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LETTERGATE: Could Costs Efficiency lead to unfair dismissal? Aenergy’s Ricardo Machado shares his side of the story

5 December, 2019

LETTERGATE: Could Cost Efficiency lead to unfair dismissal? Aenergy’s Ricardo Macdo shares his side of the story

Dear RiA-der!

Como você está? It has been a little while I have not reached to you? LOL. What are you planning for Christmas? In Tiyou’s house it promises to be busy…just like every Christmas😊

Since we started the RiA journey, I’m regularly saying that we are going from adventure to adventure. Finding ourselves in paths we will not have envisaged before but hey, this is the nature and beauty of the job to Bring (Back) Power to Africa.

Something rather extraordinary happen to me on Wednesday. I received a rather detailed email from Ricardo Machado, CEO of Aenergy that we featured early on in our platform. Why is it extraordinary? Let me first of all set the context. I met the company via the introduction of a reputable PR agency and I had the opportunity to act as an MC (Important to specify on pro-bono basis) at the side event they organise during AEF 2019. The company and people I met were very impressive and focused in their job. Taking and tackling climate at their level very seriously. We interviewed Ricardo at the time and it was very pleasant to hear more about the meteoric rise of this 7-year old company full of energy and desire, ready to serve Africa, just like their CEO. So far so good.

I was then surprised to learn through the media in September 2019 that the company lost all contracts with the Angolan government due to issue of misappropriation of funds. Rather surprising as we know the company was the first African company to win the Anti-Corruption Certification ISO 37001. It sounded very bizarre to say the least.

Even more surprising was then the email I receive from Ricardo himself. I read it carefully and the least we could say is that some elements are very troubling. In a nutshell, Aenergy believes and providing evidences demonstrating according to them that their dismissal is rather unfair and abusive and seem to be mainly based to false letters shared shared at an infamous meeting in December 2018.

Just so that it is clear, RiA is clearly not picking a side however as the African Clean Energy Champion, it is our duty to promote good business relationships and practices. In the interest of the whole industry, we have decided to share in his entirety below, the redacted email received from Ricardo.

Should the other parties decide to also respond and share their side of the story, we will be glad to do so.

PS: Please do note that document has been redacted in order not to publish emails addresses and respect privacy laws.

EMAIL FROM RICARDO MACHADO

Dear Tony,

The original version of email bellow is in Portuguese but translated to English for your reading.

In the following email Aenergy describes the evolution of the company and is completely transparent providing the necessary facts to abolish the false accusations upon us.

Aenergy is accused of misappropriating state money when in reality, since 31/08/2019, Aenergy has been unlawfully barred from continuing to provide its services to Ministry of Energy, being creditor of this institution in over $112 million dollars, and also the amount of the 4 additional turbines, requested and approved by President.

Since its inception, Aenergy has always fight to defend transparency and anti-corruption practices implementing itself the needed procedures and mechanisms and introduced efficiency business practices on the ground, translating, since the first moment, in value added solutions for its clients, i.e., selling equipment’s at competitive prices that led to a reduction of 46% comparing to competitors cost of construction and exploration of similar thermoelectric power plants in Angola. This situation exposed a lot of installed interests in the market, since a reduction of 46% per MW/contracted meant a saving to the Government of Angola of more than 200MSD based on the MW installed by Aenergy in the last 2 years.

