PDS loses ECG assets management case

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The Commercial Division of the Accra High Court has dismissed an application by Power Distribution Services (PDS) challenging the cancellation of its operation licences.This follows the termination of a concession agreement for it to manage the assets of the Electricity Company of Ghana (ECG).

Last year, PDS dragged the government to the High Court with a judicial review application asking the court to quash the cancellation of its operation licences by the government, acting through the Energy Commission.

The court, presided over by Justice Akua Sarpomaa Amoah, last Friday threw out the application after dismissing all the reliefs which the applicant sought and upheld the opposition to the application by the Attorney-General, Godfred Yeboah Dame. Justice Amoah, however, did not give full reasons for her decision, which she said would be in her ruling filed at the court’s registry.

Background

The concession was for private sector participation (PSP) in the management of ECG’s assets.

This was to make the utility provider more efficient in order for Ghana to access $498 million from the US government for its power sector under the US Millennium Challenge Compact II (MCC II), popularly known as the power compact.After winning the concession bid, Meralco of The Philippines came together with a group of companies, including local firms, to form a special-purpose vehicle (SPV), PDS, in order to satisfy the local content requirement of the transaction.In July 2018, ECG signed two agreements with PDS – a lease assignment agreement, which allowed PDS to manage the assets of the ECG, worth more than $3 billion, and a bulk supply agreement for PDS to take over the distribution of electricity in the southern distribution zone of the country.

In order to perform those functions, PDS was issued with operating licences by the Energy Commission.

Termination

The conditions precedent of the agreements made it mandatory for PDS to secure payment security to serve as a form of insurance for the assets of the ECG which it was managing.

The government said PDS presented a payment security in the form of demand guarantees from Al Koot Insurance, a Qatar-based insurance firm.

The government, however, started raising red flags in 2019 after accusing PDS of securing a fake demand guarantee.According to the government, its checks revealed that Al Koot had not issued any demand guarantee for PDS.

The government subsequently terminated the concession agreement with PDS in October 2019.

“PDS had failed to provide a payment security, which was a condition precedent for the concession agreement,” the Minister of Finance, Ken Ofori-Atta, had said.

Suit

Following the termination of the agreement, the Energy Commission cancelled the operating licences it granted to PDS and ordered it to transfer the assets it was controlling back to the ECG.

Dissatisfied with the cancellation of its operation licences, on February 12, last year, PDS dragged the Energy Commission and the Attorney-General to court, arguing that the commission had failed to give it a hearing and, therefore, breached the rules of natural justice.

It averred that apart from the Energy Commission breaching the rules of natural justice, it also failed to take into consideration certain rights it had under the transitional period following the termination of the concession agreement.

Among other reliefs, PDS wanted the court to quash the decision of the Energy Commission to cancel its operating licences and declare it as null and void, and also quash the decision of the commission for it to transfer the assets back to the ECG.

It further wanted “a declaration that the exercise of administrative power by the respondent in cancelling electricity distribution and retail sale licences results from the respondent’s acceptance of the ECG’s rendition of the provisions of the transaction agreements regarding post-termination transitional period and rights of the applicant under the transaction agreements abridged the applicant’s rights.”

AG’s opposition

In its opposition, the A-G described PDS’s legal action as unwarranted and without any basis.

Mr Dame argued that the decision by the government to cancel PDS’s licences was taken after several discussions, which had the full participation of PDS.

It was also the case of the A-G that the action by PDS was procedurally incompetent, as, per the Energy Commission Act, 1997 (Act 541), PDS should have first complained to the Minister of Energy for redress before heading to court.

Also, it was the contention of the A-G that the Energy Commission proceeded to cancel the operation licences after PDS had failed to meet the condition precedent under the concession agreement, and, therefore, the applicant did not have any legitimate case to seek protection from the court.

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