Police in Montenegro issued international arrest warrants last week for the former CEO and CFO of power utility EPCG in connection with alleged abuse of office.
According to the police, EPCG former CEO Enrico Malerba and former CFO Massimo Sala defrauded the company “of several million euros” by signing damaging consulting deals.
Another former EPCG CFO, Flavio Bianco, was arrested earlier last week for his assumed involvement in the case. He will remain in police custody for 30 days.
All three former EPCG officials were appointed in March 2010 by Italian power company A2A, which bought a minority stake in the Montenegrin power utility in 2009.
Police reports allege that the three men concluded contracts with Italian firms A2A, A2A Reti Elettriche and BAIN-Milano without public procurement procedures and mandatory decisions of the board of directors, depriving EPCG of several million euros.
A2A bought an 18.3% holding in EPCG in September 2009 and raised the stake to 43.7% a month later, leaving the government with a 55% stake in the company.
The Italian partner had the option to build a majority stake in EPCG. In 2011, it relinquished the right to upgrade the holding.
In 2014, the two stakeholders agreed to convert EPCG’s tax debt into state capital. The debt-for-equity swap increased the government’s stake in the company from 55% to 56.96%, while reducing A2A’s holding from 43.7% to 41.7%.
The government and A2A have been trying to reach agreement on the renewal of a management contract since April 2015, when their five-year management deal expired. Even though they managed to settle differences on the expansion of the Pljevlja thermal power plant (TPP), which was the government’s key precondition for contract renewal, the two sides have not yet agreed on put option.
EPCG ended 2015 with a net profit of 10.8 million euros (US$12.2 million), down from 34.7 million euros (US$39.2 million) in 2014.