This email contains the following documents:

File Email RM JBB – investigação, this email of March 6,2019 with the subject “Aenergy: Meetings MINEA – Clarification of letters presented by CEO GE ANGOLA” to the Minister of Energy and waters, describes a meeting with a GE representative that claimed to have in his possession two letters allegedly from ENDE and PRODEL, regarding the agreements between AEnergy-ENDE and AEnergy-PRODEL (in the version of the GE Angola representative), implying that letters had been handed to him by Aenergy and had been instrumental to the GE Capital Credit. In January this year, MINEA was formally notified for a request to investigate and clarify the existence of the letters referred by the representative of the GE Branch Angola and accountability of its author.
File The Wall Street Journal_07.10.2019_Sublinhado2, news from the wall street journal where it is highlighted 100 million dollars of sales prematurely booked to a customer in Angola.
File Preços Centrais Térmicas Angola 2019.11.29 summarizes a benchmark study between Aenergy and other companies to compare total cost of construction and average cost of MW. Concluding that the Government of Angola had a cost reduction of 252 651 637 USD when contracting Aenergy.
File Oficio_Minea11jan2019 request to the Minister of Energy and Water to intervein and trigger the necessary legal and judicial due diligence for the letters mentioned in the file Email RM JBB – investigação.
File MINEA_LDA_EAE_REF.0057-DNEE-MINEA_20170627_Inauguração2 letter of 27 June 2017, request from the then National Director of Energy, now Secretary of State for Energy, António Belsa da Costa, for AE to enable the inauguration of the Quileva thermal power plant.

Ricardo Leitão Machado

De: Ricardo Machado | Aenergy
Data: segunda-feira, 2 de dezembro de 2019, 22:19
Para: Minea
Cc:
Assunto: Esclarecimento AENERGY – Contra as Calúnias, a verdade dos factos

Members of the Program – State of the Nation – Radio MFM – Saturday 30 November

Energy Ministry – José Salgueiro; Manuel Quintino; Helder Adão; Pedro Afonso; Journalists – Rafael Marques; João Pinto

Cc: Minister of Energy and Water – João Baptista Borges; Legal advisor to MINEA – Henrique Abecasis; DAR Director – Charbel Andary

Following the multiple information and loose data that h been conveyed in the media, I am concerned as the company’s founder and shareholder, to clarify – with evidence, some of this incorrect information, serving the truth and combating the unfounded comments, without prejudice to the legal procedures already underway, brought by AEnergy since September 2019.

Those who followed the evolution of the company, in particular our Customers in the Energy and Transportation industries, know our effort and dedication in the design and execution of projects, done especially during the biggest economic recession that the country suffered between 2014 and 2017, in which we continued to implement and complete projects in the energy sector without receiving some payments from MINEA.

This resulted in several inaugurations of power plants, before there was even guaranteed the funding to carry them out. As demonstrated by the letter annexed, dated of 27 June 2017, the request of the then National Director of Energy, now Secretary of State for Energy, António Belsa da Costa, for AE to enable the inauguration of the Quileva thermal power plant.

From the first moment, AE demonstrated to practice competitive prices that led to the reduction, by about half, of the average cost of Construction and Operation of Thermoelectric Plants for the benefit of the Angolan State. This has put in question long-standing vested interests that have done everything to blacken Aenergy’s image and good name with slander.

In these circumstances, we are accused of misappropriating state money without performing any services, but in reality, we have already demonstrated that since 2014 Aenergy has been the Angolan State’s permanent net creditor of many tens of millions of dollars.

We were also accused of tampering with official documents, when, at the meeting on the 7 December 2018, in the presence of the Minister of Energy and Water, Eng. João Baptista Borges, mr. Director, Dr. José Salgueiro, the Presidents of PRODEL-EP, Eng. José Neto and ENDE-EP, AEnergy and General Electric, these documents were presented on the screen of a mobile phone by the CEO of General Electric in Angola, Wilson da Costa, and were immediately declared false by PRODEL’s PCA, which denounced its signature being attached to these documents, and these versions contained by GE CEO no other signature.

Mr. Minister and his team confirmed that the documents presented on the screen of a mobile phone by the then CEO of GE Angola did not coincide with the originals filed in MINEA and AE. This led us to request, immediately and then in writing, their investigation in January and March 2019 (as annexed).

Although it is the obligation of public office holders to report such facts, no follow-up was given between January and September 2019. At this time AE was forced to present a formal exposure to PGR on 23 September 2019.

