Ministry of Finance clears the air

The Ministry of finance and Economic Panning (MOFEP) has refuted claims in yesterday’s edition of the Daily Guide newspaper that government is planning to privatize the ailing and capital-thirsty Tema Oil Refinery (TOR) In a press release, MOFEP questioned the authenticity and accuracy of the 7th September, 2009 letter reproduced by the paper. The release, signed by the Media Liaison of the ministry, Abdul Hakim Ahmed, averred that the Mandate Letter, dated 15th September, 2009 superseded the 7th September letter. The Heritage has learnt that in its desire to finally redeem the refinery from the current stranglehold of debt and save it from a possible financial apocalypse, the Mills administration explores globally for solutions. After a careful examination, government, through the Ministry of Finance and Economic Planning went into an agreement with Ecobank Development Corporation and Ecobank Ghana Limited to help restructure and re-capitalize the refinery, which has over the years been mired in ballooned debt and solvency problems. A letter dated 7th September, 2009 was initially written to firm up the agreement with the Eobank. This letter became the subject matter of the Daily Guide’s publication of the 24th September, 2009.

However, this letter was superseded by another letter dated 15th September, 2009, a normal practice in putting together agreements between different parties. The 15th September, 2009 letter mandated the Ecobank to lead the restructuring and manage the eventual floatation of the TOR on the Ghana Stock Exchange and not the selling of the assets of the refinery to any foreigner. By the agreement, Ecobank has been mandated to diagnose the problems of TOR and look for the needed capital to resuscitate it. The floatation on the Ghana Stock Exchange (GSE) is a long term plan to bring back to health the refinery, which for years has been buckling under the weight of a mounting debt. The GSE floatation, if at all it will happen, will take many years, and possibly beyond the tenure of the Mills administration.

According to the 15th September 2009 letter, Ecobank will assist in “establishing and confirming the true state of TOR’s current debt; arrangement and syndication of US$300 million or the Ghana Cedis equivalent to refinance the existing and the working capital requirement of TOR; arranging a US$300 million facility through the issuance of a medium term bond to strengthen TOR’s balance sheets; and arranging additional funds to make up for any financing gaps identified”.

According to the letter of 15th September, Ecobank will be paid US$1m for the entire assignment. 50 per cent of the said amount will be paid upon signing of the Mandate Letter and the rest upon disbursement of the working capital facility.

The letter asserts that each party in the agreement will agree that, “except by law, rule or regulation, it will not disclose the service or advice to be provided” to any third party, without the written approval of the other party.