Kumbor and Djukanovic's New Partner
New Alliance: Milo Djukanovic, Milan Rocen and Ilhen Alijev
Russians to Go, Azerbaijanis to Come
Can Igor Luksic's Government, which is expected to start negotiations with Brussels in June, afford itself another suspicious privatization and to bring to Kumbor, accompanied by all deficiencies of a tender process, the company with obvious transparency problems from the country that has its own corruption issues
Have Milo Djukanovic and Milan Rocen recently flown to Azerbaijan just to spread friendship among two countries? Or to exchange some experience with President Illhen Alijev, who succeeded his father and has everything under control in that oil and autocracy land? Or was it just business?
Is it accidental that, immediately after the visit of our government top to Baku, Azerbaijani national oil company SOCAR, which is actually run by President Alijev, suddenly appears as a main competitor for beautiful site on Montenegrin coastline – military base Kumbor, in the area protected by UNESCO. SOCAR's bid for Kumbor was the first in rank, which made American consortium NCH, which also placed a bid, to appeal.
SOCAR was never in tourism business, and Montenegrin government opened bidding to turn Kumbor into an elite resort, not to turn it into oil refinery or platform. Great oil refineries usually do not develop tourist resorts, because they earn huge amount of in their prevailing activities.
Transparency International, the world's famous organization for monitoring corruption, analyzed 45 world's biggest oil companies, which produce 60 percent of world production, to see how they relate to corruption. SOCAR is on the very bottom of that list (see scheme below), at 43rs place which can show that SOCAR is more likely to encourage corruption rather than fighting it.
Fair investor is the one who publishes and implements a policy of zero tolerance to corruption and within its internal procedures shows relevant program for fighting corruption.
Ministry of Defense opened bidding couple of months ago for 90 - year lease and managing the facility of Kumbor military base named Orijen Battalion. It's a unique site of unspoiled nature that spreads over 300 000 square meters of land and facilities.
As Monitor's interviewees' state, SOCAR placed a bid although it does not meet basic conditions for bidding. Azerbaijani oil giant did not buy tender documentation which was the precondition for bidding. Documentation was bought by the company Triangle which extended the deadline for submitting bids several times. Perhaps, Triangle waited agreement between Podgorica – Baku. Immediately after first extension of deadline for submitting bids, duo Djukanovic – Rocen left to Azerbaijan.
Company Triangle investments and development limited is so called Mickey Mouse company, absolutely unknown, registered in London few years ago with inscribed monetary capital of merely 100 pounds. Triangle's owners are Gafar Gurbanov, Azerbaijani and Metiv Guvenev, British of Turkish origin. One condition to lease Kumbor was that only experienced hotel company could have bidden for it or the one that has Letter of Intent written by reputable hotel chain that would invest in this protected site.
During opening of bids, objection of the main competitor – American fund NCH that SOCAR cannot be qualified because it did not buy tender documentation, was dismissed as technical. President of tender committee is ex Minister of Defense Boro Vucinic.
Tender Committee stated on the website of Privatization Council that SOCAR Bidding was correct. According to such interpretation, Triangle was the company that bought tender documentation on behalf of SOCAR. There is no evidence to prove it, claim NCH in its objections submitted to Privatization Council on 29th March. Even if Triangle had Power of Attorney from SOCAR during tender documentation buy out, it would not help them to qualify because it was not possible for one company to buy documentation and the other one to bid.
SOCAR did not submitted along with its bid, a "Letter of Intent or Contract on managing with reputable company that runs at least two hotel resorts of international standard with at least 4+ stars", which was clearly stated in tender propositions. However, SOCAR claims that it submitted a letter from company named Melia. But mentioned letter was not addressed to Azerbaijani Oil Company but to anonymous British Triangle.
On the other hand, Consortium NCH submitted a Letter of Intent from world famous hotel chain Marriot and as well from American hotel resorts Starwood that also run Sheraton Group. But that is not the end of illogical things. According to claims of the American representatives SOCAR did not submitted financial guarantees. NCH claims that legal representative of Tender Committee from Schonherr, during the opening of bids, not only that did not (although it is a common practice) inspect documents to establish that each required document was submitted but he also did not made any record of it. Does this mean that someone can subsequently enrich the bid?