Aenergy’s evolution was and is, like any normal company that:

Born small and equipped herself with resources and skills to meet the needs of its Clients
Created bases and infrastructure, business processes and qualified employment in Angola and attracted more technology and equipment companies to complement the services offered;
With this baseline, delivered results, solved problems, reduced the cost of investment of the Government per installed megawatt (MW) and responded to the needs of its Customers, in this case, Ministry of Energy and Water and Ministry of Transport, situation that over 7 years led them to continually seek Aenergy support;
It has captured the attention of international technological partners, especially General Electric, whose vocation is primarily to provide equipment and services, without a local basis and therefore choose companies with resources and facilities in the countries of destination, in order to carry out integrated projects for the final Customer;
Mobilized her own resources, contracted financing and collected the support of its suppliers, to respond quickly to the customer’s needs.

In addition to the information I would like to reinforce the following:

1. We are not a commissioning company, nor intermediary, nor simple agents. We invested in a Team of Professionals and landed resources at our own risk, otherwise let’s see:

Aenergy, S.A., is a company governed by Angolan law, with 7 years of activity in the energy and transportation sectors and has a charter of public works, the provision of merchant services, as well as all legal documentation required for the nature of contracts concluded with MINEA;
Since 2012, it has executed more than 20 contracts for design, engineering, construction, technical assistance services and parts and equipment supplies;
In August 2019 it gave direct employment to more than 300 people between Angola, Ghana, Cameroon and Portugal and indirect to more than 500 employees;
It has a logistics and training base in Viana with 14,000m2, to support the execution of projects and operationalization, with the necessary support infrastructures (3 covered and closed storage areas, accommodation capacity for 50 people, training and office rooms, a workshop area, parking, and separation of solid waste);
We invest in the execution of projects at MINEA’s express request, some of them at 100%, in the framework of energy emergencies, as in Cabinda in December 2014, agreeing to proceed with delivery of equipment and supplies of services even when MINEA was delayed in completing the formal procurement processes and expressly asked Aenergy to advance with emergency supplies, ensuring the executive’s support to solve urgent problems of the population;
We gave priority to the hiring of national resources and promoted the transfer of technology to Angola, when most international companies only intended to sell or rent equipment, without an effective guarantee of assistance and without a permanent technical support model in Angola.

2. We have technological support both in Angola and in the international partnership agreements we have for the purpose of promoting the installation of technology and resources with expertise in Angola:

Since 2013 and until 2022 we are an exclusive partner of General Electric Global (GE) in the energy sector in Angola and since 2017, also for Cameroon and Mozambique – Annex 2;
General Electric, in partnership with Aenergy, was only involved in projects in Angola as a technology and service provider, against guaranteed and anticipated payment (downpayments), without effective availability to involve own resources; and
General Electric Power and Transportationin2013 did not have even physical structure in Angola, means, equipment and human resources, nor internal procedures for this purpose. They have the basic standards and procedures as a manufacturer, for which Aenergy prepared, equipped, certified and fulfilled, in order to be able to perform with warranty from the manufacturer the services contracted by the Customer (MINEA and MINTRANS).

3. We have a business model equipped with specialized resources, with operational and support processes certified by independent international entities:

We are certified by the quality standards of the ISO 19600 Compliance Management System, being the 1st African company, since 2018, with Anti-Corruption Certification by ISO 37,001;
Under our responsibility, we increased from about 50% to values above 95% the energy availability of the PowerPlants, intervened by Aenergy (Annex 3); and
We implemented projects in record time:

We develop innovative projects such as Capopa Modular Thermoelectric Power Plant in Malanje.

