What Could Be The Link Between Electrogas, 17 Black And The Panama Papers?
We now have confirmation; the Daphne Project is working on a massive trove of documents and emails from the Electrogas consortium behind the LNG power station in Delimara that had been leaked to Daphne Caruana Galizia a few months before her assassination.
Details of the deal, including of the entire contract, are expected to be published in the coming weeks, but everything at this stage points towards a complex web involving high-ranking government officials, big businessmen, financial consultancy firm Nexia BT and Azerbaijan.
Who is Electrogas?
One of the Labour Party’s major promises before the 2013 general election was the construction of an LNG power station, a move that it argued would both reduce electricity bills and result in cleaner emissions than heavy fuel oil. After the election, Enemalta issued a tender for the construction of an LNG power station and the sale of energy to Enemalta that was won by the ElectroGas consortium. ElectroGas was originally composed of four partners – Azerbaijan’s state-owned energy company Socar, German manufacturing giant Siemens, British LNG supply firm Gasol and GEM Holdings, which is owned by Maltese business giants Gasan and Tumas, as well as by Paul Apap Bologna – managing director of pharmaceutical importers Associated Drug Company.
Gasol was originally the lead partner of the consortium but it dropped out in 2015 after it ran into serious liquidity problems. Since then, the three remaining partners have been equal shareholders of the consortium, with Siemens replacing Gasol as lead partner.
The contract binds Enemalta into purchasing LNG from Electrogas every year for 18 years. The LNG is provided by Socar, which in turn procures it from Shell.
Konrad Mizzi was Energy Minister at the time, and a leaked FIAU report shows he had personally signed an agreement between the Maltese government and Socar for the supply of LNG to the power station, even though Socar was providing LNG to the Electrogas consortium and not to the government.
Why was the deal controversial?
Electrogas’ website as of the time of writing
The Electrogas deal was one of Simon Busuttil’s favourite punching bags throughout his four-year tenure as Opposition leader. The criticism originally centred around whether the deal had been agreed upon before the election and on how Prime Minister Joseph Muscat had failed to live up to a pre-electoral promise to resign if the power station wasn’t up and running within two years of his taking office. Later on, the Opposition’s criticism centred around the government’s refusal to publish the contract in full, on a €360 million state guarantee to cover Electrogas’ bank loans that has since been lifted, on the environmental impact on Marsaxlokk of the tanker temporarily providing LNG to the power station, and on the necessity of the power station itself.
Busuttil repeatedly argued that the government would save money by purchasing energy solely from the Malta-Sicily interconnector on the grounds that the market price of oil collapsed since the Electrogas deal was signed. However, the government countered that the deal will provide energy price stability in a volatile oil market, preventing it from having to go down the last PN administration’s route of adjusting electricity prices according to the oil price.
What did the Daphne Project reveal today?
Explanation by The Guardian
The newspapers involved in the Daphne Project started leaking details from the Electrogas contract as well as internal emails between the partners. We now know that Enemalta is paying Electrogas €131.6 million ($153 million) a year – twice the current market rate – to provide it with LNG and that, internally, Electrogas has agreed to buy this gas from its partner Socar for the first ten years. For the first five years, Electrogas is buying gas from Socar at a fixed rate of €9.40 per unit and for the the final five years, the price will be pegged to the Brent oil index, with each unit of gas costing 14% of the price of a barrel of oil.
However, Socar is not producing the LNG itself but rather purchasing it from energy giant Shell, and herein lies the rub. The Guardian has estimated that Socar is paying Shell around $113 million a year for LNG and then selling it to Electrogas for $153 million – pocketing a tidy $40 million in the process. Electrogas then sells the LNG to Enemalta for the same price of $153 million and the gas is then converted into electricity and distributed around Malta.
Energy experts have questioned the logic behind this agreement, arguing that Maltese taxpayers would have stood to save tens millions of euro had Enemalta agreed to purchase LNG directly from Shell.
A Freedom of Information request by The Times of Malta also confirmed that the committee which selected Electrogas in 2013 was composed of 25 people, including Nexia BT owner Brian Tonna and three other Nexia employees. The committee also included Identity Malta chairman Joe Vella Bonnici, Tax Commissioner Marvin Gaerty and Godwin Sant – a former Malta Resources Authority official who has been charged in court with tax evasion and money laundering in connection with the 2013 oil scandal.
After the committee gave the go-ahead to Electrogas, Nexia BT was tasked with drawing up a feasibility study of the project for the European Commission and with assessing Electrogas’ business plan on behalf of the Regulator for Energy and Water Services.
What is the link with 17 Black?
Nexia BT boss Brian Tonna was part of a committee that selected ElectroGas to build and run the power station
It is unclear at this stage, although it is interesting that the Daphne Project chose to kick off its stories by releasing an email Nexia BT had sent now-defunct Panamanian law firm Mossack Fonseca in December 2015 – as part of the process to set up bank accounts for the Panama companies of then Energy Minister Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri. Nexia BT’s email states that the two companies will be involved in businesses around the world and that they will be primarily funded from two Dubai companies called 17 Black and Macbridge.
A leaked FIAU report confirms that 17 Black had received at least three payments – one single payment of €161,000 from Mario Pullicino, the local agent for the tanker supplying gas to the LNG power station and two separate payments amounting to €1.1 million from an unnamed Azeri national.
This was the second time the Panama companies were linked to Azeri payments. Last year, Daphne Caruana Galizia claimed that a third offshore company (Egrant) exposed in the Panama Papers was owned by the Prime Minister’s wife Michelle Muscat and had received several payments from a Dubai company owned by the daughter of Azerbaijan’s ruler Ilham Aliyev. Muscat has decried the story as “the biggest lie in Maltese political history” and recently challenged the Daphne Project to dig deeper into it.
Questions are now being asked as to whether the three Panama companies, which have since been liquidated, had been set up to receive kickbacks from the Electrogas power station. Mizzi and Schembri have denied this was the case, but while Schembri said he set up his company to expand his private business interests, Mizzi insisted he had set it up for family planning purposes. Mizzi’s claim goes against Nexia BT’s email to Mossack Fonseca, which referred to the two Panama companies in the same breath.
How has the government responded to today’s story?
The government insisted that the Delimara power station, as well as a massive corporate shake-up of Enemalta, has resulted in Maltese consumers paying significantly lower electricity tariffs than they had under the last PN administration. It defended Enemalta’s decision to release a tender for both the power station’s construction and the supply of LNG, arguing that its decision “was based on information available to Enemalta at the time”.
“The contract was awarded following an open competitive process which analysed the final result on the basis of a long run average price offered by the bidders which took into account both the Capacity Payments and the Commodity Payments in arriving at the final result,” the government said. “The offer of Electrogas Malta Limited was 20% cheaper than that of the second-ranked bidder. For the purposes of awarding the contracts it was not material whether this difference in price was due to any particular component of the project, be it the cost of fuel to be used or the cost of construction. The criteria determined by Enemalta for assessment and evaluation of the offers received were available to all interested parties who were free to bid for the project and related contracts.”
The government added that the tendering process has already been scrutinised by the European Commission and by 13 international and local banks which loaned money to Electrogas.
However, the European Commission has confirmed that its role was limited to checking that Electrogas was not being overpaid by Enemalta from a state aid perspective.
“People living in Malta have benefitted from various aspects of this project,” the government said. “Domestic consumers living in Malta are paying considerably less for electricity than the EU average. Today, Malta is also benefitting from 50% less emissions and 90% less particulate matter having switched over to a cleaner and more reliable energy source.”
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