Powership follows corruption complaints in its wake
- The Turkish company which plans to moor floating power plants in three South African ports has been implicated in corruption scandals abroad, though it denies any wrongdoing.
- In Lebanon, he faces a $ 25 million fine for alleged commission payments to people with ties to politicians.
- In Pakistan, the company has been accused of paying bribes to strike a deal worth more than half a billion dollars.
The Turkish group Karadeniz faces controversies abroad which question the outcome of the South African tender for emergency electricity in which Karpowership SA, a subsidiary of Karadeniz, was selected as the bidder privileged.
AmaBhungane and others have already questioned the government’s handling of the tender. Below, we give two disturbing international examples, from Lebanon and Pakistan, in which allegations of corruption involving Turkish society have been raised.
The allegations are neither new nor secret, but did not affect the outcome if considered part of a due diligence of bidders.
- In Lebanon, Karadeniz is accused of paying commissions to a company linked to politically connected businessmen. Lebanon’s financial public prosecutor impounded the two ships it operates there as bail for a potential fine of $ 25 million.
- In Pakistan, a Karadeniz subsidiary is accused of paying more than $ 5 million to politically connected intermediaries to land a five-year contract worth $ 565 million. The deal was overturned by the country’s Supreme Court in 2012, sparking an epic seven-year legal battle and an ongoing corruption investigation.
In March of this year, Karpowership SA, a consortium led by the Turkish group, was announced as the preferred bidder and was awarded the largest share of the tender for the independent producer supply program. 2,000 MW risk mitigation electricity.
If its project reached financial close and removed remaining regulatory hurdles, Karpowership would dock electricity and gas storage vessels at three South African ports – Saldanha, Coega and Richards Bay. Their combined power will be 1,220 MW.
The tender was mired in controversy, with claims it was biased in favor of gas-fired options in general and Karpowership in particular. Rival company DNG Power, whose bid was rejected, claimed in court documents that the process was “corrupt and procedurally unfair.”
The Department of Minerals and Energy, which handled the tender, and Karpowership are defending DNG’s lawsuit, insisting they played along.
Lebanon: “commissions” and possibly a fine of 25 million dollars
While the controversy over the local offer of Karpowership SA has been unfolding in recent weeks, the Turkish group has also made headlines in Lebanon.
Like South Africa, Lebanon is plagued by a prolonged power shortage. He is also in the midst of a crippling financial crisis.
In 2012, Karadeniz’s subsidiary, Karpowership, signed a contract with the state-owned Electricité du Liban (EDL) to deploy two powerships totaling 404 MW; about 20-25% of Lebanon’s electricity supply.
The powerships have been in operation since 2013 and in June 2018 the contract was extended for three years.
Controversy has swirled around the rewards from the start, including concerns about their cost and temporary nature.
A study funded in 2020 by the World Bank said that the long duration of the emergency supply tariffs paid to Karpowership meant that “in hindsight it would probably have been cheaper to invest in permanent capacity, rather than to continue to pay high outright purchase costs “. .
In its annual report for 2019, Karadeniz Holdings, registered in Malta, reported gross profits from operations in Lebanon of $ 67 million (940 million rand now) and $ 89 million (1.25 billion rand) for 2018.
In December 2020, it was reported that EDL was in serious arrears, owed over $ 100 million to Karadeniz, who refused to be paid in Lebanese pounds.
Then in February of this year, the Lebanese TV show Yaskot Hokm El Fased (roughly translated as “down with the corruption rule”) released details of commission deals that were said to have been negotiated at the time the 2012 contract was concluded.
A central piece of evidence is a letter of March 28, 2012 titled “Advisory Services – Electricity Sale Agreement with MoE / EDL”.
The letter bore the signature of Ralph Faisal, an engineer who represented Karpowership’s interests in Lebanon and who Lebanese media say is close to politicians. It was addressed to Fadel Raad, an alleged associate of the Minister of Finance at the time of the Karpowership Agreement, Mohammad Safadi.
The letter referred to “our last day’s discussions regarding the tender” between Karadeniz and EDL and “the advisory services you plan to provide us on this project, including improving the commercial and financial contractual conditions ( including environmental consultancy services) which are necessary to shape our offering and the ensuing electricity sales contract “.