4. We always carry out work for the Government of Angola giving priority to the customer’s need, often to the detriment of payment terms:

Since the beginning of the creation, Aenergy has always been a partner of the Angolan State, with own resources and bank financing to comply with the government’s priority projects, a role even recognized by general electric’s Global CEO in May 2017 at its meeting with the current President of the Republic (at the time, the then Minister of Defense);
In January 2018, using bank indebtedness, Aenergy had carried out work for the Ministry of Energy and Water without receiving any payment, which implied liabilities exceeding $500 million in US DOLLARS; and
On average, Aenergy has so far been around 750 days without receiving, there were debts over three years old, a situation that has never prevented pressure on Aenergy to mobilize, start and continue to perform work, always with advance payments fulfilled by EA, to the GE supplier;

5. We have reduced the investment by MW/installed contracted by the Government of Angola since we started the activity:

Aenergy’s contracts contributed to reducing the average cost per MW/contract, saving the Government of Angola more than US$250 Million compared to the average cost contracted so far to other companies by MINEA (see table in Annex):
Average MW/contracted cost to other suppliers is: 2.1MUSD/MW;
Average MW/contracted to Aenergy is: 1.1MUSD/MW;
The EA reduced the costs per MW contracted by 46%;

6. The Ministry of Energy and Waters never wanted to fully recognize the value executed in contracts, nor the value of equipment and parts in stock, without first being able to issue an order for termination of contracts at the end of August 2019:

59.42% of the value of contracts in execution corresponding to 668.4 MUSD are executed, including 7 contracts with execution above 84% (4 already concluded);
In the 668.4 MUSD MINEA discounted less work and did not add more work carried out in the new Menongue Thermal Power Plant, the CSA of the Malembo Plant (Cabinda) and the Regional CSA, which amount to 72.3 MUSD, executed and recognized since 2015;
As there was only a single disbursement of payments in the amount of 643.3MUSD in December 2017, with Aenergy continuing to work until August 2019, it is clear that there is a balance in favor of Aenergy of more than 112 MUSD, not including the 6 TM2500 turbines stored in Aenergy shipyards, 4 of which were requested by MINEA and approved in November 2018 by the President;
There have been parts and equipment in stock since 2017, part to integrate the execution of contracts with MINEA, in our logistics bases in Angola that only in November 2019 were recognized by the Ministry of Energy and Water, in the amount of 60.1MUSD (Alstom – Cazenga Thermal Power Plant already delivered, Central Soyo I Combined Cycle ready for delivery and conversion for gas at the Malembo Plant already delivered in Cabinda);

7. We anticipated and warned of possible irregularities since December 2018, a situation set aside by the Ministry of Energy and Water

