Foreign and local businesses for ten years have benefited hundreds of millions from Kosovo Energy Corporation (KEK), often by selling this corporation depreciated equipment for new ones, but also by providing services and energy with prices multiple times higher than the market one.
As part of this research, where over 500 public tenders issued by KEK have been reviewed, in the amount of 550 million euros, the beneficiaries of which were 200 local and international companies, it comes out that companies have continued to be rewarded with million-euro tenders, despite the fact the equipment they sold to KEK became defunct within a very short period of time. Among these, there are two companies which are the biggest beneficiaries in KEK, “Eco Trade” of Zhugolli family from Podujeva, and “Intering” of Shoshi family from Banja e Pejes.
Also, “Preportr” has compared the list of penalties issued by KEK in 2010, and the list of 200 biggest beneficiaries. From these 200 companies, 25 of them have been penalized by KEK, whereas 18 of them, despite the penalties by KEK, have continued to benefit in tenders worth up to 1 million euros. Among these penalized companies is also: “I & A sh.p.k” of Zhugolli family.
Information obtained by this research carried out by “Preportr” also show that even when KEK generated sufficient energy for national consumption, it was forced to shut down its own generators in order to fulfill the contracts for energy import, which was bought from Serbian companies with prices much higher than the market ones.
KEK imported energy with prices much higher from companies, a part of which were Serbian companies, which quite often have been called “Ballkan energy mafia”. But despite the warnings by internationals and locals that there would be measures against Serbian “obstructions”, up till today no such action has been undertaken.
Among the biggest beneficiaries in KEK are Serbian companies together with two local companies, that of Zhugolli family from Podujeva, and that of Shoshi family from Banja e Pejes. In the first year of this government, in 2008, Njazi Thaçi signed the biggest contracts ever awarded for energy import, in the amount of 51 million euros, which were mainly given to Serbian companies. Through another contract, the state Serbian company “14 Octobar” benefited around 50 million euros for the supply of KEK with equipment for the transport of soil and lignite, which became defunct a few weeks later. Part of the consortium in this tender was also “Eco Trade”, property of Zhugolli family from Podujeva, which despite failing this tender, continued to win tenders, even reaching huge amounts of money, estimated around 170 million only from KEK, an amount won only during 2007.
Two clans of KEK and their international friends
It was 2007 and the Democratic Party of Kosovo (PDK) of Hashim Thaçi was preparing to come to power. In KEK, “the champion of tenders” which undertakes over 30% of the value of all procurements done in Kosovo, the office of procurement was led by the cousin of the Prime Minister, Njazi Thaçi.
The public investments, money from the budget of Kosovo allocated in the form of subsidies carried out in this corporation ever since after the war, exceeds the amount of 500 million euros. Only the large tenders since 2007, which “Preportr” has researched, 200 companies have been awarded with tenders, which amount to around 550 million euros. The political interference is inevitable in KEK in the largest part of investments, being that companies which have failed investments worth millions of euros have never been troubled and they continue to do business with this public company. The public procurement at KEK has awarded companies of certain families with tenders which are valued at more than 240 million euros. Various auditing reports show that KEK is loaded with scandals. They have been confirmed also by investigators of the European Commission, but were silenced by justice.
Since coming into power, PDK has been closely linked with million-euro tenders in KEK, on one hand through prime minister’s cousin Njazi Thaçi who till late led the office of procurement in KEK, and through the ex-director of Public Procurement Agency (APP), Ilir Rama who now works in KEK, and on the other hand through the companies of Zhugolli family from Podujeva.
Photo by: Lorik Bajrami
Zhugolli family has benefited from KEK only in 2007 around 170 million euros from the big tenders, an amount obtained together with all the consortiums, companies registered in Kosovo and its international offices. On the other hand, Shoshi family from Banja e Pejes, with all its companies has benefited in the amount of 70 million euros through tenders won in KEK.
The Zhugolli family has another connection with the party in power. Bejtush Zhugolli, who owns the companies “Pejton” and “I & A sh.p.k”, during the electoral campaign of Prime Minister Thaçi’s party in 2009 officially donated 900 euros.
Bejtush Zhugolli, financer of PDK appears to be even more powerful than his brothers regarding tenders in KEK, which till late was led by Prime minister Thaçi’s cousin, Njazi.
