During 2010, 2011 and 2012, Montenegrin Electric Enterprise (Elektroprivreda Crne Gore – EPCG) and the Italian company A2A arranged consulting deals worth €7.7 million, although those were mainly ordinary and regular tasks of the state energy company, performed by its special organizational units, such as financial or legal sector, MANS Investigation Center reveals.
According to earlier announcements, the government’s session where they will discuss new management agreement with A2A and conditions of extending the cooperation between the two companies is to be held today.
MANS has come into possession of some information on consultancy deals of the two companies and the documents raise doubt as to whether those jobs were supposed to be agreed at all, or whether they were the mechanism for drawing money from EPCG, where Srdjan Kovacevic is the president of the board of directors. EPCG has submitted the documentation to MANS, after the Agency for Protection of Personal Data and Free Access to Information decided in favor of MANS.
Six more consultancy deals, worth around €7.7 million, were arranged during 2010, 2011 and 2012, and according to the delivered material, EPCG and the Italian A2A S.p.A. have never concluded standard agreements on consulting services, but the services rendered by the Italian company on annual basis were precisely defined through email correspondence.
Table shows the value of agreement with A2A during a three-year period
The data show that during 2010 two deals on consulting services provided by A2A were arranged, both on 20 December 2010. The total value of the deals was somewhat over €2.3 million, where one was worth €1.4 million and the other €910,000.
The two parties refer to the basic management agreement concluded in September 2009, according to which A2A is obliged to contribute to the improvement of EPCG industrial performance. It further states that the state energy company, due to organizational matters and achieving greater efficiency in business activities, requested certain corporate services and support for key activities.
In 2010, A2A provided support in general management matters, including support for achieving corporate goals, support in relations with public and private institutions, coordination and management of business activities, then support in accounting, which involves preparation of financial accounts, processing and analysis for reporting to the management and support in planning, finance, internal audit, such as preparation of strategic plans, annual budgets and forecasts, ad hoc economic analysis, monitoring of the market, etc.
Also, A2A provided legal and corporate services, which included defining the legal needs of EPCG, its legal structure, preparation of main contracts, management of main disputes, followed by engineering, i.e. improving technical capacity of EPCG or creating new project initiatives, and, finally, services in human resource management, which included defining a new organizational structure, the transfer of skills and know-how.
The electronic documentation, which was treated as a contract, was sent by a former executive director of EPCG, Enrico Malerba to the headquarters of A2A and its director general Renato Ravanelli.
In 2011, there were two arrangements concerning the services that A2A provided to the state energy company, with the total value of around €3.1 million (the estimated value of both arrangements was one and a half million). Types of services were almost identical to those that had been contracted in 2010, email correspondence shows that the communication was also between Malerba-Ravanelli.
Model of consulting operations for 2012 had the same pattern – two deals, the same kind of services, communication Malerba-Ravanelli, only a different amount was in question. So, one consultancy deal was worth €1.2 million, and the other €1 million, giving a total amount of €2.1 million.
MANS Investigation Center does not have the information on consultancy deals between A2A and EPCG for the last three years, but EPCG financial reports indicate that the two companies had cooperative undertakings in at least two years. Thus, the report for 2013 shows the value of the contract was of €2.6 million, in 2014 it was €1.8 million, while the data for 2015 are still not publicly available.
In April this year, the Special Public Prosecutor’s Office arrested several leaders of EPCG for consultancy deals, as they were contracted without adhering to the required public procurement procedures, which EPCG is obliged to apply. Montenegrin members of the board of directors claimed earlier that before the beginning of 2014, they were not familiar with this business, although the company’s financial reports for 2012 are in contradiction with the claim, as the business activities with A2A for the given and the previous year are shown.
Italian A2A became a shareholder in EPCG in 2009, which was recorded as the year of the greatest financial crisis, with a recapitalization package worth around €96 million. Instead of investing the money in the reconstruction of the obsolete electricity distribution network and thereby reduce huge technical losses, paid by users disproportionately for years, A2A kept most of the money in Prva banka, owned by the prime minister’s brother Aco Djukanovic, thus saving it from collapse.
The Italians have not met the agreed indicators during the five-year period of managing the company, and negotiations on the continuing the arrangement have lasted a year and a half. Despite the bad experience with a foreign partner, the government has announced that it agreed on the model of continued cooperation with A2A, which could be adopted as early as this week.
MANS has pointed out several times that concluding consulting and legal agreements with affiliated companies is a known model of fictitious expenses, aimed at drawing money from the company.
In this regard, a reference to the basic management agreement between EPCG and A2A and providing majority of services that otherwise exist in EPCG are at least indicatory, especially that the Italians won the right to manage the company and improve its business performance by recapitalizing it, while the profit-sharing is based on their ownership shares, and A2A cannot be separately paid for managing the company…
Author: MANS Investigation Center
EPCG delivered agreements
As early as in September 2014, pursuant to the Law on Free Access to Information, MANS requested from EPCG to provide the consulting agreements concluded with the company A2A S.p.A Brescia, which the electric company refused on the grounds that it was commercially sensitive information and its disclosure could put the company at a disadvantage and jeopardize its own economic interests.
EPCG then stated that the cost of consultancy services was not a regulatory cost, i.e. it did not affect the price of electricity, which is why the public had no interest in being provided with that information. Furthermore, EPCG announced that it needed the approval of the other party, A2A.
MANS filed a complaint against such decision to the Agency for Protection of Personal Data and Free Access to Information, which recently canceled the decision of the electric company ordering it to provide MANS with the required information. The Agency explained that the agreements contained a clause which guaranteed the confidentiality of the data within 24 months from the date of providing the services, the deadline which has already expired.
Furthermore, the Agency determined that, because of transparency of work of EPCG, particularly because spending the revenues generated by the electric company was at issue, the public was interested into the information on its business activities.
Otherwise, in case of a dispute over the consulting services that A2A provided EPCG with, the Chamber of Arbitration of Milan has the exclusive jurisdiction.
