Fenaka faces MVR 384m liability as sewerage projects cancelled

Fenaka Corporation has cancelled contracts for 16 island sewerage projects awarded by the previous government due to significant financial losses and inadequate work.

The projects, handed over to Fenaka by the Ministry of Construction and Infrastructure in 2022, have faced numerous challenges, leading to their termination.

Speaking at a press conference on Tuesday, Fenaka's Projects Department Director Abdul Wahid Mohamed said that the company has been incurring substantial losses in executing these projects.

He explained that Fenaka received an advance payment of MVR 92 million when the contracts were first awarded, but there is no clear documentation of how these funds were utilised.

“The construction ministry has now terminated the water and sewerage projects of 16 islands handed over to Fenaka by the government in 2022,” Wahid said, adding that calculations are underway to assess the full financial impact.

One of the key challenges faced by Fenaka was its lack of equipment to start such large-scale projects, forcing the company to hire expensive external contractors.

Wahid highlighted that paying rental fees for equipment, even when work was not progressing, further contributed to the company's financial strain.

Additionally, high labour costs were a burden, with the company spending MVR 45,000 per month on the salary and allowances of an average worker. Wahid acknowledged that while this approach to staffing was not inherently problematic, it added to the growing costs of the projects.

Wahid also pointed out that the works had been subcontracted at a higher price than originally contracted. For example, the EIA, which was initially supposed to cost MVR 550,000, was subcontracted at a much higher price.

"It has been a loss from the beginning," he added.

The total financial loss for Fenaka could amount to around MVR 170 million if the projects were carried out as planned.

The initial contract value was MVR 618 million, but MVR 439 million, or 71% of the total work, had been subcontracted.

So far, MVR 55 million has been disbursed to contractors and suppliers, with an additional MVR 439 million yet to be paid.

Fenaka remains liable for MVR 384 million, and further assessments may alter this amount.