Donewell Insurance Company Limited (DICL) has expressed disappointment and dismay that Al Koot, a reinsurance company in Qatar, has denied knowledge that it has issued an insurance bond guarantee to Power Distribution Services (PDS) as one of the conditions for taking over some assets of the Electricity Company of Ghana (ECG).
“We state with great dismay that Al Koot has not been truthful in its communications with the ECG by stating that it was shocked and surprised to know of the existence of the said guarantee, when it had actually received premium for the guarantee and also requested a retrocession.
“It is unfortunate for Al Koot to further allege that its reinsurance manager did not have the capacity to act on its behalf when he had held himself out as having the said capacity to do so as far back as 2017,” Donewell said in a statement last Friday.
Giving details, Donewell said it issued two counter-guarantees to cover the periodic payments required to be made by PDS under the Lease Agreement covering the assets of ECG and the second for the bulk supply of electricity sold by ECG to PDS under the Bulk Supply Agreement.
It said it received a premium of $7 million for both guarantees for the Lease Agreement, which was $100 million, and for the Bulk Supply Agreement, which was $250 million.
The risk covered by DICL was premised on the assumption that should PDS be unable to meet its obligations under the Lease Agreement, ECG would call on the guarantee and the Bulk Supply Agreement.
It said a key component of the agreement was to find a Standard & Poor’s ‘A’-rated company to reinsure the guarantee for which Donewell’s brokers, JoAustralia Reinsurance Brokers, secured a cover from Al Koot Insurance and Reinsurance Company, an ‘A’ rated company in Qatar.
According to Donewell Insurance, prior to the payment of premium to its broker, it sought the requisite approvals from its regulator, the National Insurance Commission, to allow for the payment of premium for the reinsurance of the guarantees.
It said the premium was duly paid to the broker through a Swift transfer on March 21, 2019.
Why Donewell is surprised
Donewell, in the statement, was essentially surprised that after Al Koot had acknowledged the deal and written to the reinsurance broker, JoAustralia, to remit its share of the retrocession – premium paid by a reinsurance company to another reinsurance company to carry part of a risk being insured – it turned round to cancel the same agreement which it described as bad from the beginning (void ab initio).
“On February 26, 2019, Al Koot made a request to JoAustralia to arrange a full retrocession of its share/portion of the risk/guarantee; which request was acceded to by JoAustralia.
“On April 16, 2019, JoAustralia sent a credit note to Al Koot notifying the latter that in accordance with the mutual agreement between the two companies, JoAustralia had credited Al Koot’s holding (client) Account as per a credit note dated April 16, 2019,” the statement said.
According to Donewell, Al Koot’s sudden denial that it was not permitted by its constitutional documents to underwrite counter party and trade risk when it had in the past accepted such a risk imposed upon it by JoAustralia at the behest of DICL, was most unfortunate.
Besides, Donewell’s shock stemmed from the signatory to the guarantee bond, which Al Koot said its Reinsurance Manager, Mr Yahya Ali Al Nouri, had no capacity to sign, when in the past, the same person acted on behalf of the Qatari company in the same transaction without any objection from the reinsurance company.
“It is important to note that in an email dated July 22, 2017 sent by Yahya Ali Al Nouri, the Reinsurance Manager of Al Koot, in which Osman Hassan Hag Musa, the author of the July 16, 2019 letter was copied, Mr Al Nouri is designated as a signatory to the technical documents of Al Koot.
“It is surprising that subsequent to its denial of the knowledge of the existence of the said guarantee and the description of same as “void ab initio”, Al Koot decided to cancel the non-existent guarantee and its attendant retrocession in a letter dated July 31, 2019 on the basis of the non-receipt of premium from JoAustralia within a 45-day premium payment warranty.
“In view of the foregoing, DICL expresses its deepest shock and disagreement with the allegations made by Al Koot in its letter dated July 16, 2019,” the insurance company said.
The company said it welcomed the decision of the government to investigate the allegations of fraud related to the transaction and further assured its stakeholders and the public that it followed due process at all material times during the transaction.
The company also hinted of its right to commence legal action against Al Koot and any other persons involved.
The government has begun a full-scale enquiry into the suspended power concession agreement with PDS Ghana Limited.
The enquiry, according to the government, would, among others, establish who made false representations to the government to drive it into the agreement.
The suspension of the agreement had elicited statements from various interest groups, amid accusations and counter-accusations.
The PDS, for instance, said it did nothing wrong in the whole transaction.
A statement the company issued said: “The PDS has taken note of the statement issued by the government…. and wishes to state for the record that it had always acted and would continue to act in good faith at all times.”
The Millennium Development Authority (MiDA) also issued a statement that absolved itself from any blame over the suspension of the concession agreement.
According to MiDA, it subjected the ECG Private Sector Participation (PSP) transaction process by PDS, to careful scrutiny and various stakeholder approvals.
It indicated that several documents submitted for the ECG’s distribution and assets handover to PDS was clarified and scrutinised, as required for the transaction process.
“In line with best practice in International Business Transactions, all documents submitted as part of the transaction were accepted on the basis of good faith and the presumption in law as to their validity,” it said.
While the authority described the PDS issue as an unfortunate setback to the progress of the concession, MiDA , nonetheless, welcomed investigations into the matter.