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Transparency is also part of energy security

Even with the abundance of energy that will be made available to the island, and the security of supply it will entail, the overarching storyline on Delimara’s new gas plant is that Joseph Muscat’s premiership depends squarely on its success.

20 August 2015, 12:27pm
Labour’s roadmap towards achieving its main electoral pledge, the new LNG plant at Delimara, has been anything but clear in direction even though the project approaches finalization with works well underway.

Even with the abundance of energy that will be made available to the island, and the security of supply it will entail, the overarching storyline on Delimara’s new gas plant is that Joseph Muscat’s premiership depends squarely on its success.

Expectations on Labour’s energy road map were always high. In 2013, it was presented as the solution to Malta’s energy problems after years of accumulated difficulties, annual blackouts, mounting debt edging close to €800 million, and delayed infrastructural investment. Even worse was the realization that fuel procurement by the corporation could have been the subject of corrupt practices, apart from the unregulated manner in which the fuel procurement committee operated.   

So after presenting its energy plan as its main electoral plank, Enemalta and ElectroGas – the private consortium that will build, run and supply gas to the new plant – are to Labour what Arriva was to the Nationalist government: another occasion when expectations were high and where any failure to deliver was met by an uproar of indignation.

Any failure in the tight deadlines presented before the election were bound to create ripples. Joseph Muscat has learnt by now how political promises can easily be derailed even with the best-laid plans. Expectations are so high that accidents like freak blackouts are met with popular derision, even when reasonably justifiable, because of the way Labour has sold its energy plan.

Politically, Labour’s fortunes are tied to delivering on LNG. When the plant was delayed by 12 months, Muscat had to brush off derisory suggestions that he should resign given that’s what he famously said on TVM’s Dissett about the success of the project.

He has definitely honoured Labour’s pre-electoral pledge of reducing bills for both households and businesses, a pledge being ‘financed’ against future savings that must result from the LNG plant; and the government also shut down the polluting Marsa power station thanks to the €320 million Chinese investment in Enemalta, itself a remarkable feat of newfound alliances between Malta and the Asian superpower.

But Labour mars its own accomplishments by sheer pig-headedness on its lack of transparency. The procurement process that eventually led to the selection of ElectroGas – a consortium originally composed of London-listed (formerly) Gasol plc, Siemens, Azerbaijani state company SOCAR, and the Tumas and Gasan groups’ Gem Holdings – was itself replete with questions over its transparency, given the breakneck speed at which the short-listed winners were selected.

The departure of major shareholder Gasol, after months of speculation over its financial viability, raises doubts on the due diligence carried out when it won the LNG project on an expression of interest. The government may brush off accusations about the success of the consortium by saying that the other shareholders have taken on Gasol’s share capital, but news of the state stepping in as a guarantor for €360 million of a €450 million loan raises yet more serious questions about its relationship with ElectroGas.

The 22-month bridge loan was guaranteed by the government because ElectroGas will not commit its resources as collateral while the European Commission carries out its own inquiry into a mandatory security of supply agreement (SSA), a necessary investigation given that ElectroGas will purchase and supply the natural gas to Enemalta – at a fixed price for the first seven years, and then renegotiated for the following 11 years.

While there is an explanation for the guarantee given by the state, a temporary measure until the EC approves the power-purchase agreement, the controversy it generated is perfectly justifiable, for it raises questions about the financial viability of the private consortium to which Malta’s energy future is tied; as well as about Malta’s dependence on a gas supply from a consortium that has lost one of its major components.

This newspaper believes there was no other alternative to private investment in the bid to achieve the expensive conversion and transition from heavy fuel oil – retained at the Delimara power station extension irrespective of Labour pledges – in the absence of a gas pipeline.

But that is why transparency and public trust in this project are paramount.

The fact that the government did not publicize the €80 million guarantee does not augur well, much as its insistence not to publish the ElectroGas agreement was. The fact that the Maltese taxpayer’s energy future hinges on two of Malta’s foremost business groups, as well as the government of Azerbaijan, and causally also having a big stake in Labour’s own electoral fortunes, means there is a stronger case for transparency. 

What we are seeing is the creation of a long-term dependence on an energy giant that will monopolise gas supply for 18 years, and this in the context of effecting a quick conversion to gas and nailing long-term financial sustainability.

The country reaps the benefits of lower bills and its deflationary effect on business costs, but Labour owes it to the electorate to ensure maximum transparency and scrutiny on this important project. A parliamentary committee empowered to scrutinise the sector would be a step forward.

DealToday
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