In state secrecy mode
We must pay tribute to the courage and honesty of the Accounting Chamber. The publicly significant mission took place in conditions of limited access to financial documents on blue fuel. And, although it is not mentioned directly, the auditors found a way to identify the place of Energocom JSC in the national energy market. And also its intermediary role. Especially during the energy crisis that broke out.
According to the JV report, during the analyzed period, the purchase of gas, maintenance of insurance reserves in gas storage facilities and formation of unregulated sales prices “did not fully comply with the general regulatory legal regime”. Deviations, price and economic feasibility were dictated “from above” – by the Emergency Commission, the EBRD and on the fly regulations.
The external audit states that in some cases “procurement documents were incomplete, which reduced transparency and control over the transactions”. In addition, gas inventories were not valued at fair value, which affected the reliability of the financial statements. Thus, the JV auditors had to carry out the control taking into account deviations from the general and specific regulatory framework.
In addition, the mission was subject to the regime of “state and commercial secrets”. In other words, even those documents to which the auditors were allowed access were secret. All this was explained by “non-disclosure agreements and confidentiality established in the contracts for the purchase of natural gas signed by Energocom JSC and the contracted suppliers”.
The procurement case initially took such an important and secretive turn that in addition to the relevant Ministry of Infrastructure, the Ministry of Justice and the Ministry of Finance, the SIS and the Anti-Corruption Prosecutor’s Office, the Anti-Money Laundering Service, as well as a delegated EU expert for consultations with the government were involved in the procurement process. Then the authorities relaxed and did not even prevent “leaks” from appearing. But the secrecy was not lifted.
Alternative gas
What did the Chamber of Accounts manage to find out? Initially, natural gas purchases were carried out through the working group of the Emergency Commission. Thus, in deep secrecy, 5 tenders were held, which resulted in the conclusion of contracts with 5 operators for a total amount of 261.2 million lei for about 17.1 million m3 of natural gas. The process was controlled by the aforementioned agencies and services.
Then the austerity ended, and subsequently, the decisions adopted by the PMC specified the prices for the requested purchases, suppliers and volumes of natural gas. Thus, through 6 other decisions, Energocom SA purchased about 54.7 million m3 of natural gas and about 2 million MWh of gas in a total amount of about 4.5 billion lei.
From the EBRD loans, including re-borrowed tranches, 6.2 million MWh of natural gas was purchased for a total of 8.04 billion lei. These “acquisitions” of the operator were agreed upon by the bank’s experts’ preconditions.
Financial hub went into negative
The financial documents submitted to the external controller show that Energocom SA is not effective as a company responsible for the procurement of natural gas and electricity for the entire country. No matter how “diversified” and free of geographical dependence they are. Especially now, when the PE is inactive and the SOE ignores the tender procedure, which only it can win.
As can be seen from the reports, in the third year of procurement the enterprise went into a good minus. At the same time, the state did not hesitate to take its share of dividends from the missing profit in 2023 – 71.251 million lei. At the same time, the cost of sales at unregulated prices turned out to be lower than the selling price, which entails tariff deviations.
|
|
Revenue from sales |
Cost of sales |
Net income (loss) |
|
2023 |
17,221,464.80 |
17,396,017.80 |
-127.31 |
|
2024 |
14,879,289.20 |
14,173,038 |
74 858,100.00 |
|
Source: APP |
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The JV auditors were provided with financial information that showed that Energocom’s sales revenue increased 8 times from 2021 to 2023, but positive gross profit was not realized in any of the 3 years audited. This fact was mainly stipulated by selling below the purchase price/net cost of blue fuel and electricity. The Court of Auditors also noted that in 2021 and 2022, the “operating and financial income” accounts were nevertheless profitable – the company made a net profit. However, this trend did not continue in 2023 – auditors were shown a significant net loss of 148.4 million lei.
In addition, gas reserves were not valued at fair value, which affects the reliability of the financial statements. At the same time, the JV draws attention to the risk of non-recovery of the costs of creating and maintaining an insurance stock of natural gas from suppliers on the retail market due to ongoing litigation.
“The accounting of reserves amounting to MDL 541.4 million was not properly regulated after the end of the state of emergency. This creates risks to the quantitative and qualitative integrity of the reserves and may lead to difficulties in decision-making, especially in crisis situations,” the auditors said.
The company responded to the JV’s criticism of the chosen cost strategy by saying that maintaining natural gas reserves, diversification of sources and stability of supply depend on many factors. The costs of building safety reserves are covered by financial contributions from suppliers in the retail natural gas market. However, as of December 31, 2024, there were outstanding balances for 2022 contributions from one supplier in litigation with ANRE, which could generally affect the cost recovery mechanism.
“The formation of the unregulated price for the sale of electricity was in line with national regulations and contributed to the positive financial results. However, losses were recorded from the supply of natural gas at unregulated prices, as prices were set below the cost of production in order to avoid tariff increases for consumers,” explained Energocom JSC.
The Accounts Chamber was given an even simpler explanation. Losses from supplying “unregulated” natural gas were going to be covered within the framework of the Norwegian Nansen program, to the amount of about 34 million euros. Naturally – only in order to prevent a subsequent tariff increase for end consumers.
“Thermoelectrica and its subsidiary failed to meet expectations
The receivables of Termoelectrica SA, which arose as a result of the previous delivery of natural gas, with a nominal value of 1.3 billion lei, were transferred to Energocom from Moldovagaz SA. They promise to pay. Last summer, they agreed and signed a repayment schedule. But at the time of the transfer of the receivables in 2021, the value was not revalued.
The opening of the Romanian branch of Energocom SA in 2022 had no economic impact on the development of the company. This situation emphasizes “the need to review the company’s operational and financial strategies to improve economic and commercial benefits”, the JV said.
The purpose of this subsidiary was supposed to be the realization of gas through European pipelines. According to the explanations of Energocom JSC, in order to ensure the functioning of the company as a subsidiary operator with access to natural gas and electricity transmission systems in the region’s electricity markets, as well as to register on all stock exchanges and international trading platforms, it was necessary to replenish its authorized capital in an amount equivalent to about 19.3 million lei. But since Moldova is not yet a member of the EU, Energocom JSC could not do this directly. Access to the European markets hung up.
In three years, the subsidiary made only one test transaction, namely the purchase of 24 MWh of natural gas. It later sold them to Energocom JSC. It is not known how much it took for the services. The auditors recorded certain discrepancies in the financial information provided. They were not allowed to go any further.
In the period 2021-2023, Energocom’s capitalization with the help of the state budget reached 7.8 billion lei. Most of it was used to purchase gas. Alternative scenarios were realized with the help of a 300-million-euro loan from the EBRD. Not all the tranches of the loan have been disbursed yet. Also, in 2022, in accordance with the EC provisions, Energocom JSC was allocated financial means in the amount of 243.6 million lei in subventions to compensate the difference between the purchase price and the regulated sale price to the final consumer.
