribution Services Ltd., a venture in which Philippines-based Manila Electric Co. holds a minority stake, to operate the network on behalf of the state-owned Electricity Co. of Ghana for 20 years. The government subsequently annulled the agreement over the legitimacy of payment guarantees supplied by PDS. The transfer of the operations “was valid,” the U.S. Embassy said in its statement. “Therefore the termination is unwarranted.”

Ghana and the MCC signed the accord in August 2014 while the country suffered from a crippling energy crisis that resulted in routine 24-hour power cuts and weighed on economic growth. The program was designed to make the supply of power more affordable and reliable, according to the MCC.

Out of the total amount pledged, the MCC has committed $128 million and expended $62 million by June 30, according to its website.

Ghana had no other choice but to terminate the agreement as the PDS-venture failed to meet a fundamental term of the deal, Information Minister Kojo Oppong Nkrumah told reporters Wednesday.

“Government is still interested in private-sector participation,” he said. “In the coming days the finance minister will be outlining how government intend to achieve private sector participation in the ECG-turnaround program even in the absence of this particular option.”

Source: Bloomberg

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