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Business News of Tuesday, 24 April 2018


ECG Concession: BXC sues MiDA over ‘unfair’ disqualification

Meralco Consortium was selected after MiDA concluded the process last week Meralco Consortium was selected after MiDA concluded the process last week

One of the concessionaires that bid to manage the Electricity Company of Ghana (ECG) under the Power Compact II agreement, BXC Consortium has sued the Millennium Development Authority (MiDA) over what it describes as an unfair disqualification in the bidding process.

MIDA last week disqualified BXC Consortium and selected Meralco Consortium, a company led by Manila Electricity Company from the Philippines, to manage the Electricity Company of Ghana [ECG], under the Power Compact II agreement.

MiDA’s letter of disqualification

In a letter dated April 12, 2018, the Chief Executive Officer of MiDA, Martin Eson-Benjamin, explained that BXC Consortium was disqualified because the company has “one or more conflicts of interest”, and, therefore, cannot continue with the bidding process.

MiDA said it disqualified BXC Consortium for conflict of interest or potential conflict of interest for not disclosing existing contract with ECG.
According to the letter, the consortium said “we are not aware of any actual or potential conflict of interest arising from a prior or existing contract or relationship with Ghana, ECG, their affiliates, representatives, advisors or consultant”.

However, MiDA obtained information concerning a contract BXC has with ECG.
On the basis of this, MiDA, in the letter, said one or more conflicts of interest or potential conflicts of interest existed.

It added that the foregoing statement by BXC Consortium is false and/or misleading.

Therefore, MiDA decided not to open the financial proposal submitted by BXC Consortium.
The co-ordinator of the BXC Consortium in the ECG takeover, Daniel Azu, however, insisted MiDA’s reasons for disqualification were completely flawed and baseless as evidence emerging suggests that it was done to favour Meralco Consortium.

“We are in court because we think MiDA has not been fair to BXC and we need them to explain to us the reasons why they have disqualified BXC. MiDA was aware BXC had other projects with ECG, and we made that clear to them from the beginning. We do not know why they are bringing this up now. We can provide documents to show that in all the presentations that we did, we included this knowledge. We want the court to look at the merit of the decision,” Mr Azu said.

BXC, in a letter dated April 13, 2018 and addressed to MiDA, said: “it had not misled MiDA and/or have not engaged, and/or are not aware of any actual or potential conflict of interest in anyway whatsoever and/or howsoever. We state that we have always informed MiDA about our distribution contracts together with our previous pending contracts with ECG.

“We add that by a letter dated 1st March, 2018, prior to the submission of the bid, we informed you of all past and present contracts between BXC Consortium and ECG dating as far back as 2005. We add further that contrary to your statement in your letter under reference, in the bid submitted to MiDA, and specifically on pages 17, 76, 87, 88 and 95 of the technical proposal, we make specific mention of the contracts entered into between BXC and ECG. We would therefore urge you to reconsider your decision to disqualify our bid and request that you send us a response by the close of Friday, April 13, 2018,” the letter further indicated.

BXC Ghana Limited (BXC), a Chinese company registered in Ghana, is a subsidiary of Xiaocheng Electronic Technology Stock Co. Ltd.

The company is engaged in the business of manufacturing and deploying highly efficient pre-payment metering systems and management of power supply across the world.

BXC Consortium was established in Ghana in 2010. It has over the years trained and used Ghanaians to implement major projects in Ghana.

In September 2011, BXC Consortium and the ECG signed an agreement for 10 years, where BXC was expected to engage in System Loss Reduction in the Teshie and Bortianor areas, the commercial aim of which was to share proportional losses recovered by the project while technically improving the infrastructure and deploying more modern systems of power distribution management.

What happens to BXC, ECG contract?

What happens to the contract of BXC with ECG is yet to be clarified by MiDA.
Therefore, MiDA’s decision to reject the BXC Consortium could result in a legal tussle.

BXC Consortium has Xiaocheng Technology Stock Company Limited and Shaanxi Regional Electric Power Group Company Limited as part of it.

A. BXC operations in Ghana since 2011 are as follows:
1. Solar IPP project in Mankoadze
? $30M - completed
2. Rural Electrification project
? $40M – completed
3. Boundary metering project
? $11M - completed
4. Thermal power generating plant in Takoradi
• $650M – work in progress

5. Mining Concession in Eastern Region (not discussed at meeting)
• $20M – exploration completed, mining about to commence

6. $170M Pre-finance loss reduction contract with ECG in Accra West covered by contract signed in 2011 - work in progress

a. Contract called for BXC to invest its own funds to reduce Technical and Commercial Losses from 31.98% for a population of 450,000 subscribers in Accra West.

b. BXC and ECG will share 80% and 20% respectively on revenue from loss saving

c. BXC was assigned by ECG to work in the Teshie, Nungua and Bortianor areas covering 200,000 subscribers, and upon completion of assignment, there was dispute about the baseline of 31.98% loss level to measure performance

d. Based on independent system planning division in March 2017, Technical Losses have been reduced to about 7% due to investment in Accra West Network, indicating a highly successful performance by BXC contractual obligation.

e. To resolve this, an agreement was reached to compensate BXC for work done and return on capital employed

f. Again, BXC claimed, and ECG disputed, compensation of $80M, but later both parties settled on $60M to enable further work to continue in harmony
g. An addendum to existing contract was signed in March 24, 2017, in which, among other amendments, ECG resolved to pay the agreed sum of $60M at 6% monthly annuity instalments of $590,000 for 12 years

h. Payment has only been ongoing for six months, for which ECG MD apologised for and promised to normalise

i. BXC now working in Nsawam covering the remainder of the 250,000 customers contained in the contract

There are issues with delays, complaints, finger-pointing from both sides, and, above all, lack of payment for the current Nsawam phase of the contract. BXC claims ECG currently owes it about $3,600,000 for Operations and Maintenance ($180,000 monthly payment for about 20 months).