European Commission finds no breach of procurement regulations on new power station

The European Commission appears to be satisfied with the procedure adopted by the Maltese government and its transparency in the procurement of a 200MW power station.

According to the European Commission, the Maltese authorities did not bypass any procedural procurement obligations stipulated by directives of the European Union.

In reply to a question tabled by Nationalist MEP Therese Comodini Cachia in the European Parliament, a spokeswoman for the European Commission confirmed that the principles emanating from the Treaty on the Functioning of the European Union were not breached.

“From the information at its disposal, the Commission considers that the Maltese authorities have not circumvented any EU procedural procurement obligation,” the Commission told Comodini Cachia in a written reply.

In her question, the Maltese MEP said that the Maltese government had eschewed the standard tendering process for the procurement of a new 200MW power station costing €370 million. She said that the government had explained that its expression of interest would still be in line with EU legislation since it would ‘invite a private operator to participate in the supply and generation of energy and not procure a new power station’.

The government, she said, also said it would ensure that bidders were pushed to offer the lowest price possible.

In October 2013 the Government of Malta struck an 18-year agreement with a consortium, including an Azerbaijani state-owned energy company, to supply Enemalta with electricity and to build a new power station.

“Within the context of EU public procurement regulations on coordination of procedures for public utilities contracts and related requirements, is the Commission satisfied with the procedure adopted by the Maltese Government and its transparency?

“Does the Commission agree that the construction of a new power plant can be defined as merely ‘inviting a private operator to participate in the supply and generation of energy’, given that this definition could give leeway for a Member State Government to bypass procurement?” Comodini Cachia asked.

In its reply, the Commission explained that contracts for the supply of energy or of fuels for the production of energy – such as gas purchase agreements – were excluded from the scope of the currently applicable "utilities" Directive when awarded by entities operating in the energy sector.

“On the other hand, a power purchase agreement which entails the obligation for the investors to build and operate a new power plant constitutes a concession contract which is also not covered by Directive 2004/17/EC, and therefore only subject to the TFEU Treaty principles,” the Commission replied.

“As for the competition process, the Commission notes that the corresponding call for expressions of interest provided for the use, as a guideline, of the provisions of the Maltese Legal Notice 178 of 2005, which implements Directive 2004/17/EC, despite the fact that these provisions do not specifically apply to the supply of energy or of fuels. Until proven otherwise, this implies that the Treaty principles have been respected.”

According to new timeframes announced by Energy Minister Konrad Mizzi, Malta will be making use of gas-generated electricity by June 2016. A 200MW interconnector connecting Malta to the European grid will be commissioned early next year as works on the interconnector are in their final stages.

The agreement between Enemalta and Chinese-state owned company Shanghai Electric Power, signed this month, will see SEP become a shareholder in Enemalta by year’s end. Shanghai will pay €100 million for a 33% stake in Enemalta and €150 million for a 90% shareholding in the Delimara 3 plant – more commonly known as the BWSC plant – that was hived off to a separate company called D3 Generation Limited.

The remaining €70 million will be invested next year for the conversion of the Delimara 3 plant to gas.

Around 50% of Malta’s required electricity will be generated through the ElectroGas consortium, the Delimara 3 plant is set to cater for 30% while the interconnector would provide for the remaining 20% of the energy mix.

According to the Energy Minister, the Delimara 3 plant will operate on dispatch instructions. It will be up to a technical committee appointed by Enemalta to determine the amount of electricity to be bought from the three different sources.