General News of Tuesday, 24 September 2013
Source: Abdul Malik Kwaku Baako Jnr
There is a determined effort on the part of some members of the Communications Team of the ruling National Democratic Congress(NDC) including Ministers and Deputy Ministers of State of the Mahama Administration to allocate blame on the shoulders of 2012 Elections Flagbearer of the opposition New Patriotic Party(NPP), Nana Akufo-Addo for the judgment debt liability incurred by the State-owned Ghana National Petroleum Corporation(GNPC) following the latter`s ill-fated and poorly crafted "hedging dealings" with the French Bank, Societe Generale in the 1990s.
This determined effort obviously tailored at "purging" former GNPC Boss, Mr. Tsatsu Tsikata, of any responsibility for the judgment debt liability, is predicated on excerpts of a statement read by Mr. Tsikata at a press conference in Accra on 6th. September, 2001 in reaction to an earlier press conference held by the then Minister of Energy, Mr. Albert Kan Dapaah on 8th. August, 2001.
Last Saturday`s episode of Joy FM/MultiTV`s flagship program, Newsfile, witnessed two Deputy Ministers of State, Samuel Okudzeto Ablakwa(Education) and James Agalga (Interior) trying very hard to indict Nana Akufo-Addo for the judgment debt liability incurred by the GNPC and the Government of Ghana(GoG) in the course of the litigation between the GNPC and Societe Generale in a London High Court.
Relying exclusively on excerpts of Mr. Tsikata`s 6th September, 2001 press statement, the two Deputy Ministers accused Nana Akufo-Addo of "recklessness" and "refusal to defend" the GNPC and the Republic of Ghana in the court case and thus virtually handed Societe Generale an easy victory in the litigation the outcome of which, according to them, Mr.Tsikata was sure would have favored the GNPC and the Government of Ghana if the GNPC`s external solicitors had not been withdrawn from the case by the Government of Ghana.
They made references to Mr. Tsikata`s view that after the withdrawal of the external solicitors, Ghana`s Attorney-General`s Department which had assumed responsibility for the case on behalf of GNPC, failed to pursue some "important applications" the external solicitors had already made to the court and that action enabled Societe Generale to take advantage of the situation to apply to the court " to make certain amendments to their case and then, thereafter, applied for judgment against GNPC".
"There was no representation by or on behalf of the GNPC, and judgment was entered against the Corporation", Mr. Tsikata had articulated at his 6th September, 2001 press conference.
The two Deputy Ministers also recalled Mr. Tsikata`s speculative view that the GNPC was bound to win the litigation in the UK High Court because Societe Generale had twice failed in attempts to detain GNPC's drillship D511 via a suit it (Societe Generale) had filed in the District Court in Houston and the Court of Appeal in New Orleans, both in the United States of America (USA).
Hear Mr. Tsikata: "Before Societe Generale brought their claim in the London High Court, they had earlier in 1998 filed a suit in the United States- in the District Court in Houston- seeking an order to have the GNPC drillship, D511, moved to the US and detained by them upon conclusion of its contract in Mexico. This suit was brought against the US Company that chartered the drillship as well as GNPC. The case of Societe Generale was thrown out and when they appealed to the Court of Appeal in New Orleaans, they were again unsuccessful. It emerged in those proceedings that Societe Generale had sought legal advice about taking action in Mexico, where the drillship was operating, or in Panama where the drillship was registered, and they realized that they could not succeed in either jurisdiction if they filed a suit".
Mr. Tsikata also disclosed that discussions regarding settlement of the claims of Societe Generale had gone on both before and after their court actions. He claimed that after Societe Generale had initiated their court action in London, one of their management personnel who visited Ghana as part of a French delegation called on him(Tsikata) at the GNPC with the indication of their willingness to discuss settlement.
"I communicated this to the GNPC solicitors who began to have discussions on possible settlement. These discussions had not reached a conclusion. Societe Generale`s settlement proposal was for US$20 million. This led to a counter-proposal from the GNPC Lawyers for a US$12 million settlement payable in instalments from the expected commencement date of production from the Tano Fields.Societe Generale Lawyers asked for certain clarifications on this proposal and that is where things stood", Mr. Tsikata clarified.
