Updated | PN wants audit of ElectroGas plant, government in contact with NAO

The Opposition has called for an investigation by the National Audit Office over contracts the government signed with the ElectroGas consortium for an LNG power plant at Delimara.

Public Accounts Committee chairman Tonio Fenech said the decision followed from the announcement by Gasol plc, formerly a London stock exchange listed company, that it would no longer form part of ElectroGas.

The government is under fire for having accepted to act as a guarantor for ElectroGas on an €88 million bank loan to the consortium from Bank of Valletta, which the government retains a 25% stake in.

Fenech stressed that an investigation into good governance and due diligence was needed, and he reiterated the opposition’s request for the publication of documents related to the government’s agreement with ElectroGas.

He added that the government should also explain what consequences it has exposed BOV to, should the European Commission decide that the banking guarantee goes against state- aid rules.

The most recent financial statement of Gasol reported a negative equity of €12.8 million and accumulated losses of €96 million, with independent auditors warning that the company doesn’t hold enough cash or liquid assets to meet its commitments. The company has also been delisted from the London Stock Exchange.

Gasol was previously the lead partner in the consortium, with a  30% stake. The three remaining partners – Siemens Financial Services, Socar Trading SA, and GEM Holdings Limited – are now equal shareholders, with Siemens the new lead member.

PN deputy leader Mario De Marco said that the Opposition had previously warned the government about Gasol’s negative financial situation, stressing that their audit report showed that “the group does not currently hold sufficient cash or liquid assets in order to meet its commitments as they fall due for the next 12 months.”

He added that the government should also answer to questions relating to public procurement regulations which stated that a company couldn’t leave a consortium until the end of the government’s legislature. “Was this change in the consortium given the government’s consent? What consequences will this change have on the banking guarantee?” he asked.

The LNG plant was originally scheduled for completion by March 2015, before the government delayed the deadline to July 2016. The government explained that this delay was due to the reopening of negotiations with Electrogas following Shanghai Electric Power’s acquisition of a 33% stake in Enemalta in March 2014.

Shadow economy minister Claudio Grech said that the opposition expected a major project like this to be based on more secure and solid dealings. “At this point we can only hope that the government had more certainty when it had signed the original agreement,” Grech said.

He also questioned why the security supply agreements had not been cleared with the European Commission prior to the publishing of the expression of interest.

Energy minister Konrad Mizzi has argued that the bank guarantee was a temporary solution “in the national interest”, until the government receives clearance from the European Commission that the Security of Supply Agreement it had entered into with ElectroGas satisfied EU requirements and does not constitute incompatible state aid.

Shadow energy minister Marthese Portelli today questioned the very validity of the new power station. “The government has said that the new power station was being built to lower electricity bills, and given its insistence that these bills are dropping anyway, this begs the question of whether we really need this new facility.”

She further questioned the real reasons behind the planning of the new power station. “We expect an independent and thorough scrutiny of the government’s actions in this issue,” Portelli added.

Government reaction

Energy minister Konrad Mizzi said that Gasol's departure had not impacted upon the consolidation of ElectroGas's structure, which retains engineering company Siemens and gas giant Socar.

"Government on Tuesday sent a letter to the NAO about the matter to clarify facts. A meeting with NAO has already been set up. Government welcomes all scrutiny on the matter and reiterates that due process was followed. Moreover the increase in shareholding by two global giants is testament to confidence in the project which is progressing to plan," Mizzi said.

The minister said the specialisation, skills and knowledge required to implement and operate the power and gas facilities, had not changed and are still vested in ElectroGas through Siemens and Socar. "Construction, operations, maintenance and all other contracts remain unchanged.
The recent consolidation will have no impact on project timelines, construction and provision of power and gas to Malta and the Maltese people," Mizzi said.

He also said that through Siemens, Socar and GEM holdings, ElectroGas had strong financial backing that would deliver "a world-class infrastructure which will continue to contribute to the country's competitiveness and also reduce emissions significantly."