First ranked Azerbaijani oil giant did not buy out tender documentation as precondition for bidding. Documentation was bought by anonymous company Triangle registered in Great Britain with inscribed monetary capital of 100 pounds, which extended deadline for bidding several times. Perhaps it was looking for a partner or some kind of the agreement from Podgorica-Baku. Duo Djukanovic – Rocen went to visit Azerbaijan immediately after first extension for bidding.
American consortium offered twice as much money for the lease, two EUR per square meter which is 27 million EUR more than bid from Azerbaijan, as calculated by Vijesti from Podgorica.
SOCAR offered considerably higher investments - 57, 6 million in first three years, total 258 million in eight years. NCH offers 36, 5 million in first three years, and 54 million in the following years, announcing more than 200 million for investments.
According to our sources, SOCAR does not have defined business plan and it is not clear in investment program how the funds will be spent. "SOCAR points out that it will invest 20 million EUR during the first year while the site is
being cleaned which costs only couple of million. The level of investments drops to 14 million in the third year when the resort is supposed to start developing. "It is not logical that the investor invests more in cleaning the area than in construction," says Monitor's associate included in business for this tender.
Perhaps the cleaning will cost more than construction because the best machines such BEMAX must be engaged. It is interesting that company that has no problems to invest 50 million EUR during three years offers only minimal allowed amount for lease. Amount for lease represents obligation that is not usually changed. However, investment program can be negotiated while obligations can be avoided. We have already seen in KAP and in other companies the manner of executing obligations from investment program.
SOCAR offer has no precisely defined ecology study, but it predicts creating of several artificial islands. It is obvious that such artificial islands seriously cause damage to natural surroundings in delicate eco system such as gorge of Kumbor.
SOCAR's offer does not have precisely defined ecology study but it predicts creating of several artificial islands which would seriously cause damage to natural surroundings in delicate eco system such as gorge of Kumbor. Besides, construction of artificial islands is exorbitantly expensive, therefore this attractive suggestion sounds more like a dream, megalomanic project similar to previous projects we are familiar with from drafts of strategic partners such as: Hotels AS, Fjord, Cane's ST Nicola.
In addition, construction of artificial islands is exorbitantly expensive, therefore this attractive suggestion sounds more like a dream, megalomanic project similar to previous projects we are familiar with from drafts of strategic partners such as: Hotels AS, Fjord, Cane's ST Nicola. Construction of an artificial island is not in compliance with the state's study draft of Sector 5 site published at Government's web šage.
In the end, SOCAR did not define social program. That is another disadvantage in their offer in the country whose citizens suffered huge damages due to unsuccessful privatizations. 23 million EUR loan for KAP which has to be paid by everyone is only the beginning of the long agony, bankruptcy Montenegro will be found into for the reason of suspicious business and partnerships.
During the previous years, Government of Montenegro provided excuses stating that disinterest of West companies is the main resons for which Montenegrin factories were privatized by means of unknown off shore ways and tyconns from the East, like Deripaska. Government has a choice this time and they could change the structure of foreign investors. According to our sources, American diplomacy has already been negotiating with Montenegrin officials regarding Kumbor. Final decision of the Kumbor privatization should be brought by Privatization Council led by Prime Minister Igor Lukšić, in the moment when ship is already on sale.
Can Igor Luksic's Government which is expected to start negotiations with Brussels in June, afford itself another suspicious privatization and to bring to Kumbor accompanied by all deficiencies of a tender process, the company with obvious transparency problems from the country that has its own corruption issues.
If that happens, in the midst of current privatization difficulties in Montenegro, Kumbor could become another case which confirms the rule – Djukanovic wants like-minded ones by his side and Luksic has the role of covering his jobs by democratic rhetoric. Djukanovic is only left with Azerbaijan, even Russians closed their door.
6th April 2012