Apparently, it is this "gospel according to Tsatsu Tsikata" that NDC Communicators and Ministers and Deputy Ministers have sought refuge in, and are vigourously depending on, to "crucify" Nana Akufo-Addo. But how credible is the "foundation"( the "gospel according to Tsatsu Tsikata") on which they stand in pursuit of their "Indict-Nana-Akufo-Addo-by-all-means-and-at-all-cost" propaganda onslaught?
Going by the "who caused the liability" thesis posited by late President Mills in the wake of the Woyome and Waterville judgment debt scandals, there`s enough empirical evidence pointing in the direction of the Tsikata-led GNPC Management as the primary source and/or perpetrator of the judgment debt liability to Societe Generale. As admitted by Mr. Tsikata himself, before the assumption of office by the Kufuor Administration in 2001, there was a court litigation and an out-of court settlement discussions going on between the GNPC and Societe Generale. He revealed that whilst Societe Generale`s settlement proposal was for US$20 million, the GNPC had put forward a counter-proposal of US$12 million" payable in installments from the expected commencement date of production from the tano fields". He also indicated that the "discussions had not reached a conclusion" but "stood" at a stage where the lawyers of Societe Generale had "asked for certain clarifications". Mr. Tsikata however does not elaborate on the "certain clarifications".
Even more strikingly revealing are the contents of a 15th.December, 1998 Memo authored by Mr. Tsikata and addressed to the Chairman and Board of Directors of GNPC on the rationale and status of the " Societe Generale Transactions". This particular Memo provided the "smoking gun" which underscored how fatally flawed the entire "Societe Generale Transactions" were from their very inception. The GNPC`s main pillar in the hedging dealings with Societe Generale was its unfounded "anticipation" of oil and gas production from the Tano Fields in 1998.
“In the course of discussions with them (Societe Generale) the issue of establishing a framework for protecting the projected revenues from the anticipated oil and gas production from the Tano Fields was a key concern. Resulting from these discussions agreement was reached in September, 1996 for commencing a series of transactions whereby GNPC could obtain price protection for the future production from the Tano Fields", intimated Tsikata in his Memo to the Chairman and GNPC Board of Directors.
He continued: " These transactions began in October, 1996 and involved: (a) the purchase by GNPC of put options to provide a minimum price for future production from the Tano Fields. The strip of put options covered a period from 1998 when production start-up was anticipated up to 2012; (b) In order to generate the required premium to purchase these put options another set of transactions was entered into whereby GNPC sold options".
Mr. Tsikata further indicated that “there was no reason to believe that the projected start-up date for production from the Tano Fields would not be met. As things turned out, however, by the end of 1997, it was clear that the projected start-up date of January, 1998 was not being realized and that the physical transactions intended to underlie the positions were not going to be in place. The end of 1997 was also when oil prices began to decline significantly".
He said as oil prices declined from then through 1998 the value of the options through which premium had been generated declined. That decline, according to Mr. Tsikata, was to a much greater extent than the increase in value of the put options purchased by GNPC for the simple reason that future oil prices for the later period did not decline as rapidly as the front end of the price curve.
"With the continuing uncertainty over the actual start-up date for production, Societe Generale would not expand the credit line to address this price situation pending the start-up of production. They required the positions to be closed and this was done in july 1998. at the time of the closure of the positions, the decline in overall value was at the level of US$35,203,700.00. however, as GNPC had earlier received premium income of almost US$5 million the total amount due Societe Generale came to US$40,181,115.00", Tsikata informed the Chairman and GNPC`s Board of Directors in his 15th December, 1998 Memo to them - 24 clear months before Kufuor`s Administration assumed office and some 30 months before the sale of GNPC`s Drillship, D511 which incidentally had been used as a mortgage in the transaction with Societe Generale.
Documentary evidence shows that Mr. Tsikata on 14th January, 1998, upon the explicit request of the Director and Head of Commodity and Trade Finance of Societe Generale, Mr. William Nagle, signed an agreement "to provide with all possible haste such additional security in the form of a second mortgage on the drillship Discoverer 511 and a first mortgage on the semi-submersible drill rig Asterie".
