Posted on: www.dailyguideghana.com
By William
Yaw Owusu
Tuesday,
February 25, 2015
It has emerged that the Attorney General (AG) and Minister for
Justice advised the Ghana National Petroleum Corporation (GNPC) that it was not
within the corporation’s statutory mandate to provide loan guarantees to other
entities - whether public or private.
This was in respect of the ongoing public-private partnership (PPA)
agreement between the Electricity Company of Ghana (ECG) and Karpowership of
Turkey over the emergency power barges or ships to mitigate the power
generation deficit in the country.
Coercive Powers
Reports say the presidency has coerced the GNPC to issue the $100
million bank guarantee since the government says the ECG, which is signing the
agreement, is not liquid enough to take up the deal.
To make matters worse, the National Democratic Congress (NDC)
government is bypassing parliament to push the deal through.
There have been arguments over the suitability of the GNPC abandoning
its core mandate of oil exploration and development and entering into the power
sector and others have wondered how the corporation was going to find the requisite
funds to guarantee for the ECG in the first place.
However, sources say the government is relying heavily on the
recent court order that is allowing the GNPC to source $700 million loan
without parliamentary approval to push through the barges deal as the main
guarantee.
GNPC’s Letter
The GNPC wrote to the AG on January 16, 2015 specifically asking
the government legal advisor to state her position on “whether the provision of
bank guarantees falls within the mandate of the GNPC.”
The corporation also wanted the AG to advise on “whether
parliamentary approval is required for the transaction in case GNPC were to
issue a bank guarantee on behalf of the ECG.”
AG’s Advice
The overall effect of the AG’s advice was that for the GNPC to
establish sufficient connection between its core mandate and the provision of the
bank guarantee, “the corporation should negotiate and execute the heavy fuels
and/or gas sale agreements with Karpowership,” and also when the GNPC Board had
approved the guarantee transaction, it should be forwarded to the Minister of
Finance through the Minister of Petroleum for approval.
The AG’s letter of advice on the GNPC’s request said even though
the corporation was statutorily barred from providing loan guarantees to other
entities, the corporation “may enter into contracts if such contracts have a
sufficient connection to the core mandate of the corporation.”
The letter sighted by DAILY GUIDE with reference E63/SF.
9TJ written on February 4, 2015 and signed by Dr. Dominic Akuritinga Ayine, a
deputy AG further said there was sufficient connection between GNPC and the
overall transaction with Karpowerships to justify the issuance of a guarantee
to facilitate the transaction.”
Heavy Fuel
Oils & Gas
The deputy AG explained that once the GNPC was commencing
negotiations with Karpower in order to supply it with heavy fuel oils and also
conclude a gas sale agreement, if the two agreements were negotiated and
executed then there is going to be “sufficient connection” with the core
mandate of the corporation.
“It must be stated that a guarantee is just another contract.
Statutory corporations, like other corporate entities, have capacity to enter
into and perform contracts,” the deputy AG said in the government’s advice.
Public Corporation
The AG said that “in the case of public corporation set up for
commercial purposes, such as GNPC, it would be unusual to state in their
establishment law that they have the power to lend money or grant bank
guarantees.”
“However, in view of the fact that they have generic power to
contract, they can enter into contracts of guarantee insofar as these contracts
relate to their overall statutory mandate.
Parliamentary
Approval
On the issue of parliamentary approval for the transaction, the AG
said that “it is our pinion that because a guarantee constitute a contingent
liability, it is technically equivalent to a loan,” but added that Parliament
had waived its right to approve the type of such loans or guarantees.
“In the circumstance, there would be no need for parliamentary
approval for this transaction,” the AG added.
Banks
apprehension
The two local banks with their headquarters in Togo and Nigeria
respectively - earmarked to finance the deal reportedly developed cold feet.
Sources said it is taking much effort from the presidency to
convince the banks but even that, things were still proving to be difficult.
Feet
Dragging
The source said the pan African bank with its headquarters in Lome
was unwilling but, presidential powers reportedly were brought to bear on its
Accra office to advise Togo and it was purportedly based purely on the opinion
of the Attorney General.
As a result, the bank was forced to agree last week and they have
since issued their $50million guarantee on behalf of GNPC.
Killing
Similar Deal
The
Nigerian bank on the other hand, is adamant to enter into the deal but the
presidency was said to be “hitting hard against the group in Nigeria to get
them to approve it.”
The bank
has become reluctant because in the past when they got the Kufuor
administration to finance a similar project in Tema under a PPA worth $20
million based on the offtaker agreement, the NDC government after just two year
in office killed the deal culminating in the biting dumsor.
The
Agreement
Under the agreement, the Turks are expected to run the barges and
sell power to the ECG for onward transmission to customers which is equivalent
to what the Volta River Authority (VRA) is doing for ECG.
However, they (Turks) want a clear-cut guarantee to ensure that
their investment did not go down the drain.