The inability to fulfill the contracts won with the company “I & A sh.p.k” does not stop Bejtush Zhugolli to win other tenders from KEK. Only during 2010-2011 he won tenders worth 4.1 million euros with consortiums in KEK. Despite being penalized in 2010 for not fulfilling two contracts, in 2011 he was awarded with another three contracts, the value of which is more than 1.5 million euros.
The two leading families with tenders in KEK, Zhugolli and Shoshi come together in the tender of 2008 in the value of 70 million euros for the replacement of lignite transporting bars from Sibovc, an investment for which ex-minister of Economy, Ahmet Shala had considered to be one of the biggest projects in the last two decades, an investment that failed one night before New Years’ Eve of 2010. Part of this tender, through a consortium with “Eco Trade” is also “IMK 14 Octobar” from Serbia, whereas the other part, in the amount of 22 million euros has been won by “Intering” of Shoshi family together with “Magdeburger ForderantagenUnd Baurnaschinen GmbH”. KEK has continued to award these companies of Shoshi and Zhugolli families without the least hassle, even after failing the investments mentioned above.
It is interesting that even “Eco Trade” but also “Intering”, as biggest beneficiaries from KEK have something in common. There are cases when, for example, “Intering” of Shoshi family is involved in consortiums with foreign companies, representative of which is “Eco Trade”. “ThyssenKrupp Fördertechnik”, according to the official website, is represented by “Eco Trade” of Zhugolli family, but has won tenders with “Intering” of Shoshi family, as the case with the Rehabilitation of Bloc A4 in an amount of 8.7 million euros in 2006. The rehabilitation of one bloc of Kosova A in 2006 failed only after ten days when ex-minister of Energy Et’hem Çeku and ex-minister of Justice Januz Salihaj had inaugurated this investment. It was never made clear whether the investment which failed ten days later was the one implemented by “Intering”, because KEK does not have or does not want to give information on tenders before 2007. However, the reportings of the media on June 2007, and those obtained by “Preportr” show that during this period, this was the only investment of this extent on the rehabilitation of blocs of Power Plant “Kosova A”. No one gave accountability for this failure either.
On another tender during 2008, “Turbo Care” from Poland, partner of “Intering” of Shoshi Family, sold KEK a transformer at the price of 3.7 million euros. This transformer broke down in less than three hours. It was bought second-hand, although a Bulgarian company had offered KEK a new transformer with the same characteristics at the price of 800 thousand euros. This interest group has continued to win tenders in KEK even beyond this scandalous failure, and up till now no legal action has been undertaken to recover this damage. KEK, in answers provided for “Preportr” regarding the question whether there is a legal proceeding against the company, only confirms that it has initiated such a proceeding, but it never provided any document which proves such a proceeding against the company which wasted 3.7 million euros. Surprisingly, this contract was not found even in the public notices on the official website of the Regulative Commission of Public Procurement (KRPP).
They pretend in the corporation, that due to the damage caused to KEK by “Turbo Care”, an arbitration court has automatically initiated a lawsuit against this company. Initially, the media statement by the official, Eglantina Hoxha claimed that since the transformer had failed, KEK would buy another one from Konçar company, and measures would be taken against “Turbo Care”. This never happened, and “Turbo Care”, together with its partner, “Intering” of Shoshi family continued to be awarded tenders from KEK, such as is the case of the tender on the capital repair of the steam turbine and the electric generator in Bloc A3, at the amount of 3 million euros. In the same tender, on the second Part, the partner of Turbo Care, Intering wins around 9 million euros for the capital repair of boilers.
Prime Minister Thaçi’s family, on the other hand, is linked to the tender on the sale of lignite. “OVE Group”, property of Visar Bajinca from Macedonia, is the company whose appeal cancelled the tender on the sale of lignite announced this year, which is still under procedure, cancelled lately due to the lack of responsible bidders. Shareholder of the company, when it was named “BOXON” was also Milaim Cakiqi, a businessman from Drenas, who appears to be a shareholder in some businesses with the younger brother of Prime minister Thaçi, Blerim. Cakiqi, according to the reporting of JNK newspaper, currently has a complex of buildings constructed by “Iliria Building”.
Visar Bajinca is also the contact person in another company from Tetova, “Polog”, a company which won 2 tenders in KEK in 2009, at the amount of 140,240 euros.
