Fenaka buckles under MVR 3.8 billion debt and arrears

Last Tuesday, Fenaka was ordered to pay MVR 44 million within 14 months for equipment supplied by a local company called Classico.

As of December, Fenaka was estimated to owe MVR 2.8 billion to more than 1,090 suppliers and contractors. In addition to the unpaid bills, Fenaka needs to repay loans in excess of MVR 1 billion. According to records from 2021, receivables are typically collected within 59 days. But Fenaka takes an alarming 524 days to pay contractors.

Established in June 2012 to provide water, electricity, and sewerage services to more than 150 of the 187 inhabited islands in the Maldives, Fenaka’s monthly operational costs of MVR 299 million at present outstrips revenue of MVR 213 million. Monthly operational costs include MVR 17 million for administrative expenses and MVR 79 million to pay salaries for more than 7,600 employees.

The wage bill exploded after a hiring spree during the previous Maldivian Democratic Party government. Ahead of the MDP's presidential primary in January 2023, Fenaka’s workforce grew from about 2,000 employees to more than 3,800 when polls closed. The bloated workforce stood at more than 8,200 when former president Ibrahim Mohamed Solih left office in November 2023.

But the MDP blamed Fenaka’s dire financial straits on inherited debt and unpaid bills worth MVR 1.18 billion as well as essential infrastructure investments made during Solih’s administration. Speaking in parliament in late 2023, former majority leader Mohamed Aslam also noted a high rate of non-payment. Only 60 percent of customers paid their bills regularly, he said.

Upon assuming office, President Dr Mohamed Muizzu appointed former lawmaker Muaz Mohamed Rasheed as Fenaka's managing director. But Muaz resigned a year later, citing the government's lack of commitment to "right-sizing" the organisation and reducing wasteful spending. Merely reducing operational costs would be insufficient to resolve Fenaka’s financial challenges, Muaz stressed in his resignation letter in December 2024.

Muaz was replaced by Major (Retired) Mohamed Najah.

According to the Privatisation and Corporatisation Board's latest published records, 36,753 were employed in state-owned companies by June 2023, an increase of 2,698 from March that year. Financial liabilities and risks associated with SOEs stood at over MVR 2.5 billion.

Between 2020 and 2023, Fenaka was ordered to pay more than MVR 50 million to private businesses for various supply contracts. In the meantime, the corporation incurred MVR 4.2 million in fines for failing to meet legal requirements for environmental impact assessments in the construction of powerhouses across 21 islands.

In January 2024, Fenaka was ordered to pay MVR 35 million within a month to Power Engineering for generators and cables. In October, the civil court ordered the government company to settle dues of MVR 13 million within seven months to Island Engineering Services Pvt Ltd for supplied materials. Apollo Holdings won a lawsuit to recover more than MVR 27 million for another material supply contract.

According to Fenaka’s 2024 annual report, 40 percent of revenue was allocated for debt repayment. Last year, the corporation sought a three-year moratorium on loans of MVR 150 million from the finance ministry, MVR 33 million from the State Trading Organisation and other loans from the state totalling MVR 231 million. Fenaka also sought government assistance to negotiate the restructuring of an MVR 400 million loan from the Maldives Islamic Bank.

In late 2024, the Muizzu administration abandoned plans to merge the debt-ridden Fenaka with the profit-making STO.

Meanwhile, Fenaka is owed MVR 400 million for unpaid electricity bills, which includes MVR 178 million owed by state-owned companies and MVR 222 million from government offices and agencies. Private parties owe Fenaka an additional MVR 300 million.

The corporation has also faced scrutiny in the past over suspected corruption and questionable procurement practices. In April 2023, Fenaka spent MVR 2.9 million to purchase a luxury Audi Q7. The price tag appeared to be significantly inflated as the car typically retails for MVR 910,000.

With new procurement guidelines developed in collaboration with the World Bank yet to be implemented, more than 31 cases involving procurement worth at least MVR 71 million are currently under investigation by the Anti-Corruption Commission.