Interestingly, our Special Business Desk has also sighted correspondence between Societe Generale and Mr. Tsikata showing that Mr. Tsikata had at one stage, contemplated the sale of the D511 drillship in order to raise the needed funds to discharge GNPC`s liability to Societe Generale. In a 19th January, 1998 letter to Mr. Tsikata, Societe Generale recalled that " At the time of writing, we wish to advise you that as you have stated that the proposed sale of the D511 rig will be concluded within 48 hours from today`s date and that GNPC will be in a position to confirm such matters by no later than 23rd January, 1998".
Mr. Tsikata was subsequently reminded that “under the circumstances, in the event that your confirmation of the foregoing is not forthcoming by this date, Societe Generale will require the provision of a formal mandate as previously discussed with Messrs Nagle, Walker and Bicknell. This document should be made available by no later than our close of business on 26th January".
Another letter dated 25th September, 1998 from Norton Rose, solicitors of Societe Generale to GNPC, for the attention of Mr. Tsikata, referred to discussions held in the offices of Societe Generale(SG) in Paris on 24th September, 1998 "concerning the repayment of the outstanding debt due by GhanaNnational Petroleum Corporation(GNPC) to SG in the total principal amount of US$40,181,115(the "debt") together with interest accrued due to 22nd September, 1998 of US$693,527".
Mr. Tsikata was further reminded that he(Tsikata) had at the Paris meeting, expressed the wish to enter into an arrangement with a third party bank similar to the "current State Street Bank and Trust Company("State Street") financing in order to enable the repayment in full of the Debt of US$40,181,115.00". Societe Generale indicated that "in view of your (Mr. Tsikata`s) representation at the meeting with SG, SG is prepared to maintain the suspension of the commencement of legal proceedings of the recovery of the Debt..."on terms which were stipulated in the letter dated 25th September, 1998.
However, the bottom line of it all was the clear acceptance by Mr. Tsikata of GNPC’s liability of over US$40 million due to Societe Generale as a result of the hedging dealings/transactions between the Corporation (GNPC) and the French Bank (Societe Generale). Official GNPC Records show that the Corporation failed to fulfill the terms of the 25th September, 1998 letter which Mr. Tsikata had "accepted and agreed" for and on behalf of GNPC on 29th September, 1998. It was the GNPC`s failure to fulfill the 25th September, 1998 Agreement which eventually led to the commencement of legal action by Societe Generale in 1999.
Mr. Tsikata`s own 15th December, 1998 Memo referred to earlier, revealed that Societe Generale, before they opted for legal action, had written to Ghana`s Minister of Finance and Minister of Mines and Energy on their outstanding problems with GNPC. Recalling that GNPC was notified after the fact, Mr. Tsikata indicated that Societe Generale`s Director in London, Mr. William Nagle, "with whom we had been dealing, informed us that his bosses in Paris had decided to take this step" and that the matter had been taken out of his hands. Mr. Tsikata revealed that since the communication to the two Ghanaian Ministers, Mr. Nagle had been to Ghana to hold discussions at the Ministry of Finance and with Vice President Mills.
Mr. Tsikata noted that upon receipt of the letter from Societe Generale, he briefed Vice President Mills and Finance Minister, Kwame Peprah, who wrote a response to the letter he (Peprah) had received from Societe Generale. Mr. Peprah, according to Mr. Tsikata, indicated in his response that “he has asked me (Tsikata) to discuss the matter with the Societe Generale Chief Executive in order to find a mutually satisfactory solution".
"I had a meeting with the Societe Generale Chief Executive in Paris on 4th December, 1998. In the discussions in Paris I emphasized that it was always our intention to resolve the issue at a corporate level based on the framework that had been discussed. It appeared that Societe Generale thought that a letter to Government would yield a quicker solution at the same time as they were in discussions with us on the corporate solution involving the re-financing secured with receivables from a new D511 charter. Societe Generale acknowledged that these were corporate obligations with no government commitment involved", articulated Mr. Tsikata while ending on the note that " further negotiations are going on with Societe Generale on the basis of the re-financing proposed by them".
Unfortunately, the "further negotiations" culminated in litigation in a London High Court where an order was given for the seizure and detention of GNPC`s Drillship, D511 which had been spotted in the waters of Oman far away from the jurisdictions of Mexico, Panama and the United States where earlier attempts at seizure and detention had failed. By this time up to the assumption of office by the Kufuor Administration in 2001, the US$40,181,115.00 which Mr. Tsikata had admitted was GNPC`s liability to Societe Generale as at 15th Dccember, 1998, had increased to US$47 million(accrued interest inclusive) and was at the core of the legal proceedings in the London High Court.
