PN accuses Labour of negligence in selection of ElectroGas

PN calls on government to explain why Gasol financial woes went unnoticed during bidding process for new power plant project 

The Opposition yesterday lambasted government for ignoring the financial troubles of the majority shareholder in the ElectroGas consortium, which was entrusted with the gas-powered power station project at Delimara.

The Nationalist Party described Gasol’s exit as “the latest in a string of worrying developments that are plaguing the project”.

On Friday, the West African energy firm Gasol, which had only recently delisted from the London Stock Exchange, pulled out of the Labour government’s flagship LNG project, citing financial difficulties.

The PN called on government to explain why the company’s troubles went unnoticed in the bidding process.

“The new power station was a cornerstone of Labour’s electoral campaign. Joseph Muscat has pledged his political future on delivering this project and delivering it within a two-year timeframe. In order to meet this unrealistic deadline, government cut corners in the procurement process and in the development application process,” the PN said.  

Noting that the procurement process had been solely based on an expression of interest and was not subject to a full tendering process, the PN said: “the evaluation of the bidders failed to pick up the fact that Gasol, one of the partners of the consortium, was facing financial problems.”

On Friday, the ElectroGas consortium said that Gasol was removed to “maintain the long-term stability of the project company which will supply energy and natural gas in accordance with its commitments to Enemalta and all stakeholders”. 

The most recent financial statement of Gasol – which held a 30% stake in ElectroGas – reported a negative equity of €12.8 million and accumulated losses of €96 million, with independent auditors warning that the company did not hold enough cash or liquid assets to meet its commitments. 

“This fact should have been picked up by those assessing ElectroGas’s (Malta) bid. Government chose to ignore this reality and pressed ahead with selecting ElectroGas (Malta) despite this very serious shortcoming,” the PN charged.

Rules governing public procurement, the PN said, stated that all partners in consortia were bound to remain in the consortium until the conclusion of the contracting procedure and must include the same partners for the whole performance period of the contract. “The performance period of this contract has not elapsed. Therefore the departure of one the lead partner should not have normally been considered and approved.”

The PN also asked who had approved the significant change in the consortium’s formation and whether the Director General of Contracts had been involved in the process.

It also called on government to publish all legal and technical advice it might have received and questioned whether government received detailed submissions from the consortium explaining how it will cover Gasol’s functions and financial obligations.

Minister reassures project is ‘on track’ 

In an attempt to claw back government’s dented credibility on the LNG power plant, energy minister Konrad Mizzi said that despite Gasol’s exit, the project remains on track. 

Referring to Gasol’s exit as the “recent consolidation”, Mizzi reassured that the change will have no impact on project timelines, construction and provision of power and gas to Malta and the Maltese people.

 “ElectroGas Malta’s recent consolidation of its structure demonstrated commitment by world class organisations to the project. These include engineering and power plant giant Siemens and gas specialist SOCAR,” Mizzi said. 

He also insisted that the specialisation, skills and knowledge required to implement and operate the power and gas facilities had not changed and were still vested in ElectroGas through Siemens and SOCAR, the Azerbaijani state energy company.

“Construction, operations, maintenance and all other contracts remain unchanged,” Mizzi added. 

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.

ElectroGas ‘committed’ to deliver project  

ElectroGas has said that Gasol was removed to “maintain the long-term stability of the project company which will supply energy and natural gas in accordance with its commitments to Enemalta and all stakeholders”. 

The three remaining partners – Siemens Financial Services, Socar Trading SA, and GEM Holdings Limited – are now equal shareholders, with Siemens the new lead member. 

“We remain fully committed to its obligations to deliver the project that will introduce natural gas for power production in Malta, and all the environmental benefits associated with it, within the agreed timeframes,” ElectroGas said. 

The government has controversially granted ElectroGas an €88 million state guarantee to cover the consortium’s €101 million loan from Bank of Valletta. 

Mizzi has argued that the guarantee was necessary “in the national interest” until the government receives clearance from the European Commission that the Security of Supply Agreement it entered into with ElectroGas satisfied EU requirements and does not constitute incompatible state aid.