Tourism Minister Konrad Mizzi today said the government welcomed a National Audit Office report on the Electrogas power station deal, despite the serious shortcomings flagged by the NAO.

Konrad Mizzi called the shortcomings pointed out by the National Audit Office report minor and 'administrative', and said that despite the concerns pointed out by the NAO, he considers the project to be a "blueprint for best practice".
He was addressing a press conference this evening. 

Minister Konrad Mizzi - who was responsible for energy at the time of the contract also said the report showed that the entire process had been “fair and transparent”.

Asked by The Malta Independent about the shortcomings that the NAO pointed out in its report on the Delimara gas power station project, and where exactly the report says that the project is a blueprint for best practice, as Mizzi had said it was in reaction to the publication of the NAO's findings, Mizzi said that the report says "clearly that whilst there were administrative shortcomings as in every process, the end result of the evaluation was not going to change" and that the evaluation process would still have led to Electrogas being chosen as the winning bidder.

He also pointed out that the auditor clearly stated that the procurement process was "fair and transparent" and that the criticism presented by the NAO was "very different" from that presented in the BWSC case, which was "fundamental" in nature.
The key concern that emerged from the NAO's review of the evaluation process of contracts awarded to ElectroGas Malta Ltd by Enemalta Corporation was the inconsistent approach at times adopted in the assessment of submissions. While the NAO acknowledges that certain submissions were eliminated on sufficient and justifiable grounds, others proceeded to the Request for Proposals (RfP) despite similar shortcomings, the NAO said in a statement.  The review did say that these points of divergence bore no effect on the outcome of the awarding of the contract.

The NAO report however also noted that there were shortcomings related to due diligence, with checks undertaken deemed insufficient. Also of concern was the lack of evidence of Enemalta's consideration of alternative procurement models and it is in this context that reservations regarding the design of the project emerge, the NAO said. 

Pushed by this newsroom on whether, in Mizzi's view, the project constituted the true meaning of what "best practice" was, despite all these shortcomings, Mizzi responded that it does.

He pointed out that the project was supported by a number of financial institutions and has been lauded by a number of entities, and noted that one must look at the outcomes and compare the present day to the starting date of the project.  He said that Maltese were now taking advantage of the second lowest tarrifs in the EU, and that the money that Enemalta had been draining from the government had been transferred into other sectors as a result of this project.

It should be noted that nowhere in the NAO's 500 page or so report is there any description of the project as being carried out in "best practice". In a short live comment on Facebook, Minister Konrad Mizzi - who was responsible for energy at the time of the contract - said the report showed that the entire process had been “fair and transparent” and described it as “an example of best practice.”

He said the report brought to nothing the Opposition’s claims on state aid and corruption.

Konrad Mizzi said once again that he had no association with the once secret company 17 Black.  He said that the auditor general had found no instance of corruption in the granting of the contract for the Electrogas project, and added that there "is no relationship" between him and the companies 17 Black and MacBridge.  

"I invite you all to search all around the world and to chase every bank in the world instead of chasing me, but you are not going to find anything", Mizzi told media.  

Asked whether he knew who owned 17 Black, Mizzi said that he was not aware of the owner; "my guess is as good as yours", he said before reiterating that he had never planned to receive any illicit funds and had no association whatsoever with the two secret companies.

The minister said that there is an inquiry ongoing into 17 Black like there was into Egrant, and he said that he is sure that once the results of that emerges all will become much clearer then.

It was recently uncovered that director and CEO of the Tumas Group Yorgen Fenech, who is a director and shareholder in the Electrogas consortium, is the owner of 17 Black. Electrogas runs the gas power station. 17 Black was listed as the 'Main Client' and 'Possible Payer/Sender' of Tillgate and Hearnville, the offshore Panamanian companies owned by OPM Chief of Staff Keith Schembri and Tourism Minister Konrad Mizzi, leaked emails obtained by German paper Süddeutsche Zeitung, and published by the Daphne Project, showed. Yorgen Fenech has not denied the claim that he is the owner of 17 Black. 

Former Enemalta CEO - New source of electric generation required

Former Enemalta CEO Frederick Azzopardi, also speaking during the press conference, remarked that the government should be looking at a new source of electricity generation.

He explained that the peak energy two years ago was estimated to be that of 434MW whilst in 2017 it had exceeded that amount and peaked at 488MW. Today, Azzopardi said, we can barely ensure the security of supply.

When the interconnector is not available due to maintenance works, operational restrictions or network congestions in Italy, which Azzopardi noted is a real risk, Malta can only guarantee 459MW without the emergency plants. 

If the interconnector is not available, the electricity demand required last year would not be available. Azzopardi said electricity supply would not be enough.

Technical expert - 'A simplistic accounting exercise'

Technical expert, Johnathan Scerri, speaking at the press conference explained that the pricing structure as calculated by the NAO is "disappointing and totally incorrect."

The Electrogas pricing in the NAO report was calculated between the period April 2017 and June 2018, the expert said. Scerri explained that this was a transition period whereby the power station was operating in an open cycle, not at full efficiency.

This, Scerri explained, meant that the prices were skewed and at some points abnormally high. He also said these prices and transition period were established by the contract.

Furthermore, he said, that the interconnector prices as calculated by the NAO were not the actual market prices. The prices represent the Enemalta's conscientious decision to buy electricity only when prices are lower.

He compared this to buying an item on sale and saying that prices are always low.

Without the Electrogas power station, Malta would have to buy from electricity from the interconnector at all times, irrespective of the price, Scerri said.

Scerri also said the comparison of the Electrogas versus interconnector prices were not like with like and was 'unexplainable'. The Electrogas electricity prices included fixed costs and variable costs whilst the interconnector prices did not include fixed costs.

Fixed costs include operational risk, depreciation, interest rates, insurance and maintenance, Scerri explained. The fixed costs would increase the interconnector costs by 54 per cent plus another 3 per cent for transmission losses and 1.5 per cent for transformation losses.

Furthermore, he said the report did not consider most technical considerations. "The argument that Enemalta could have bought electricity better is a simplistic accounting exercise with no engineering considerations."

Scerri also said that at the moment prices of electricity from the interconnector are higher than that from the gas run power station. 

In a statement, the Ministry for Energy and Water Management, now headed by energy minister Joe mizzi, welcomed the Auditor General’s report conclusions “that the gas power station was a necessary project for the country’s security of supply.”

“On the contrary of continuous baseless allegations by the Opposition, the Auditor General confirmed that the awarding of the contract was based on a fair competitive process with respect to the value of transparency,” the ministry said.

“Even though a number of minor administrative shortcomings were identified, it is now confirmed that the selection of the ElectroGas consortium represented the most advantageous and cheapest offer for consumers. 

In the whole process, which was also scrutinised and approved by the European Commission, no cases of conflict of interest have resulted.”

Tourism Minister Konrad Mizzi later delivered a press conference, saying that the NAO report concluded that the process used was "comprehensive, well-structured and trasparent", describing the shortcomings listed by the NAO as being of a "minor administrative" matter which did not have an impact on the final outcome.

The report, Mizzi said, also "negates" criticism by the opposition, saying that the project "positively changed and transformed Malta economically and environmentally".