At what stage are the Infratel penalties on Open Fiber?

20 March 20231 year ago babelfish

Infratel (Invitalia), Open Fiber and penalties. Luigi Pereira's point with Infratel's answer

It's not a far-fetched question even if it only circulates among a few insiders and little, indeed nothing, in the newspapers.

Here are all the details.

On the basis of the documents published in the last two years by the company Infratel (implementing entity of the National Broadband Plan of the Invitalia group), the situation of the penalties, now accrued and in fact not collected, which have been higher since 2020 than previously today requested by the grantor. The situation also appears very clear to the government.

THE WORDS OF UNDERSECRETARY BUTTI

Indeed, in a hearing on 24 January before Commission IX of the Chamber, the Undersecretary for Innovation Alessio Butti declared that "delays must be made up for and the responsibilities of those who caused them must be identified and sanctioned".

The undersecretary was referring to the PNRR tenders for the gray areas but he certainly does not forget the delays of the three previous tenders, those of the white areas. The five agreements of the first tender were signed on 16 June 2017, the six agreements of the second tender on 8 November 2017 and the three agreements of the third on 3 April 2019. Since that month of June which saw the first signatures affixed, the over 5 and a half years passed; the delivery of the fiber Municipalities scheduled for 3 March 2020 (7,439) was to take place within three years, in mid-2020. Others will still need more: some say less than a year, but more likely two or three more.

The undersecretary has a good opportunity to show his rigor and determination. Demand from Open Fiber the payment of all penalties that no one has so far imposed. The calculation is easy and now we will propose it again at least in its essential lines. Result? If Butti and the government wanted, there would be around 100 million to collect immediately which mysteriously Infratel has not collected at least since the beginning of 2020, if not before.

WHAT WOULD HAVE HAPPENED

Let's see what would have happened if the previous governments had applied the rigor that Undersecretary Butti is calling for today.

Few data leaked out for the first three years of the concession, but those few are nonetheless worrying. Parliament asks and gets little more. Finally, near the three-year deadline of the first tender, Infratel Italia realizes that it must show greater transparency and begins to publish monthly progress reports and other data on the Open Data section of its site. The delays begin to appear evident to an attentive reader and can also be correlated with the race predictions.

On 3 March 2020, before the lockdown that kicks in a week later, the total number of Municipalities with FTTH project scheduled for tender 1 are 3,036, those whose delivery of the final projects is still awaited (the first step of the time schedule) are well 814, or 26.8%. It's a huge amount; the program is just over three months from the expected delivery date and more than one out of four projects has not yet been delivered.

No red flags were issued, no serious recovery measures, no crisis unit, nothing at all.

Naturally, things are not much better for the six lots of tender 2. There are 3,713 Municipalities awaiting the FTTH and the final projects to be delivered are 638, 17.2% of the total eight months after the deadline, i.e. the expected delivery of the tested works. For the lots of tender 3 there are 690 municipalities with missing final projects for 527 of them (76.4%), many but there would be more time and, if measures had been taken, one could even think of recovering.

The definitive project of a Municipality is drawn up "on paper", i.e. no site inspections are carried out and permits are not required for underground infrastructure and excavations. Although it is called "definitive", it is in all respects a preliminary project.

On 3 March 2020, the penalties already accrued only for the non-delivery of the final projects pursuant to art. 33.2 of the agreement are equal to €157,928,500 (first tender), €101,487,000 (second tender), €27,456,250 (third tender) for a total of €286,871,750.

With the exception of Marche-Umbria, Lazio and Sicily (lots 3, 4 and 6 of the second tender), delays only in the final design trigger penalties as early as March 2020 beyond the 10% threshold. The analytical calculation by lot shows that 10% had already been exceeded for all lots of tenders 1 and 3. According to the concession agreement, it is not possible to exceed penalties of more than 10% of the value of the works but, under this condition, "the Grantor will have the right to terminate the concession agreement” (Article 33.3). In short, only for planning delays, the Open Fiber concessionaire had already consumed the entire amount of delays granted and had accrued the maximum penalty of 10% for almost all lots. Yet, from the outside it is not perceived that measures are being taken to recover an already serious situation. It had been known for some time that it was. On 23 January 2019, answering question no. 5/00885, the Ministry of Economic Development stated that «it can reasonably be hoped that the works will be completed by 2021». Delays were beginning to be admitted, while easing the situation in Parliament.

Subsequently, on 11 July 2019, in response to question no. 5/02480, the same Ministry reaffirmed its commitment to "ensure that services to users take place without further delays with respect to the deadlines established at national and European level". In March 2020, under pressure from Parliament and the Regions, Infratel Italia began publishing a few pieces of data. Now the completion of the project has already been postponed to 2023: therefore officially in just one year the expected delay goes from one to three years compared to what is foreseen in the agreements. But it's not over.

THE STATEMENTS OF PATUANELLI AND PISANO

In a hearing in the Transport Commission of the Chamber, the Minister of Economic Development Stefano Patuanelli himself on 10 September 2020 expressed doubts about this new deadline and his declaration was reinforced a few days later by the Minister of Innovation Paola Pisano who on 16 September in the same parliamentary seat declared ominously that "if the contracts and agreements made are not respected, then all the actions will take place accordingly". Boisterous words are not followed by deeds.

WHAT INFRATEL WRITES ON OPEN FIBER

But the penalties are not imposed or are imposed in negligible quantities by Infratel Italia. Let's jump forward six months: infratel writes that "at the end of March 2021, the following contractual penalties were contested against the concessionaire" € 982,500 "in relation to the 3 phases already concluded for tenders 1 and 2, due to the delays in submitting the final design. To this must be added € 2,159,500, again according to Infratel "for the design activities of phase 4, not yet completed" to be recalculated at the end of phase 4. This is a total of only € 3,164,500, if we also take into account the € 22,500 for the definitive planning of the Municipalities of tender 3. We are one year from the date in which, as seen, on the basis of the data published on the state of the definitive planning in many Regions, 10% of the amount had already been exceeded.

In the progress report of 11.30.2022 which provides the data at the end of last October, for all reasons the penalties imposed are € 45,313,000, an amount still far from the 10% of the value of the work which would trigger the termination clause of the concession contract. Why?

Penalties are not only used to raise cash – indeed it should be a secondary motivation – but, mainly, to make it clear that one is determined to achieve the result, in this case obtaining the optical network in the shortest possible time, without favoritism.

In summary, pursuant to the concession agreement, it is not possible to exceed penalties of more than 10% but under this condition "the Grantor will have the right to terminate the concession agreement" (Article 33.3). Penalties have well exceeded 10% only with delays on the final design at a date prior to the lockdown. Furthermore, it should be noted that the final design is carried out only on paper and therefore the justifications often put forward regarding delays in permits (which are requested later, in the executive design phase) are not acceptable.

Why didn't Infratel Italia demand the payment of penalties up to 10% of the value of the work? If he had done so, the debate could have started as early as March 2020 as to whether it was more convenient for the State to continue with Open Fiber or withdraw the agreements.

HERE IS INFRATEL'S FULL REPLY TO START MAGAZINE'S COMMENTS

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/penali-infratel-open-fiber/ on Mon, 20 Mar 2023 07:35:43 +0000.