After nine years of activity on the island, Canal Gestión Lanzarote continues to accumulate millionaire losses. If in 2020 it already had a negative result of more than 6 million euros, that figure skyrocketed in 2021, reaching losses of 15.7 million euros in a single year.
This is reflected in the accounts that the company has presented on the past year, and which show that in total, it has already accumulated losses of almost 38 million euros.
In fact, the report warns of “significant doubts about the normal functioning of the company”, and emphasizes that the parent company, Canal de Isabel II, has had to make “participatory loans” worth more than 129 million euros “to restore its equity situation”. In addition, it mentions a loan with Canal de Isabel II S.A. “for a maximum amount of 153 million euros, which will allow it to meet its payment and investment commitments”.
Regarding the losses of the past year, the audit report attributes it in part to the health crisis caused by Covid-19 and the fall in tourism. However, the turnover was only 1% lower than in 2020 -when the pandemic began-, and the losses have multiplied by 2.5.
The other factor it points to is “the effect produced by the escalation of energy prices in the second half of the year”. In this case, Canal's expenses in energy consumption went from 11.4 million in 2020 to 18.6 million in 2021, with an increase of 7.2 million.
Claims 7.7 million for the price update
What the report does not refer to are the other losses, which are those that occur in the network, and which have skyrocketed in recent years. In fact, in 2021 Canal produced 27,152,578 of desalinated water and only billed 10,485,897. That is, more than 61% of the water produced was supposedly lost in the network, which is the worst figure since records have been kept.
The report does, however, talk about the revision of consumer prices, which Canal has been demanding since 2017. In this regard, it recalls that the contract signed at the time by Pedro San Ginés established that from that year onwards, annual increases would be authorized even above the CPI (specifically, the CPI plus 1%), but then that clause was not fulfilled.
The company then went to court, which has ruled in its favor in the first instance, although the ruling is appealed and awaiting a final decision. In the report, Canal maintains that until December 2021 it has failed to collect 7.7 million euros for not updating the rates as established in the contract, and demands to be compensated for that sum.
Dance of figures with investments
Regarding the investments that that contract also contemplated, it maintains that when the five-year period agreed for it ended, it had invested 54.4 million in works, although most have not yet been validated by the Water Consortium.
“As of December 31, 2021, actions of 59,387,000 euros have been carried out, of which 8,819,000 euros are in progress”, the report adds below, with a contradiction in the figures. And that is that at the end of 2021, only works worth just over 50 million would have actually been executed, according to Canal, when it should have invested 56 million until 2018.
An unexecuted sentence that ordered the review of the award
The audit report also refers to the judgment issued in 2016, which ordered the review of the award of water to Canal. That ruling concluded that there were “substantial alterations” of the specifications for the benefit of this company, when it was declared void in the tender and a negotiated procedure was used, on the advice of the lawyer Ignacio Calatayud.
San Ginés did not execute that ruling at the time and neither has the current government group. In this regard, the Canal report indicates that already in June 2019, the Contentious-Administrative Court Number 3 of Las Palmas de Gran Canaria issued an order instructing the administration to carry out “the judgment in full and due effect within the deadlines indicated by Law, practicing what the fulfillment of the ruling requires”. And it refers to this, stating that if the contract were declared null, “Canal de Isabel II, S.A. would be entitled to economic compensation.”
Specifically, based on a report commissioned by the company itself, it indicates that it should be returned “the amount corresponding to the initial canon updated according to the interest rate”, “the amount corresponding to the investments executed”, “the operating or exploitation losses suffered during the years in which the contract has been executed”, as well as “the repair of any other emerging damages derived from the nullity”.
“The previous compensation would be determined in the contract liquidation procedure”, states the Canal financial report, which also recognizes that for this “it may be necessary to exercise legal actions”, and that it would be the courts that would rule.
In any case, it adds that “as of the date of formulation of this report, none of the parties involved in the process (initiated by Club Lanzarote S.A) has initiated proceedings to request the declaration of nullity of the concession award procedure”.
When talking about the situation of the parent company, the report also refers to the judicial cases of corruption in which several directors of Canal de Isabel II are immersed, although it rules out that it may have economic consequences for the company in case of conviction.