Another important family in PDK is beneficiary in KEK. The family of Deputy Shaip Muja, through “Doni” and “Ci-Kos” companies, property of Fatmir Muja, is contracted for the sale of scrap in KEK, where the Office of the Auditor General found a series of irregularities.
According to investigators of the European Commission (OLAF), Fadil Ismajli, now chief-executive of KOSST is in conflict of interest as regards the public tenders worth millions, won by “Komtel” company where he is co-founder with Vegim Gashi. The latter was a candidate of New Allicance for Kosovo for the mayor of Prishtina, a party of ex-president and Kosovar multimillionaire, Behgjet Pacolli.
Investigators of OLAF did not “spare” even ex-businessmen, now parliamentarians of the Kosovar opposition. According to the investigators, the concession of the Kozhner Hydro Power Plant (Lumbardhi) had been carried out with irregularities. It was given to “Triangle” company, which even in the declaration of wealth for 2012, Vetvendosje deputy, Florin Krasniqi himself declared that he still holds 25% of the shares. Krasniqi himself had once declared publicly that nothing can be done in Kosovo without bribes.
Even before PDK coming into power, the corporation was a haven for abuse of funds amounting to tens of millions, although up till 2010, the corporation had been audited by the Auditor General only once, back in 2005.
Siphoning off the money through one-source tenders
According to work reports of the Public Procurement Agency (APP), now changed to Central Procurement Agency (AQP), apart from procurements in general, KEK is also the corporation championing in one-source tenders. This method of giving one-source tenders has been constantly criticized on the Progress Report as a method which leads to tenders with a risk of favoritism.
At the time when the Procurement Office in KEK was led by Njazi Thaçi, Ilir Rama had been appointed as director of APP, and he staid in this position up to July 2010.
After leaving his position in APP, having served for one year and a half as acting director, despite being in violation of the law on holding the position of acting director only up to six months, Ilir Rama was hired in KEK as procurement officer.
Based on the data of KRPP from 2007 to 2011, Rama had proceeded 26 one-source tenders in KEK, compared to the time when he was not director at APP, when KEK had proceeded only 6 such tenders. Rama was head of APP for one year and a half (2008-July 2010). Now, when the new legislation in power which allows the institution to undertake one-source tenders without the permission of APP, KEK only so far in 2012 has proceeded 15 one-source tenders.
Photo by: Lorik Bajrami - The loss of the overall generated energy in Kosovo is estimated to reach 40% due to technical and commercial reasons
On a response for “Preportr”, Rama denies any links on the larger number of one-source tenders proceeded for KEK when APP was led by him, compared to when APP later on was led by Mursel Raci. Rama and the management of KEK say that he was degraded from the position of APP director to a procurement officer in KEK.
For them everything went “OK”, since Ilir Rama was accepted in KEK through a public vacancy announcement and he was the best of all applicants. They say the same in APP as regards the employment of Njazi Thaçi’s cousin, Libona, once assistant director for Ilir Rama, and now advanced in the position of procurement officer in this institution.
For them, there is no connection between these movements, despite the fact that since Ilir Rama left APP, the number of one-source tenders in KEK has been reduced considerably.
“As regards the reduction of request approvals in KEK, the perception of much and little are much more an issue of rumors and misjudgments, because the number of approvals is calculated in relation to requests initiated during time periods, and not in relation to numbers”, ex-director of APP states, now employed at the tenders in KEK.
After Rama’s involvement in KEK, Njazi Thaçi was advanced from chief of procurement, to the position of operative director of the company, which has constantly played a role of deputy director of the corporation as well.
Balkan Energy Mafia
Serbian companies are beneficiaries of around 400 million euros in KEK ever since after the war, including here the purchase of electricity which account to over 365 million euros, but also other tenders.
OLAF found suspicious links at tenders of Serbian importing companies of energy, which since 2000 mainly appear with names “Rudnap” based in Belgrade, “Geni” also from Belgrade, and “EFT” based in London, but with roots in the Serb state.
According to European investigators, KEK and Serb companies have undertaken suspicious transactions. For the purposes of these transaction, “Artesia Bank” based in Greece has been used, naming businessman Vuk Hamovic as beneficiary. Payments in this bank ended also for companies “EPCG”, “EFT” and “Rudnap”, which according to OLAF are considered as the Ballkan energy network. Moreover, according to this investigation, suspicions are raised regarding links between “EFT” and “Rudnap”, which are led by the same group of businessmen, including Vuk Hamobic, Vojin Lazareviç and James Nye. Apart from “Artesia Bank”, Hamovic and Lazarevic are also partners in “EuroAsix” bank, based in Belgrade. Shareholder in “Rudnap” is also businessman Damir Fazllic, who is accused for economic crimes in the Ballkans, whereas in Albania, the opposition accuses Prime minister Sali Berisha for being close friends with Fazllic.
