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World Bank may black list Veidekke

Veidekke's part in the Bujagali project may be at risk, after the disclosure that a former subsidiary, Nor-Icil, bribed the Ugandan Minister of Energy back in 1999. The Norwegian construction company may lose a multi-million dollar contract.
Artikkelen er mer enn to år gammel. Ting kan ha endret seg.
Veidekke's part in the Bujagali project may be at risk, after the disclosure that a former subsidiary, Nor-Icil, bribed the Ugandan Minister of Energy back in 1999. The Norwegian construction company may lose a multi-million dollar contract.


By Pia A. Gaarder
Norwatch

In addition, Veidekke risks ending up on the World Bank black list, over companies caught for corruption. Worst case scenario; the entire controversial power plant project tips over.

Rarely has a Norwegian company had the dubious honour of being mentioned in the Wall Street Journal, featuring corruption in one of its subsidiaries. It doesn't happen often, either, that the World Bank temporarely halts the handling of a the financing plan for an international monster project, on count of corruption carried out by a Norwegian company. Niether is it common places, that a Minister of Internal Affairs in a developing country investigates his own ex-Minister for having accepted briberies from a Norwegian-owned company.

However, all this have happened to Veidekke in connection with the Bujagali project in Uganda (See NorWatch, no 3/4 2002).

African media raises questions regarding the continuation of the cooperation between Veidekke and the US construction master, the greatest privat energy  producer in the World, AES Corp. Veidekke is one of AES' main contractors, and leads the syndicate that is to construct the controversial 580 million dollar power plant.

The Ugandan Minister of Energy, Syda Bbumba, has told the Kanyan news paper 'The East African' that, according to US legislation, an American company cannot do business with a company accused of corruption.

Financial crisis
The same news paper points out that AES Corp. is now experiencing such a financial crisis that the US company may choose to use the corruption allegations directed towards its main contractor as an excuse to pull out from the contract all together.

And the finacial crisis 'The East African' is referring to, is of some dimensions: According to The Wall Street Journal, the AES' share value has shrunk from 72 US dollars to a petty 4, since October 2000.

Even though the Bujagali project is described to hold promises of the moon and the stars for AES, it is questionable at this point whether the US energy giant does in fact itself have the ability to mobilize enough funds for the construction.

- Such a contract cannot be granted a company facing bankruptcy, said the Ugandan parliamentarian Ken Lukyamuzi.

The World Bank
One thing is certain: The World Bank handling of the so-called MIGA financing, worth 215 million US dollars, is postponed until the facts surrounding the corruption issue have been mapped.

It was an employee with Veidekke's then UK registered subsidiary Nor-Icil who paid a Ugandan official 10.000 US dollars in 1999. The staff-member left Nor-Icil one year later, the same year as the company was terminated.

The Guardian has identified the empoyee as former Managing Director Paul Hinks. Receiver was Richard Kaijuka, then Ugandan Minister of Energy, and up until recently vice-director of the World Bank's Africa 1 Group. Kaijuka has admitted receiving the money, but denies it having anything to do with corruption. He claims the money was payment for a job carried out by his son. Late August this year, Kaijuka however gave in for the criticism and quit his job in the World Bank.

It was after repeated corruption accusations and massive pressure from NGO's that the World Bank asked all parties to investigate extra thoroughly everything having to to with the Bujagali project. Veidekke found this incidence of corruption in Nor-Icil, and itself gave notice to AES.

GIEK support
The Norwegian guarantee institute for export credits, GIEK, this May decided to fund the Bujagali project nearly half a billion NOK. The export credit requires, however, that The World Bank MIGA funding is granted.

On direct question from NorWatch, Managing Director of GIEK, Erling Naper, said he cannot give an answer to whether or not a previuos case of corruption may have consequences for possible GIEK guatantees.

- GIEK allways demand in our undertakings that corruption have not happened. Our guarantee, in this instance, presuppose MIGA involvement. The entire question at hand thus lies with The World Bank. It is The World Bank that now has to find out whether or not this has influenced the project, said Naper. He cannot remember a single previous instance of corruption in connection with a project handled in GIEK.

The Black List
The World Bank black lists companies which have been engaged in corruption. Those who end up on this list are shut out from contracts financed by The World Bank. The exclusion may either have a time limitation or be permenent.

On the black list - according to The World Bank's own set of regulations - end up not only companies that have committed the criminal act, but also the mother company, and all majority owned subsidiaries of the black listed company.

According to NorWatch's understanding, a juridical conviction is not required in order to end up on this list. It is sufficient that The World Bank's own internal control procedure finds that corruption has taken place.

Open cards
NorWatch asked Veidekke how they viewed the risk of being black listed by The World Bank:
- We are calm. This concerns a limited case. Even if the allegations are correct, it has nothing to with the project itself. We stand with open cards, and have been met with positive responds to the way we handle this matter, said Concern Director Kai Krüger Henriksen.

Krüger Henriksen emphasizes the fact that Nor-Icil was into power lines, not power plants, and that the 10.000 US dollars payment took place before the syndicate that is to construct Bujagaly was established.

The question is whether the Energy Minister bribe has buttered the Ugandan decision making system, and thus opened doors for Nor-Icil's mother company, Veidekke, which in the end acquired the operator position in the syndicate.

Norwatch Newsletter 7-8/02

- Annonse -