The Court of Auditors (TdC) today recommended to the Regional Government and the Madeira Electricity Company (EEM) to take concrete and global actions to safeguard the investment made in EEM-Biotechnology, after detecting several irregularities and high annual losses in this venture.
In a note, the TdC stressed that, as part of the audit, it found that the project, which began 15 years ago, recorded a “significant volume” of negative cash flows, amounting to EUR 57.3 million and high annual losses, of EUR 4 million since the start of the operation.
The body concluded that “the investment decision was based on insufficient reasoning and diligence,” and therefore recommended to the members of the current boards of Directors of EEM-Biotechnology and the Madeira Electricity Company, and the current Regional Secretaries of Equipment and Infrastructure and Finance “that concrete and global actions have to be initiated by the 30th of July 2023, to defend the investment made and to safeguard the underlying financial public interest, as well as to stake out the financial loss shown over the years.”
The project aimed to “enable the sustainability and energy self-sufficiency of Porto Santo through the production of biodiesel, using carbon dioxide (CO2) emitted by the Thermal Power Plant of Porto Santo, owned by the Madeira Electricity Company (EEM), in place of fossil fuel.”
To realise the project, EEM signed a partnership with the Spanish private entity BFS, assuming all investment and other obligations for the materialisation of the project, despite its minority position.
According to the TdC, EEM forwarded without guarantee 9.0 million to BFS, a company created two years earlier and with which it had no history of business relationships, for the execution of a work that came to be awarded three years later.
The investment, outside the competence area of the EEM Group, based on an experimental technology that was not the subject of scientific validation, was supported by financial projections with a high degree of optimism, despite the numerous uncertainties and the increased risk it entailed. The weak results of the initial production dictated the reorientation of the project for the production of dry biomass for the food and nutraceutical industry and the disinvestment in the biofuel production process, an inflection that diverted the project to a business area even further from the EEM group’s competence and performance centre and the objectives pursued ‘ab initio’ ‘state the TdC.
For the TdC, the operation of the industrial unit, which began only in 2019, was based on an “exploration model that perpetuated the dependence of EEM-Biotechnology in relation to the technological partner” and, 13 years after the creation of the partnership and the first disbursement of capital by the Madeira Electricity Company, uncertainty about the project is growing.
“As a result of the large investment, which reached 2021.54 million euros at the end of 2016, and the weak results in terms of production and marketing, EEM-Biotechnology’s economic and financial position was critical, accumulating 57.2 million euros of negative cash-flows and 13.2 million euros of losses (before taxes), amounts that condition investment recovery expectations and increase, the probability of any potential unevenness being recognised,” stated the TdC said.
Samantha Gannon
info at madeira-weekly.com