At the joint meetings held between AE-GE-MINFIN-MINEA in December 2018, it was clear that there were documents (PRODEL/ENDE) in the possession of the Ministry of Energy and Water and Aenergy (on paper) different from those presented (on a mobile phone screen) by the head of GE Angola at the time;
MINEA asked General Electric for a due diligence (DD) to investigate alleged irregularities, however, this DD has never presented;
Aenergy, in January 2019, presented on its own initiative, a complete due diligence on the processes supported by contractual documents, Aenergy has never received any comment or contest from the Ministry;
Aenergy, on 12/01/2019, in an annex letter dated 11/01/2019 and on 06/03/2019, sent by e-mail to the Minister of Energy and Waters requesting his intervention to prompt a criminal investigation to the documents presented on the December 2018 meeting by the then CEO of GE Angola, a situation which was ignored and set aside – Annex;
Aenergy, in December 2018 and during 2019, requested several times to GE/GE Capital access to the version of the alleged PRODEL/ENDE letters announced by the CEO of GE Angola at the time, as well as its delivery protocol for the clearance of its origin. To date, GE did not release the documents for evaluation of the paper version of those letters, nor to the evidence of its origin. This forced Aenergy to promote action in the United States of America to make all relevant information available for the purposes of Aenergy’s defense in the termination of contracts. Including access to the letters that GE Angola’s CEO claims to have delivered to GE. In this subpoena process for the delivery of information and documents, which is currently in the United States District Court – Southern District of New York. Aenergy also requested GE to immediately deliver all the accounting documents regarding the acquisition of the four turbines by Aenergy, which have already prompted a clearance of responsibilities investigation within GE itself, as recently reported by Wall Street Journal (page 6 of the News in Annex), believing that these documents, in GE’s power, can reinforce the demonstration of the regularity of AE actions throughout this process.
There is no falsification of any documentation by AE. Nor would AE benefit anything from that.
On the other hand, the desperate and erratic behavior of the Minister of Energy and Water and his Office, until 30 September 2019, the date of the rejection order from AE complaint on the act of termination of contracts, MINEA has never mentioned in any communication sent to AE that the plea or reason for the alleged irregularities was based on those false letters which it had already been aware of since 7 December 2018.
The Minister of Energy and Water has always preferred to ignore this issue, not responding to the repeated requests of AE on the subject and the duty to immediately report to the Attorney General’s Office of the Republic of Angola the facts with criminal relevance. It is very strange that the Minister for Energy and Water has only mentioned the issue of false letters in the order of rejection of the AE complaint, after AE re-indicated to that matter precisely in the administrative rejection of the resolving the Contracts act on 13 September 2019 and after AE had noticed the Dignified Attorney General of the Republic of Angola ,on 20 September 2019, of this process of frontally unlawful and abusive termination, also requesting an investigation into the subject of the fake letters.
In view of MINEA’s alleged arguments for resolving contracts with the AE, it would be expected that the entire contractual resolution process would be preceded by a serious and rigorous investigation with initiative of the Minister of Energy and Waters and promoted by the Attorney General’s Office of the Republic of Angola to determine any irregularities that were suspected. The requirement for a serious and rigorous investigation was even more pressing, considering that the Minister himself had direct knowledge of the suspicion of the practice of criminal events, since 7 December 2018, related to documentation of expert entities by MINEA.
Never at any time, during this contractual resolution process, the Office of the Minister for Energy and Water referred the issue of false letters or gave any sequence to the repeated formal requests of AE to report the facts and initiated the competent criminal investigation. We are unaware of the reasons under this apparent cover-up by the Minister of Energy and Water of the situation of the false letters of expert entities by MINEA, and the violation of the duty of mandatory and immediate complaint of the facts to the Public Prosecutor’s Office General Of the Republic of Angola, pursuant to Article 164 of the Angolan Code of Criminal Procedure.
Unfortunately, this is the story of how a Minister pretends to ignore facts of a criminal nature, tries to subdue and strangle financially, for 9 months, an Angolan company, legally hired, trying to force the transfer of its contractual position to a third entity, repeatedly and frontally ignoring relevant information and documents. And finally, without any serious and rigorous investigation, based on incorrect and unsubstantiated assumptions, the President of the Republic mistakenly mislead His Excellency in the application for authorization to unilaterally resolve the Contracts with AE.
In any case, the Minister of Energy and Waters now intends to remove contractual consequences of an alleged criminal offence which has not been investigated by the Attorney General’s Office of the Republic of Angola, let alone the subject of a final court decision, in violation, to that extent, the principle of separation of powers, the principle of the presumption of innocence and the most basic rules of a rule of law.
Apparently, the Minister of Energy and Water of Angola owns the power to conduct criminal investigation, the prosecution and proceed to the summary trial, as if it was a judge. We are facing a gross violation of the rule of law that will certainly scare anyone or any entity who wants to live, work or invest in Angola.