The letter stated that Raad would be entitled to a commission of $ 0.08 per kilowatt hour if Karadeniz won contracts for the Zouk and Jieh ports (which he did) and half that amount if he did not obtain only one ship, in Zouk. The cost of the electricity supplied by the ships, excluding fuel, was approximately $ 0.50 per kilowatt hour.
Commissions can be legal, but they raise red flags, especially when they are secret, and can become illegal if they are intended to exert undue influence over public officials.
This particular commission agreement appears to have gone through various iterations and was subsequently changed for a fixed amount. In an amended letter of agreement from June 2012, the commission was $ 5,650,000 (around R80 million now). By January of the following year it had changed again, with the letter now stating that “you will be entitled to a royalty of $ 3,550,000.”
The reports have apparently prompted action. In March, financial prosecutor Ali Ibrahim, whose function is similar to that of an examining magistrate, requested arrest warrants against Faisal and Raad.
At the start of last month, Ibrahim ordered the Lebanese Ministry of Finance to suspend further payments to Karpowership pending a potential fine of $ 25 million against him for corruption or bribery. He also ordered that the Karpowership ships be held as surety. Lebanese customs authorities and security forces have been ordered to prevent ships from leaving Lebanese waters.
Ibrahim’s order, in Arabic, referred to a preliminary investigation by Ibrahim’s office and also an anti-corruption pledge by Karpowership in July 2012.
Signed by Karadeniz Chief Executive Officer Orhan Karadeniz, the undertaking attested that “neither Karpowership … nor any of its directors, employees or agents … has offered, given or promised any material benefit” for the purpose of influencing public officials.
“In the event that a violation of this letter of engagement is proven before a competent Lebanese court … we undertake to pay USD 25,000,000 … as pre-awarded damages to the government of Lebanon in addition to the sanctions applied in accordance with to Lebanese law. “
In response to Ibrahim’s order, Karadeniz warned the Lebanese authorities to revoke the boarding of her ships and settle the arrears or she would cut off the country’s electricity supply.
Karpowership Managing Director Zeynep Harezi told a Turkish news agency that “the company’s assets, reputation and business… are at risk due to the illegal and unfair payment demanded by Lebanese local authorities.”
“We have informed the Lebanese authorities that we will stop the supply of electricity if this situation, which lacks a legal basis, is not reversed.”
On May 14, Karpowership followed through on its threat by shutting down the generators of the two ships, citing the $ 100 million it is believed to be owed in Lebanon.
In the weeks that followed, Yaskot Hokm El Fased released leaked voice recordings in which Faisal, Raad and a nephew of Safadi, the former finance minister, can be heard discussing commissions. The recordings also involved Gebran Bassil, who was Minister of Energy and Water at the time Karpowership initially made the deal with Lebanon.
Bassil later claimed that the show “distorts the truth”, including alleging that the discussion mentioned “commissions” when what was discussed was “tensions”.
Safadi distanced himself from his nephew’s actions, alleging that his nephew was using his name without his knowledge.
Faisal, who was arrested alongside Raad following Ibrahim’s request for arrest warrants, reportedly denied any wrongdoing and said the tapes were taken out of context. His lawyer was quoted as saying that the prosecution was being conducted “on the basis of recordings made and edited … with the intent to blackmail”.
In a statement, Karpowership affirmed its “full confidence in Mr. Ralph Faisal”. The company called on the Lebanese justice system to prioritize the case to end what it called a campaign of “extortion and defamation”.
Faisal is said to have fled the country after being released on bail.
It was not the first time that Karadeniz had been trapped in allegations of corruption. He had already spent years pushing back similar allegations in Pakistan.
Summarizing the allegations in Lebanon and Pakistan, amaBhungane told the Turkish firm’s public relations team that it appeared that Karpowership had a habit of entering new markets by paying significant facilitation fees to politically exposed persons, which could be interpreted as corruption.
The company responded, “It’s unfortunate that you only consider very limited parts of the events rather than the whole picture using the set of facts already provided.
“Your claims are completely incorrect and unfounded, and Karpowership rejects them in their entirety. The facts are that Karpowership SA won projects because we provided the best combined package of affordability, cleaner energy, proven technology and economic development initiatives. “