EDP compensation leaves €228 million black hole in government budget allocation

 In News, Public Spending, State Budget

The Portuguese government will have to pay €228 million to compensate investments made by energy giant EDP over a dam project that was cancelled. 

And worse is that the cancellation made by the first PS socialist government of António Costa wiped out almost 50% of the €500 million provisional budget allocation that minister of Finances, Joaquim Miranda Sarmento has for this year.

This is according to a report on the budget execution for the first quarter of 2024 from the Budget Support Technical Unit (UTAO).

The €228 million paid to EDP almost corresponds to the €239 million that the ministry has already spent. (47.7%).

In 2019, the then minister of the Environment, João Matos Fernandes, decided to cancel a government contract with EDP for the construction of the Fridão dam.

EDP demanded compensation of €350 million that was contested by the government, but the Supreme Administrative Court decided in December – one month after the then prime minister resigned – that the State would have to compensate EDP for investments made.

The €228 million compensation was paid in Q1 of 2024, wiping out almost half of the provisional allocation.

Following the controversy about the previous government spending a savings pot on extraordinary expenses after António Costa had resigned, UTAO decided to investigate the budget execution on extraordinary expenses revealing that almost half of the cash cushion has been wiped out to compensate the energy company.

However, despite half of the provisional allocation being wiped out, the Ministry of Finances still has €261 million at its disposal, while its €412 million budget reserve could also be used.

There are also central government allocations of €745 million but these can only be used for specific aims such as offsetting debts and asset applications (€690 million) and paying the national public share of investments co-financed by the European Union (€50 million) or for the participative budget. (€5 million).