It was within these circumstances of a US$47 million GNPC debt obligation to Societe Generale, the parlous state of the Corporation`s finances, the need to restructure and refocus GNPC on its core function of exploring and developing hydrocarbons and the protracted nature of the court litigation among others that the Kufuor Administration decided to seize the bull by the horn by bringing the litigation to an end by entering into negotiations with Societe Generale for a settlement of the dispute which had been raging in Court since early 1999.
As part of its plans to settle the dispute with Societe Generale and refocus the GNPC on its core function, the Kufuor Administration set up a Committee to review the Corporation`s activities, both core and non-core with the object of restricting the operations of the Corporation to its core object of exploring and developing hydrocarbons. A memorandum to the Cabinet dated 8th May, 2001 and signed by the then Minister of Energy, Albert Kan Dapaah, requested Cabinet to consider and recommend among other measures, the identification of "all GNPC assets and recommend ways to dispose of those that are non-core related and no longer needed" as well as " examine and make recommendations on any related issues for the effective functioning of the restructured GNPC".
On the 3rd of May, 2001, the Committee issued its interim report in which it expressed great alarm that several of the Corporation`s drilling rigs and marine assets were maintained at great cost to the nation without any equivalent revenues accruing to it and recommended immediate action on the disposal of those assets. The Committee observed that since 1991/92, when most of those marine assets were purchased, they had not been put to any use by the GNPC.
"They have also earned very little revenue. The D511 drillship is about the only exception; which has earned the Corporation US$14.6 million. What is critical in the Committee`s observation, is that notwithstanding the fact that these assets are not earning any revenue for the Corporation, a staggering amount of US$248,430 is expended every month to maintain them. In addition, all the rigs have no current insurance covers. They serve no practical economic purpose", underscored Kan Dapaah in his memo to the Cabinet.
It was against this backdrop that Kan Dapaah requested the Cabinet to give his Ministry "the authority to immediately dispose of these non-profit making assets" and also for “a Committee to be put together by Cabinet to work out the modalities for the disposal of same". Meanwhile, the litigation in the London High Court had resulted in the seizure and detention of GNPC`s D511 which had been used as collateral for credit facility GNPC had obtained from Societe Generale. The Kufuor Administration then decided to cut Ghana`s losses and run. Hence, the negotiations with Societe Generale which resulted in the reduction of the latter`s claim of US$47 million to US$19.5 million. The Ghana Government subsequently agreed to the sale of the detained D511 to Frontier Drilling of Norway for US$24m out of which Societe Generale was paid the agreed settlement figure of US$19.5 million.
Considering the essential elements of this saga and the sequence of events leading to the settlement of the dispute with Societe Generale, experienced business analysts and industry players wonder how anybody would seek to indict Nana Akufo-Addo and the Kufuor Administration for the judgment debt liability and the sale of GNPC`s drillship D511 to defray GNPC`s undisputed debt obligation to Societe Generale; a US$47m debt obligation which arose out of hedging transaction premised on the "anticipated and projected start-up production date of January, 1998" of oil and gas. Note that Ghana made her discovery of oil and gas in commercial quantities in June 2007 while production began in December 2010 - almost 16 YEARS after the projected start-up date set by the "Financial Wizard", Mr. Tsatsu Tsikata (apologies to Mr. Rawlings).
Yes, the documentation/records covering the transaction can and must be found and made available for critical public scrutiny. The principles of probity, accountability and transparency should not be sacrificed on the altar of political expediency and partisanship.
And it is in this respect that all should support the work of the Sole Commissioner on Judgment Debt to dig to the bottom of the Societe Generale judgment debt and the consequent sale of GNPC`s Drillship, D511. Those in the ruling party and the Mahama Administration who are leading the charge against Nana Akufo-Addo must be fair, accurate and factual in the presentation of their case or risk being exposed for their lies and mischief.
Please stay tuned for more exclusive analysis of the unfolding saga involving Societe Generale, GNPC and the sale of the latter`s marine assets including the D511.