Montenegro wind farm scandal: Enemalta’s due diligence was not up to standard, internal audit reveals

An audit had flagged serious shortcomings at Enemalta over its involvement in the purchase of a wind farm in Montenegro, including poor due diligence of the obscure company from which it purchased the project.

The internal audit report was tabled in parliament on Monday by Energy Minister Miriam Dalli. It had been concluded in 2021 but was kept hidden until the Times of Malta won a freedom of information challenge to be given a copy.

The report states that more rigorous due diligence procedures should have been conducted by Enemalta in order to identify potential conflicts of interest.

Enemalta had invested in a windfarm project in Montenegro in 2015, after buying the shares from Cifidex, a Seychelles-based company.

However, a journalistic investigation revealed that Daphne Caruana Galizia murder suspect Yorgen Fenech’s 17 Black profited from the windfarm deal through its business relationship with Cifidex.

Enemalta bought the shareholding at a much higher premium than what Cifidex paid to acquire the project from a Spanish firm. The project is also being investigated by the Montenegrin government.  

The audit was carried out by Mamo TCV advocates.

The report states that Enemalta should have sought a legal opinion from a reputable law firm confirming whether the shares in Cifidex could be legally sold without hindrance and detailing the ownership structure of Cifidex.

The firm carrying out the audit said Enemalta was not aware of the identity of the beneficial ownership of Cifidex, and therefore it might not have known that it would be acquiring an investment from an entity with a beneficial owner that may have sat on the board.

“[Mamo TCV advocates] would have expected more rigorous due diligence procedures to have been conducted by Enemalta… in order to allow it to identify any potential conflicts of interest,” the report reads.

The report states that Enemalta knew that Cifidex was still in the process of itself acquiring the investment for €2.9 million.  “There appears to have been knowledge within Enemalta that this investment was originally acquired by Cifidex for the Cifidex Acquisition Price.”

Among its conclusions, the auditors said that the internal policies and procedures adopted by Enemalta were not of the highest standard, partly because some policies and procedures did not formally exist in written form, and there was no formal adherence to any written policies and procedures by Enemalta officials during the investment process.

“Enemalta was directly responsible for the entirety of the project, and accordingly would have done well to apply a more rigorous due diligence procedure,” the report states.

It also states that during the period in question, directors in decision making roles were themselves not involved in any wrong doing capable of giving rise to liability on their part, and their continued performance of their directorship duties would not “on this basis” impact the legal standing of Enemalta today.

Enemalta was ordered to publish the internal audit report in response to a freedom of information request filed by the Times of Malta and later taken before the Information and Data Protection Commissioner by the Daphne Caruana Galizia Foundation. 

Lawyer Therese Comodini Cachia filed the appeal as part of a legal support programme for journalists led by the foundation.