The Malta Independent 15 November 2018, Thursday

Delimara power station: Brussels finds no violation of procurement rules

Sunday, 14 February 2016, 09:30 Last update: about 4 years ago

The European Commission has found “no elements indicating a circumvention of EU procedural procurement obligation” when it came to the procurement process applied to the new Delimara power station or regarding the departure of Gasol as one of the Electrogas consortium’s partners.

European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs Elżbieta Bieńkowska (photo below) this week confirmed that neither process had violated EU rules.

Since at least July of last year, the Opposition has been questioning the legality of the changes in the Electrogas consortium that is to build the new power station, arguing that in terms of general procurement rules: “All partners in the joint venture/consortium are bound to remain in the joint venture/consortium until the conclusion of the contracting procedure. The consortium/joint venture winning this contract must include the same partners for the whole performance period of the contract other than as may be permitted or required by law.”

The Opposition has accused the government of cutting corners in the procurement process in order to meet the project’s two-year deadline. It has argued that the procurement process was based simply on an expression of interest and did not proceed – as should have been the case for a project of this nature – to a full tendering process.

At the time of Gasol’s departure from the project last summer, the Opposition argued that: “The performance period of this contract has not elapsed. Therefore the departure of one of the lead partners should not have normally been considered and approved except in exceptional circumstances as may be ‘permitted by law’.”

But this week Commissioner Bieńkowska poured cold water on the allegations, saying that Brussels found no basis for either of the Opposition’s procurement complaints.

In reply to a parliamentary question tabled way back in September by Nationalist MEP David Casa, Commissioner Bieńkowska this week said: “…on the basis of the information available to them, the Commission services have no elements indicating a circumvention of EU procedural procurement obligation.

“On the one hand, contracts for the supply of energy or of fuels for the production of energy are excluded from the scope of the currently applicable ‘utilities’ Directive when awarded by entities operating in the energy sector. On the other hand, a power purchase agreement which entails the obligation for the investors to build and operate a new power plant constitutes a concession contract which is also not covered by Directive 2004/17/EC, and therefore subject to the general principles of the Treaty on the Functioning of the EU.”

With respect to the departure of Gasol from the consortium, she explained: “As regards the recent change in the composition of the consortium to which the contract was awarded, the Commission services do not have any information at this stage relating to a possible breach of the Treaty principles as concerns public procurement. They would of course examine any element that they would receive in this respect.”

Last July, Electrogas announced that Gasol Plc – which formed part of the new Delimara power station building consortium – will not form part of a new and improved company structure.

The company announced that its new structure will result in three partners with an equal shareholding (33.333 per cent) in ElectroGas Malta: Siemens Financial Services, Socar Trading SA and Gem Holdings Ltd. Siemens will serve as a lead member. Gasol previously held a 30 per cent stake in the company, the same as GEM Holdings, while Siemens and Socar held 20 per cent each.

 

Project awarded after a very structured competitive process – Energy Ministry

Contacted yesterday, an Energy Ministry spokesperson said that the Commissioner’s comments showed that the project had been awarded after a “very structured competitive process”.

The spokesperson added, “Despite Simon Busuttil’s constant attempts to stop the country from having a cleaner power station, the European Commission once again confirms that government is heading in the right direction even on this matter.

“The new gas and power project was awarded on the basis of a very structured competitive process which followed best practices. This process resulted in the selection of a world class consortium which is bringing the best technologies to Malta.

“One hopes the Opposition stops attempting further cheap shots against the interests of citizens.”

 

Brussels still assessing Electrogas’ state guarantee

The European Commission is meanwhile “still assessing” the government’s controversial loan guarantee to a number of banks in respect of Electrogas’ financing of the new Delimara power station.

The first guarantee, for €88 million, was made in June 2015 and the sum was increased exponentially to €360 million the following August.

European Commissioner for Competition Margrethe Vestager confirmed last month that: “The Commission is in contact with the Maltese authorities as regards the measures taken in relation to the financing of the comprehensive energy project, of which the new gas power plant in Malta is part.

“The Commission is still assessing the information submitted by the Maltese authorities. The temporary guarantee provided by the Maltese Government is part of the package of measures being assessed under State aid rules.”

From the Commission’s reply, it appears that the Commission is not only looking into the state guarantee but is also investigating the Security of Supply agreement the government has struck with Electrogas.

In fact, the Commission’s replies indicate that all may not be quite so rosy with the government’s Delimara financing arrangements. And given the Commission’s history of generally approving state guarantees for private sector power station projects, the delay appears to be somewhat inordinate.

Sources in Brussels, speaking with this newspaper last autumn, had confirmed that the European Commission is “likely” to give the Maltese government the green light to the Security of Supply Agreement for the ElectroGas power station project.

That green light may, however, come with certain caveats that may not go down well with ElectroGas, the company building the new power station and contracted to supply electricity to the country for the following 18 years.

Much, however, hinges on ongoing talks in Brussels between the Commission, the Maltese government and ElectroGas itself.

Energy Minister Konrad Mizzi had previously hinted that the EU may tweak the Security of Supply Agreement, without specifying what tweaks were actually under discussion.

Possible changes to the agreement imposed by Brussels, as applied in other cases, could very well be met with opposition from ElectroGas. Such changes may include assurances that any higher profits emanating from the project, other than those currently expected, including any unforeseen lower construction or eventual production costs, will be shared with consumers and taxpayers.

Once the SSA is given the green light from Brussels, the government will be freed from the state guarantee it has given to the ElectroGas loan, which the government insists is only a temporary measure to satisfy bank requirements.

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