In these benefits reaped by Serbian companies, the annual damage by the Serbian state to Kosovo through additional tax restrictions in the transmission network, estimated at 10 million euros, is not included, a damage published by Fadil Ismaili himself, chief executive of KOSST. In the presence of Besim Beqaj, Minister for Economic Development, Ismaili accuses Serbia for, as he calls it, Ballkan energy mafia, and the Minister guarantees that he would denounce this state at the respective mechanisms. Although it is been a year since these statements, it is not known whether anything has been done in this respect. It is almost a year also since the statements of KEK Chief Advisor, Masoud Keyan that he is planning to appeal in Vienna against Serbia for deforming the price of energy that kosovars import, since this could be in violation of the rules of the Community of Energy. He did not want to answer “Preportr” whether he realized his plan to appeal, or whether KEK ever appealed in the Secretariat of Energy Community.
Photo by: Lorik Bajrami - The distribution was sold at 26 million euros to the consortium Limak-Çalik from Turkey. This sale was considered to be at a very cheap price
Responsible persons in KOSST have also avoided questions by “Preportr”. They say that since 2007, they do not publish information regarding the entry point of imported energy, whereas public reports mention mainly the transmission with Serbia, although this costs Kosovo multiple times more due to additional rates that this country apples towards Kosovo, which is also admitted by officials of KEK. Kosovo imports energy from companies at a price of 75 euros per megawatt, whereas one MW at KEK is generated at a cost of 27-30 euros.
The transmission with Montenegro is mentioned to have gone in repair much often, and it is not excluded that within the year it could have been repaired more than once.
Taking down power plants in favor of import
According to international advisors in KEK, the reason why this corporation in 2008 bought the most energy, more than 51 million euros, was due to Prime minister’s cousin, Njazi Thaçi.
In an internal report of 2008 of PA company, contracted by USAID as consulting company for KEK, it is concluded that after a few months of tricks played by the procurement chief of KEK, which the report names as “a cousin of the Prime minister”, and after the Ministry of Economy and Finance reassured that there were funds, a tender was announced to purchase energy for the period October 2008-March 2009. “Prices were 20% more expensive than in previous tenders”, the report concludes.
The report by PA makes a serious accusation against the management of KEK. This report mentions that in November of the same year, KEK had a surplus of production even beyond the 24 hour supply, due to the good weather. “Nevertheless, KEK had to shut down its generators because of the contracts signed for the import of energy from importing companies”, says the report.
According to this report, the contracts which are mainly signed with Serbian companies by the hand of the cousin of Prime Minister Thaçi obliged KEK to pay, despite the fact that in reality it never used this energy.
The investigators of the European Commission had found out that KEK began to go astray starting with a fund of 5.4 million euros donated by AER through UNMIK for the employees of KEK, which at the and according to investigators of OLAF, went into the hands of Joan Pierce and Mott McDonald.
OLAF raised suspicions even for one-source tenders won by the French company “Allstrom”, the German company “Siemens” and companies “Swedpower”, “Wattenfall”, ‘ESBI”, “Llyr Rowlands”, etc.
On all of these and other issues raised by the investigators of OLAF, a few days ago the Italian newspaper “La Republika” also wrote. The newspaper writes that the European Parliament suspected on massive abuse of international funds for the Energy Corporation of Kosovo and Prishtina Airport. This is about 11 files related to the investigation concerning the destination of 3 billion euros of finances for the reconstruction of Kosovo. These two subjects, KEK and the Airport have been the biggest beneficiaries of the 3 billion euros of international funds which were given by donors in the accounts of UNMIK.
According to the article, EULEX is hindering the provision of complete information, especially regarding KEK. A request for explanation handed over by the European Commission to Oli Rehn, Enlargement Commissioner in 2008 never saw a reply, up to the termination of his mandate.
EULEX did not have an answer even for “Preportr”, when asked whether investigations are under way regarding the suspicions for abuse in KEK.