Konrad Mizzi will be asked to testify again in front of PAC

Daphne Caruana Galizia Foundation published government’s temporary security of supply agreement with Socar • Agreement was mentioned in 2018 NAO report on Electrogas contract

Konrad Mizzi (centre) during one of his appearances in front of the PAC last year (Photo: James Bianchi/MaltaToday)
Konrad Mizzi (centre) during one of his appearances in front of the PAC last year (Photo: James Bianchi/MaltaToday)

Konrad Mizzi will be called to testify again in parliament’s Public Accounts Committee, Opposition MPs have said.

The development comes following the publication by The Daphne Caruana Galizia Foundation (DCGF) of a security of supply agreement Mizzi had signed with Socar in 2015.

The PAC is probing the findings of the National Audit Office’s investigation on the Electrogas contract, concluded in 2018. Mizzi had already testified at length in the previous legislature.

The PAC is chaired by Opposition MP Darren Carabott, who said Mizzi will be asked to testify on the published agreement, which was already part of the NAO investigation.

The agreement published by the DCGF formed part of government’s temporary guarantees given to the Electrogas consortium, pending the European Commission’s analysis of the security of supply agreement and the deals entered into between Enemalta and Electrogas.

The foundation obtained copies of the LNG Security of Supply Agreement, dated 14 April 2015, entered into between the Maltese government and Socar Trading SA. The agreement was signed by then energy minister Konrad Mizzi for the government. The agreement was terminated on 7 December 2017, after the Electrogas consortium obtained financing for its power station and LNG terminal project. The termination agreement was also published.

NAO had visibility of published agreements

The information contained in these two agreements, made public for the first time, is not new and the National Audit Office had visibility of these arrangements when it probed the Electrogas contract.

In its 2018 report, the NAO had referred to the LNG security of supply agreement between the government and Socar Trading finalised in 2015 and its subsequent termination in 2017 when the project reached financial closing.

The report stated: “Although not part of the Transaction Agreements, on 14 April 2015, Government and Socar Trading SA entered into an LNG SSA. According to the LNG SSA, given the considerable insecurity of supply in the future global LNG market, the Government, as Enemalta’s majority shareholder, sought to secure a clear obligation from Socar Trading SA to continue to supply LNG to the plant even in circumstances that would otherwise permit Socar Trading SA to cease supply. On 7 December 2017, Government and Socar Trading SA entered into the LNG SSA Termination Agreement. The Parties agreed to terminate the LNG SSA on financial closing, which was to occur shortly thereafter.”

This side agreement, including government’s multi-million-euro financial guarantee, enabled Electrogas to secure bank financing for its project while the European Commission analysed the Malta deal to determine whether it breached state aid rules.

In January 2017, the commission gave its green light, saying the arrangement between Enemalta and Electrogas, including a security of supply guarantee included in the deal, did not breach state aid rules. All government guarantees were subsequently terminated.

READ ALSO: NAO | ‘Significant concern’ over due diligence in Electrogas tender

NAO concern on late inclusion of SSA

In its analysis, the NAO did not dispute the security of supply arrangement included in the contract but commented on its late inclusion during the tendering process.

There had been no prior mention of a security of supply agreement in the earlier stages of the tendering process, which could have potentially allowed other bidders to present better proposals.

What the SSA did was provide the winning consortium with assurance that government would step in instead of Enemalta in circumstances where the latter could not honour its obligations.

These major changes, at a late stage in the RfP (request for proposals) process, were deemed by the NAO as a shortcoming in the governance of the procurement process. Although all bidders were informed of these developments, the nature of the changes and their timing drew the Office’s concern, for they significantly altered the contractual relationship that was to be entered into, drastically reducing the risk to revenue for the selected bidder.

The risk was transferred to Enemalta and government, now obliged to purchase 85% of the annual contract quantity, be it power and gas, irrelevant of requirements. Aside from these considerations, in the NAO’s opinion, it was in Enemalta’s interest to disclose all conditions favourable to prospective bidders in order to encourage competitive tension in the RfP, with relevant implications on value for money.

The NAO commented thus: “…the Office maintains reservations regarding the manner by which the SSA was brought to the attention of prospective bidders. Despite the centrality of the SSA, no reference was made to it during the EoIC and in the RfP. The SSA was only mentioned in the bidders’ conference and in clarifications issued late in the RfP stage, with limited reference made therein. Ultimately, the SSA was crucial in the achievement of financial closing, providing the lenders of ElectroGas Ltd with the required comfort to permanently finance the project.”

Murder and corruption

The Electrogas contract is mired in controversy amid allegations of corruption that stem from the Panama Papers revelations.

One of the Electrogas shareholders, Yorgen Fenech, is charged with masterminding the murder of journalist Daphne Caruana Galizia.

Fenech’s Dubai company 17 Black, had been listed as a target client for companies set up in Panama that belonged to Konrad Mizzi and former OPM chief of staff Keith Schembri.

Caruana Galizia had first flagged the existence of 17 Black in February 2017, which is just about the time, according to court testimony, that Fenech allegedly kicked off plans to commission the journalist’s murder.