“Participants remain the same although prices are growing”. Consequences of reforms in “Belenergo”

Earlier in 2021 Belarus officials reported about the recent reforms in the energy sector. On January 1 eleven repair and construction organisations were excluded from “Belenergo”. Market players supposed that such a decision might lead to transparent procurement procedures and allowed to decrease prices on repair and construction services at power facilities. However, as can be seen from a journalist investigation by the “Davaite razbiratsia” team, the reforms exist only on paper. In reality only certain companies are in business, for which services the budget pays extra.

Earlier “Belenergo” included lots of different state and private organisations, which were responsible for repair and construction works at power stations, power lines and heat pipelines. Thanks to membership in the state holding company, its participants can avoid public tenders and get contracts through internal procurement procedures within the holding. Thus, such procedures create preconditions for overcharges and exclude competition. Taking into account that maintenance and modernisation of the power sector cost billions of dollars, overcharges might reach extra millions.

Our Belarusian Investigative Center analysed services that JSC “Belkotloochistka” provided from 2016 to 2020. Although the company became private in 20211, it remained a privileged member of “Belenergo” holding.

In 2016 “Belkotloochistka” carried out a chemical cleaning of a boiler in Slutsk power station for 7000 belarusian rubles.

Our Investigative Center under the guise of a customer received commercial proposals from other companies which are not members of “Belenergo” holding.

One private company offered their services for the same work done for 3300 belarusian rubles and one state company for even less than that.

Other services provided by “Belkotloochistka” was cleaning of fuel oil reservoirs in Bereza power station in 2016. The state holding paid it about 142 000 belarusian rubles, whereas some other companies (not members of the holding) were ready to provide their services for almost three times less sum than that.

JSC “Belkotloochistka” claimed that extra profits are absolutely out of the question as one of its membership terms doesn’t allow its cost-efficiency to exceed 15%. However, the Investigative Center analysed its financial reports and came to the conclusion that extra profits exist. A Joint Ltd. “Alizi” and its ultimate beneficiary Valentina Zimenko gave “Belkotloochistka” expensive loans and let equipment, costs and expenses of which were then included in utility bills.

Another claim made by JSC “Belkotloochistka” was that they provide services of higher quality which explains its higher costs. Yet, the Investigative Center found out that it is far from true.

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Thus, in 2016 JSC “Belkotloochistka” dismantled a fuel oil reservoir with a total capacity of 20 000 cubic meters in Rogachev power station for 95 000 belarusian rubles, a third of which was supposed to be spent on decontamination and waste disposal. Nevertheless, as eyewitnesses said, “Belkotloochistka” simply trashed 100 tons of waste on Rogachev power station territory. Someone even reported to the Ministry of Natural Resources that conducted an inspection and failed to find any waste in the soil.

Then, the Belarusian Investigative Center entered the territory and took a photo of a huge fuel oil swamp visible to even an untrained eye.

Reforms

On January 1st 11 companies were excluded from the state holding “Belenergo”. Most of the companies are in “BelEnergoStroi Holding”, which in return is a member of “BelEnergo” Holding.

After these changes it was supposed to distribute contracts under a competitive liberal environment, which, in return, will lead to lower prices and less budget expenditure.

But in February 2021 Pavel Drozd, CEO of “BelEnergo” wrote to the Department of Energy with a request to invite companies from “BelEnergoStroi” holding and ex-members of “BelEnergo” to participate equipment procurement. Drozd’s rationale was that “the energy system needs more time to regulate its structural changes” and that this decision “would improve the reliability of maintenance of equipment, electricity stations buildings and constructions and provide quality and timely preparation of it for the cold season”.

Then Minsk Heating Network announced a tender for a boiler repair in “Masiukovschina” heating plant with a cost of 25 mln belarusian rubles.

One of the procurement criteria was having 5 years experience in the energy sector, thanks to which only “BelEnergo” State Holding members could participate in the tender.

The only tender participant who met the requirements to conduct work at “Masiukovschina” TPS was “Energotechprom”. Thus, the tender was cancelled and the contract was signed directly with “Energotechprom” as recommended by Pavel Drozd.

As can be seen from the reports the Investigative Center had at their disposal, “Energotechprom” carried out 2 types of work from those announced at the tender. They were diagnostics preparation and boiler diagnostics itself that cost 13 000 belarusian rubles. Our journalists analysed alternative business proposals and found out that such works can be done for 3600 belarusian rubles. Thus, the state budget paid “Energotechprom” 4 times more than market value.

Although JSC “Belkotloochistka” remains priviliged, in 2019 and 2020 during open tenders by “Belenergo” final contract prices appeared to be significantly lower than in the commercial proposal by “Belkotloochistka”.

Anyway, such open tenders are very rare. For instance, in May 2021 Lukoml power plant signed a contract with “Belkotloochistka” avoiding any open tenders. The company disposed about 100 tons of emissions for 50 000 belarusian rubles, which makes it 500 rubles per ton. The Investigative Center analysed the market and found offers for at least 2 times cheaper.

Sergey Gerasimovich:

“Judging by the tenders that happened after January 1, when private companies were excluded from the state holding, the system remains the same. Same market players and same high prices”.

“Belenergo” and “Energotechprom” refused to comment on the situation.

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