Donewell Insurance takes on AI Koot in response to PDS concession fiasco
One of the insurance companies at the center of the Power Distribution Services’ (PDS) concession agreement debacle, Donewell Insurance Company Limited (DICL) has welcomed government’s probe into the deal.
Government on July 30, 2019 suspended the concession agreement with PDS for distribution and sale of power in Ghana with immediate effect following what it said was the discovery “of fundamental and material breaches of PDS’ obligation in the provision of Payment Securities (Demand Guarantees).”
The Electricity Company of Ghana was subsequently directed by the Energy Commission to take over services provided by PDS.
DICL is said to have been issued two counter guarantees – the first was for the periodic payments required to be made by PDS under the lease agreement for the lease of the assets of ECG and the second for the bulk supply of electricity sold by ECG to PDS under the Bulk Supply Agreement.
A key component of the Agreement was to find an ‘A’ rated Standard & Poor’s company to reinsure the Guarantee and Donewell Insurance in a statement said it’s brokers, JoAustralia Reinsurance Brokers secured a cover from Al Koot Insurance and Reinsurance Company, an ‘A’ rated company in Qatar, in accordance with international best practices.
Energy Minister, John Peter Amewu, subsequently said investigations conducted by the government had established that some of the documents presented by PDS as a guarantee for the takeover were forged.
Government is currently investigating circumstances that led to the fiasco.
Donewell Insurance in a statement issued on Friday, August 9, 2019 insisted that “at all material times during this transaction, due process was followed and the company awaits the successful completion of the investigative process.”
It however took on Al Koot, a Qatar-based insurance & reinsurance company said to have denied knowledge of the existence of the guarantee in question despite allegedly benefiting from premiums from the deal.
“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.”
“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. Al Koot’s sudden denial of the fact that it is 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, is most unfortunate,” Donewell said in a letter issued on Friday, August 9, 2019.
MiDA takes on Al Koot
The Millennium Development Authority (MiDA) had also stated that Al Koot duly notarised the Guarantees provided by Power Distribution Service in accordance with Qatari law verifying their authenticity.
It said in order to ensure the enforceability of the Guarantees, MiDA insisted on having the Guarantees notarised, which was duly done.
In a statement dated August 8, 2019 reacting to the issue, MiDA stated that throughout the transaction, it followed all the necessary due diligence procedures at all times to ensure that the interest of Ghana was duly protected.
MiDA also welcomed investigations into issues surrounding the Guarantees and advised the public to be circumspect in drawing conclusions not supported by facts and evidence while investigations are ongoing.
Below is the full statement from Donewell Insurance Company Limited:
Donewell Insurance Company Limited (DICL) has taken note of the recent developments with regards to the Concession Agreement between [the] Electricity Company of Ghana (ECG) and Power Distribution Service (PDS). DICL as a stakeholder issued two counter guarantees – the first was for the periodic payments required to be made by PDS under the Lease Agreement for the lease of the assets of ECG and the second for the bulk supply of electricity sold by ECG to PDS under the Bulk Supply Agreement.
The Guarantee for the Lease Agreement was One Hundred Million United States dollars (USD 100,000,000.00) and that for the Bulk Supply Agreement was Two Hundred and Fifty Million United States dollars (USD 250,000.000.00). The premium received by DICL for both Guarantees was Seven Million United States dollars (USD 7,000,000.00).
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.
A key component of the Agreement was to find an ‘A’ rated Standard & Poor’s company to reinsure the Guarantee and DICL’s brokers, JoAustralia Reinsurance Brokers secured a cover from Al Koot Insurance and Reinsurance Company, an ‘A’ rated company in Qatar, in accordance with international best practices. Prior to the payment of premium to its Broker, DICL sought the requisite approvals from its Regulator to allow for the payment of premium for the reinsurance of the Guarantees which was duly made to the Broker through a Swift Payment to complete the process on March 21, 2019.
In view of the foregoing, DICL expresses its deepest shock at and disagreement with the allegations made by Al Koot in its letter dated July 16, 2019.
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. 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 16th April,2019.
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. Al Koot’s sudden denial of the fact that it is 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, is most unfortunate.
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 the circumstances, DICL as a responsible corporate citizen welcomes the decision of the Government of Ghana to investigate the allegations of fraud related to this transaction.
DICL further assures all stakeholders, including the good citizens of Ghana, that at all material times during this transaction, due process was followed and the company awaits the successful completion of the investigative process.
DICL reserves its right to commence Legal action against Al Koot and any other persons involved.
Signed:
DONEWELL INSURANCE COMPANY LIMITED