ElectroGas Malta, the private consortium that has struck a Power Purchase Agreement (PPA) and a Gas Supply Agreement (GSA) with the Labour government, will continue to receive regular payments from the state even if Opposition Leader Simon Busuttil makes good on his pledge to purchase electricity and gas from cheaper sources elsewhere if elected Prime Minister, The Malta independent on Sunday can reveal.
Sources who worked on the ‘secret’ Power Purchase Agreement with ElectroGas, an agreement which the government is still refusing to make public, have confirmed with this newsroom that one of the clauses stipulated in the contract clearly states that Enemalta will be bound to purchase electricity produced by ElectroGas for a period of 18 years, irrespective of market prices.
More importantly, this newsroom can also reveal that the secret contract gives Enemalta the liberty to purchase electricity and/or gas from other sources over the course of the 18-year agreement, but ElectroGas will still cash in “the difference between the hedged rate for 18 years with the government and the cheaper market price at the time of purchase.”
An expert in oil procurement speaking to this newsroom on condition of anonymity explained that the government must have conceded such terms for security reasons, rather than commercial considerations.
The expert pointed out that Enemalta needed a contractual clause through which it would be able to purchase electricity and gas from other sources in the eventuality that ElectroGas defaulted on its PPA for one reason or another.
This means that a security clause in the agreement that favours the government is also being used as a commercial measure that favours ElectroGas, unless gas prices happen to skyrocket over the 18-year contractual period.
It is not yet clear to this newsroom, however, whether ElectroGas managed to secure a counter-clause in the agreement that would give it the facility to charge Enemalta higher rates should the price of gas turn out to be higher than that established in the final, hedged 18-year electricity price.
As matters currently stand, Dr Busuttil’s electoral promise, made last Monday during his reply to Budget 2016, will not benefit the Maltese taxpayer should he become Prime Minister, since ElectroGas will continue to enjoy its unique and exclusive cash cow agreement - irrespective of where a future Busuttil government decides to purchase its electrical power and/or gas.
Even more interesting was the Prime Minister’s reply to the Opposition Leader the following day. On Tuesday, Joseph Muscat expressed dismay at Simon Busuttil’s pledge to dishonour the ‘secret’ power purchase agreement should he become Prime Minister.
Dr Muscat argued that his impression was that after the 2013 election, both parties had learnt their lesson and that they would in future honour commitments made by their predecessors.
But the Prime Minister stopped short of disclosing the clause in the ‘secret’ agreement — which would have rendered Dr Busuttil’s threat virtually harmless — allowing Enemalta to purchase electrical power and gas from other sources at cheaper rates - as long as ElectroGas gets its share through the compensatory mechanism.
While the Opposition once again this week reaffirmed its position that the power station project was a farce from the get-go, Dr Busuttil has never addressed the question as to what, exactly, he would do with the new power station should he find himself in power following the next election in two years’ time.
As concerns the ‘secret’ PPA signed between the government and ElectroGas, this newspaper is of the firm belief that the government should come clean and publish the agreement’s salient points, while also making the full contract available to the Leader of the Opposition to view under the auspices of the Security Council.