Something doesn't add up at the PEC

May 1, 2009 in Finance

AK points out a story from our favorite financial journalist, Jeff Goldberg, regarding the Palestinian Electric Company's surprising 2008 profit of $6mm.  What Goldberg fails to note (citing instead a quote on nebulous "corruption") is that the PEC is paid an unconditional annual fee of $29mm by the Palestinian Authority, meaning they actually hemorrhaged $23mm. In fact, the PA even pays for the plant's fuel, which makes me incredibly curious where the money goes, seeing as their primary cost is waived and they have no competitors. Dare I suggest it gets funneled to... someone else?

And how is this bizarre subsidy justified? According to the PEC executive managing director's laughable quote:

When people are investing, they should get a return.

Sort of turns the whole risk/reward thing on its head, doesn't it?

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