Bright Simons, a brilliant social innovator and researcher, has revealed that the contract signed between the Mahama-led National Democratic Congress (NDC) government and the Middle East Resources Investment Group LLC, also known as AMERI Group or AMERI Energy “might be the most outrageous swindle this country has seen in the last decade.”
According to the founder and president of mPedigree, Ghana paid $260 million more in the deal which translates into 21% per annum, saying, “That 21% effective annual interest rate is the product either of criminal incompetence or sheer recklessness, which leads many right-minded persons to suspect underhand dealings.”
Giving the breakdown, he said his research showed that $110 million went to the people who actually procured the plant and did all the work – Metka/PPL and $150 million to the broker, which is AMERI.
Mr. Simons, who is also affiliated to IMANI Ghana, a think tank, said his analysis of the controversial deal had been informed by what he called the ‘outlandish’ claims by former Deputy Minister of Power, John Abdulai Jinapor, under the previous NDC government to defend the deal.
The $510 million Build, Own, Operate and Transfer (BOOT) Agreement came under the spotlight once again after the Ministry of Energy had tasked a committee chaired by popular lawyer, Phillip Addison,to restructure the deal.
The committee recommended to the government to call back owners of the Dubai-based company (AMERI) for renegotiation.
It said that in the event that AMERI Energy refuses to come to the negotiation table “GoG should repudiate the Agreement on the grounds of fraud.”
It stated, “The Committee recommends that Ameri Energy should be invited back to the negotiation table to address and remedy the issues enumerated in this report and for GoG to aim to claw back a substantial portion of the over $150 million commission.”
However, the opposition NDC, which signed the deal whilst in office, has been speaking strongly against the new government’s move to get AMERI back to the negotiation table, making many wonder if the opposition party has Ghana’s interest at heart.
Former Power Minister, Dr. Kwabena Donkor, who supervised the signing of the controversial deal, and other NDC ministers together with the minority MPs in parliament, have condemned the NPP government for taking steps to re-examine the deal.
“The comparable cedi interest rate is 50% (accounting for the dollar-cedi inflation and exchange rate depreciation differentials); it is MADNESS for any sovereign state to borrow at such rates!” Mr. Simons said.
He added, “But that is effectively what we have done in this AMERI deal! It is an implied loan at a cut-throat interest rate!
“Do we have even table-top sellers paying that kind of interest to microfinance companies in Ghana?” he queried.
Total Rip Off
The mPedigree founder said that had Ghana borrowed $250 million over five years to buy the power plant-units and pay for the balance of plant auxiliaries, the total cost would have been $325 million and added that Ghana would have paid $360 million if the country used a contractor alone without engaging any broker like AMERI.
He said in the end, Ghana will pay $510 million, because it used AMERI as the broker, saying, “What is so damn difficult about seeing that a GREAT SWINDLE has taken place? Perhaps the worst such swindle of the last two decades?”
Cost Of Financing
There are two major aspects responsible for the confusion, Mr Simons claimed, and mentioned them as the cost of financing, as well as the integration of the unit plants into a whole called “balance of plant.”
“Because these are modular, compact, self-contained plants, the ‘balance of plant’ is also more or less turnkey and is available on the open market.”
He noted, “This is starkly different from what is the case when building a normal thermal plant. Dozens of projects examined show an average of about 10% of total plant cost going to balance of plant costing (for the Tm2500+) the balance of plant is often trailer-mounted and can be assembled in a few weeks.”
Mr. Simons said, “So we can put the ‘raw costs’ of the final AMERI plant at $250 million maximum based on open catalogue prices and not speculation.”
He said that a tough negotiator “can bring down the pricing as we have seen in Indonesia and Egypt, where per MW prices for some of these deals have gone as low as $500,000. Remember that in AMERI’s case we are paying more than $2 million per MW in capital costs alone!”
Mr. Simons said that General Electric (GE), which sold the 10 TM 2500 aeroderivative gas turbines with AMERI as the broker, had also sold thousands of these plants directly and through engineering partners.
He said GE has a massive financing arm that enables prospective customers to obtain advice on how to structure the financing for these plants, adding that Ghana should have taken that option and not use AMERI as a broker.
“These plants are designed for delivery during emergencies so GE is very familiar with the financing needs of customers pressed for time and short on cash, and can recommend solutions.”
“Ghana needed 10 plants, which are sold for $22 million each, saying we needed 256 MW and obviously wanted a financing option we could afford. So we went to a company called Ameri to put together a turnkey project that will help us procure the solution.”
He said, “Ameri went to a Turkish company called Metka, which bought the equipment from GE. Metka brought in an affiliate called PPL that supplied the components and engineering manpower used to integrate the plants into a single whole. The ground works were executed at Ghana’s cost by Engineers & Planners.”
Mr. Simons observed, “Ameri then signed an agreement with Ghana in which Ghana will pay for the plants over a period of 5 years in monthly installments of about $9.9 million. Ghana obviously also pays for the fuel and other operational and other servicing costs. Think of this as ‘hire purchase’, or what the taxi drivers call ‘work and pay’.”