Damning report shows EDP squandered hundreds of millions on suspicious contracts

Increasing a suspicion that energy company EDP looks good on paper but in fact is rooted in the management practices of its State-owned past, an audit has shown how and where hundreds of millions of euros have been squandered during the building of hydro-electric dams.

EY describes examples of poor management control in the construction of several dams, such as Baixo Sabor, Ribeiradio Ermida and Foz Tua, which entailed ‘deviations’ of hundreds of millions of euros.

An audit requested by EDP itself, revealed flaws, deviations and defaults in the construction of its dams.

The report by EY lists areas of deep concern, including the direct award of additional work, the use of factors not disclosed in the tender, payment of premiums to the builders even though they had failed to hit deadlines and the non-application of fines that were contractually due.

The audit was carried out at the end of 2017 at the request of EDP but has been kept in the bottom drawer since its publication last year.

EY’s work describes poor controls over the construction of several dams, such as Baixo Sabor, Ribeiradio Ermida and Foz Tua. The cost overruns alone have cost hundreds of millions of euros.

EDP says that it has begun correcting the flaws identified in the audit, claiming that most of the situations were already known to the management team following internal audits.

The company said that, “in 2018, EDP decided to hire EY to provide support in the implementation of some improvement opportunities identified in its 2017 work and reinforcement of controls.”

With an overspend of this magnitude and a demonstrable inability of EDP to manage many areas of its business, the public prosecutor will be interested in reading more about the contractors involved and their cosy links to senior EDP figures involved in the dam projects.