Posted on: www.dailyguideghana.com
By William Yaw Owusu
Thursday May 31, 2018
The contract signed between the erstwhile Mahama’s National Democratic Congress (NDC) administration and the Africa & Middle East Resources Investment (AMERI) Group, which experts described as a rip-off of public funds, is beginning to bite the country hard.
This is because after months of deliberations, the Attorney General, Gloria Akuffo, has stated emphatically that there are going to be damning financial consequences for Ghana, if the Ministry of Energy wants the deal abrogated.
The AG has not said the agreement is clean or good, although she agrees that it is a one-sided and unfavourable agreement the Mahama government signed on behalf of the people of Ghana.
The Mahama government signed the Built Own Operate and Transfer (BOOT) agreement with AMERI in 2015 for the supply of 256mw of power, but it is evident that Ghana is losing about $150 million as a result of lack of due diligence on the part of officials who negotiated the deal on behalf of the people of Ghana.
The agreement had been drafted with “the most ironclad clauses ever seen in Ghana’s agreements with private entities; and there is no way the government is not going to suffer if the deal is truncated,” noted a financial analyst.
In the heat of the transition, Energy Minister Boakye Agyarko set up a 17-member Ministerial Committee chaired by Lawyer Phillip Addison, to look into the previous government’s AMERI deal; and the committee had recommended to the government that it should call back owners of the Dubai–based company for re-negotiation and advised that should the company refuse to honour the invitation for re-negotiation, the government should renounce the agreement on grounds of fraud.
The whole BOOT Agreement between Ghana and AMERI Energy was estimated at $510 million, and it involved among other things, the installation of 10 General Electric TM 2500 aero-derivative gas turbines at the Aboadze Power enclave, near Takoradi in the Western Region.
On May 19 and October 31, 2017, the Ministry of Energy sought legal advice from the AG on the decision by the government to suspend monthly payments for AMERI; the necessity or otherwise of obtaining a court order in support of the suspension of payments and also to determine whether the case should be adjudicated in Ghana or outside.
On November 27, 2017, the AG in a letter sighted by DAILY GUIDE, provided legal advice and explained the circumstances under which the AMERI deal could be abrogated.
On the suspension of monthly payments, the AG stated, “No allegation of either a default or a breach under the BOOT Agreement on the part of AMERI has been made by the government. AMERI has provided and continues to provide power for the use of the government in accordance with the agreement, albeit through its agent, Power Projects Sanayi Insaat Ticaret Limited Sirket.”
The AG said documents made available indicated that “the BOOT Agreement was originally purportedly entered into on a sole source basis.”
She averred, “For the BOOT Agreement to be valid on the basis of single source procurement therefore, at least one of the exceptional circumstances provided under Section 40 of Act 663 as amended must have existed and the procuring entity must have received approval from the board of PPA.”
The AG pointed out, “It does appear however, that the then Ministry of Power did not originally follow due process in the procurement of the services of AMERI as per the BOOT Agreement via single sourcing.”
Ms Gloria Akuffo said there was a power crisis in the country during the period within which the agreement was concluded and a decision to proceed under single or sole source procurement process would be justified under Section 40 (b) of the Procurement Act.
The AG said in her opinion, the Ministry of Power under Kwabena Donkor, subsequently obtained ratification for the procurement upon application by the PPA on January 25, 2016, adding, “The otherwise invalid agreement was rendered valid when it was ratified by the board of PPA.
“In the absence of any default or breaches of any obligations on the part of AMERI as specified in the agreement, the government is obligated to make payments to AMERI on a monthly basis under Section 10(a) of the agreement and non-fulfillment of government’s payments would entitle AMERI to draw down on the Stand-by Letter of Credit of $51 million per Section 11 (i).”
The AG said the legal effect of the Stand-by Letter of Credit issued by the Mahama administration to AMERI “is unfavourable to the government and overly favourable to AMERI.”
According to Ms Akuffo, “It gives AMERI the opportunity to call on the full $51 million after collecting the required payments under the BOOT Agreement, without having to give notice to the government, even when there is an invoice dispute between the parties.”
The AG said the government’s legal position would have been better protected if it had signed a Power Purchase Agreement (PPA), which would have enabled a proper risk allocation.
The AG further said that the government’s main complaint stems from the financial aspect of the BOOT and related Agreements, claiming, “Whereas the deferred payment facility agreement provides that the maximum total cost of the projects over the five-year term is approximately $360 million, the BOOT Agreement itself provides the cost of the project will be a minimum of $510, a significant difference of $150 million.”
Ms Gloria Akuffo asserted that the then government sat down for AMERI - a private entity - to assume a stronger bargaining position in all aspects of the agreement and the current government has no option but to follow what AMERI has to say because the agreement was freely signed between the parties.
“Responsible officers of government executed the agreement amid calls by a Norwegian and members of the public of the exorbitant cost of the project. But neither the government nor parliament, which subsequently granted approval for the agreement, found it necessary to conduct any due diligence that may have resulted in a better deal for the government.”