8. Aenergy had nothing to gain from the PRODEL / ENDE letters in relation to the contracts it had with the Government of Angola

Aenergy’s 13 contracts with the Government of Angola envisaged, among other services, to acquire 8 TM 2500 Turbines;
The amount received by Aenergy in the single payment of MINEA settles exclusively 19 invoices approved by MINEA, based on the execution of the existing contracts, whose description is clear regarding the payment of the 8 turbines, TM 25000;
As with other equipment since 2013, Aenergy contracted GE at the end of 2016 with the acquisition of 6 additional TM 2500 turbines prior to the conclusion of its contracts with MINEA, even before any funding. Which have not yet fully settled and have not sold these turbines to any Customer;
The letters from PRODEL / ENDE held by the Ministry of Energy and Water and Aenergy were simply letters of intent, subject to future cost-benefit assessment, on the possibility of acquiring more turbines; And
From a rational point of view, apart from the illegality of it, it would be completely meaningless for AE to deliver false letters to GE which allegedly would amend two of its MINEA Agreements when the same AE during 2018, confirmed to GE itself and to MINEA that it was not possible to amend these contracts because they had their advanced execution and it was impossible to include these 4 additional Turbines in these Contracts.
What logic could be behind the negotiation of AE have with MINEA for the inclusion of these 4 additional Turbines in the O&M Contract (Central do Soyo), amendment approved by MINEA on 31 October 2018, if it had in any way delivered to GE documents allowed the definitive inclusion of these turbines in other contracts?
We do not want to speculate on the reasons for the existence of such false letters and those responsible for them, given that the facts require a thorough investigation by the Attorney General of the Republic of Angola.
In any case, GE itself and the then CEO of GE Angola have already confirmed a relevant fact: the then CEO of GE Angola delivered to GE Capital and GE Power these false letters from PRODEL and ENDE.
In this regard, it is also particularly serious that GE Capital considered those letters for financing purposes to the Angolan Government when it did not receive those letters directly from the Angolan Executive, its counterparty and financed in the Financing Agreement, but from the then CEO of GE Angola in clear and blatant conflict of interest.
Further, it completely escapes our understanding that GE Capital and / or Financing Agent have accepted and taken good financing for the purposes of the letter merely delivered by a representative of GE Angola, without any formal confirmation from any other entity. Angolan Government, when the Financing Agreement between the Government of Angola and GE Capital has been the subject of a broad set of formal authorizations and confirmations, from the Presidency of the Republic to the Court of Auditors, including the opinion of the General Attorney of Angola on all documents and contracts funded.
From a legal point of view, it is also at least doubtful to accept that simple letters allegedly exchanged between the Contracting Parties were sufficient to amend Contracts which had been approved by Presidential Order.
Therefore, it will be important to ascertain the due responsibilities of the entities involved, if it is confirmed that they allowed and accepted documents submitted by the then representative of GE Angola that were apparently relevant to the scope of the financing.

In this context, it is also important to note that under the agreements in force until 2022 between AE and GE, we will not dismiss the support to which GE is contractually bound in response to what is determined to be in the national interest.

We also point out that GE is providing direct support to MINEA despite continuing to be bound by contracts with Aenergy.

Since 31/08/2019, Aenergy has been illegally prevented from continuing to provide its services to MINEA and is credited to MINEA in excess of $ 112 million, plus the price of the 4 additional GE 2500 turbines requested. and approved.

Considering the facts above, the falsification of the letters of Prodel-EP and ENDE-EP should be formally investigated in an exempt and impartial manner by the GFR of Angola, as well as the cover-up and absence of complaint by the Minister of Energy and Waters of the crime of falsifying documents of public entities that has had direct and personal knowledge since December 2018, without complying with the obligation for immediate complaint provided for in Article 164 of the Code of Criminal Procedure Angolan.

From our side, we must maintain Aenergy’s full willingness to actively cooperate with judicial entities in the necessary investigations into this whole process, hoping that the Angolan Court will act independently and impartially.

Aenergy will not fail to defend its rights in the competent administrative and judicial bodies, in the interests of its employees, shareholders and other creditors, and is available to collaborate with the Government of Angola in the resolution of this dispute, in a transparent and objective manner. within the applicable legal framework.

Without further discussion, I can only offer my best regards.

The Management of Aenergy,

Ricardo Leitão Machado

Founder & CEO

Angola | Ghana | Cameroon | Portugal

aenergy.com

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