The new gas-fired power station project has suffered another setback, the PN said in a statement this afternoon, adding that government cut corners in the procurement process.

"Gasol, the leading partner in the consortium commissioned by government to build this power station, no longer forms part of the said consortium. This is the latest in a string of worrying developments that are plaguing this project. The new power station was a corner-stone 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 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, 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. These problems were highlighted by the same auditors of Gasol in their comments on Gasol's 2013 published accounts".

The PN argued that the auditors, when commenting on the accounts of Gasol, said "the group does not currently hold sufficient cash or liquid assets in order to meet its commitments as they fall due for the next 12 months.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.

"During the development application phase, a number of important studies, including a maritime impact assessment, were not carried out in order to expedite matters. The lack of these studies raises questions on the safety aspect of the project. The fact that this project, as revealed through recent statements, may lead to bunkering activities within the harbour, makes it more damning that the Maritime Impact study was not carried out.

"Despite doing away with these studies, the project still failed to take off and the two-year deadline was completely missed as the project faced new problems in part relating to the financing of the project".

Electrogas (Malta) was having problems raising the financing for the project, the PN added. "In order to resolve this setback, government issued a state guarantee to Bank of Valletta to cover an €88 million loan to Electrogas (Malta). This move is unprecedented and exposes the tax payer to risks which government is refusing to quantify. Again this move was necessary in order to keep this politically-important project alive. The political risk for the government was passed on to the tax payer in the form of a commercial risk".

"As a holder of that risk, the tax payer has now an even greater interest in having all the facts tied to this project, not least the facts surrounding the departure of Gasol, made public. The conditions pertaining to this loan were not published. Government has in fact refused to publish most of the documentation of this project. The publication of these documents becomes more imperative with the departure of Gasol".

The PN stated that general rules governing public procurement read: "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 performance period of this contract has not elapsed, the added. "Therefore the departure of one the lead partner should not have normally been considered and approved except in exceptional circumstances as may be 'permitted by law'".

"Government should therefore explain what procedure was used to allow Electrogas (Malta) to dispose of one of its lead partners. Government should also state who approved this significant change in the consortium's formation. Was the Director General (Contracts) involved in the process? Was legal and technical advice sought? If so, who provided this advice? Government should publish this advice. Did Government receive detailed submissions from the consortium explaining how the consortium is going to cover the expertise, functions and financial obligations that were going to be provided by Gasol? Were these submissions evaluated by government appointed experts? How long did the negotiations, between Government and the consortium, on this change in formation of the consortium take?"

Government should also take this opportunity to investigate how the poor financial health of Gasol escaped unnoticed during the bidding stage, the PN explained. "Whoever was responsible for this oversight should be held accountable".

"Given that the tax payer is now guaranteeing the loan, government and the Bank of Valletta should explain in detail the implications of this development on the state guarantee. Will the departure of Gasol impact in any way on the conditions of the bridge loan? Was the bank consulted prior to the change in formation?

"Government's statements on this project to date have been devoid of detail, relying usually either on press releases of Electrogas or politically-charged statements. Given the state of affairs, government should reassure the tax payer by providing clear and unequivocal replies backed by documentation. By government's own admission, this project has the potential of bringing 'economic turmoil'. In view of the risks involved, government needs to subject itself to full public scrutiny by the taxpayer, the same taxpayer who today is unwittingly and unwilling guaranteeing this project".

Gas and Power Project which led to reduced tariffs and cleaner air proceeding as planned - government

In reply, the government said the Nationalist Party still cannot accept the fact that tariffs have been reduced to the tune of 80 million euro per annum and that heavy fuel oil is being phased out.

ElectroGas Malta's recent consolidation of its structure demonstrated commitment by world class organizations to the project. These include engineering and power plant giant Siemens and Gas specialist Socar.

The specialization, skills and knowledge required to implement and operate the power and gas facilities have not changed and are still vested in ElectroGas through Siemens and Socar.

Construction, operations, maintenance and all other contracts remain unchanged.

The recent consolidation will have no impact on project timelines, construction and provision of power and gas to Malta and the Maltese people.

ElectroGas, through Siemens, Socar and GEM holdings, has strong financial backing and will deliver a world class infrastructure which will continue to contribute to the country's competitiveness and also reduce emissions significantly.