The following article was first published on The Times of Malta by John Vassallo last December. He analysed just how rotten the Electrogas deal was. Now we are waiting for a criminal trial that may show the deal was, for some, worth killing for.

The link to the original article as published is here. It’s worth another look.



I have begun this essay about the shenanigans around the production and sale of Malta’s Energy Supply on several occasions but never finished it nor published it. The reason why I never published this essay  is because I have been involved with Malta’s Energy Sector for a number of years between 1996 and 2008, in my professional capacity as Director and Head of the European Affairs office of the main supplier of Malta’s power station, and closely connected with Malta and its politics generally after 2008.

My connection with the history of the sale , construction and commissioning of the Delimara power station , its replacement  and the recent revelations concerning undisclosed transactions, redacted contracts, long term gas supply contracts from undemocratic regimes as well as secret Panama and Dubai accounts now known to have been opened by the Government Ministers and members of the Consortium involved in the transactions on the other side with promises to transfer given amounts over a long period of time in the future, have changed my decision to remain silent .

I have decided to share what I know, what I do not know but guess or deduce through my training as an Internal Auditor with a big Multinational company during the years 1975-1985 and my experience as head of the European Government Affairs and Legal Services of General Electric which involved me with numerous cases of transfer asset robbery, of bribery of foreign officials investigated and punished around the world.

The Delimara power station was bought by the Maltese Government, using the European Funding programme run through the Financial Protocol with the Italian Government during the period preceding Malta’s  EU membership. Since the Italian funds dictated that products acquired with such funds should originate preferably from Italy and since General Electric, the World leader and competitor of Siemens, in the production and installation of power stations , had a power station production facility in Italy, it could tender for this project . GE won the tender to develop, build and install the Delimara Power Station.

The project was in its final stages of construction and commissioning before I got involved. What happened was an accident that occurred during the commissioning stage with an explosion and damage to part of the pressure vessels provided by a Dutch sub-contractor . This accident stopped and delayed the commissioning and start-up of the plant. The buyer, the Government of Malta, asked for damages according to the contract. This is where my office in Brussels got involved and my involvement with Malta’s Energy sector begun.

During a period of several months, repairs were made, penalties were paid, and commissioning resumed. Things like this happen in engineering works and delays are not abnormal. Everything was resolved. The plant came into operation in 1994 and served Malta well for many years.

During my involvement I learned that the plant was planned to be built and run on fuel oil, but the design and investments included all that was necessary for it to be increased to double the size by the addition of a second turbine,  since piping, cooling, and transmission connections as well as space were reserved for an extension. The plant and its planned second turbine were also built to specifications that would allow an easy transformation from fuel oil to gas.

Thus, what should have happened was a planned extension and transition from fuel oil to gas and a planned closure and mothballing of the Marsa power station that was over 100 years old. The Marsa power station had also been originally a GE turbine and lasted almost a full century providing energy using coal and heavy fuel. it was high time to close it.

That this plan was never followed remains shrouded in mystery and has caused me consternation and left me highly suspicious that all was not correct. There was something rotten in the way subsequent Maltese Administrations dealt with the Energy Issue in Malta.

The previous Administration procrastinated, failed to provide agreements to have gas supplies and to transform the existing turbines to gas. Not only did it not do these changes but , when extra power requirements were called for because of the growth of the Maltese Economy it chose to take another Policy direction than the gasification of existing plants and the utilisation of the existing investments to double the capacity of the existing power station. Instead it went for an interconnection cable system with the mainland grid and the call for tender to buy a set of smaller diesel turbines that ran on heavy fuel, to respond to the increased demand for energy. The BWSC project came on stream in 2012 and the Interconnector in 2014.

An interconnector is a good thing because it provides extra security should our stand-alone system were to break down. It also allows Malta to buy energy from sources like Nuclear, Hydro, Wind, Solar, Coal, fuel oil or gas fired stations around Europe at prices that are much lower than our own power stations can ever reach. Larger European systems built around larger turbines and run by companies owning several turbines and hence able to spread their overheads and other costs on much larger volumes can sell energy at much lower prices. The European grid allows buyers of electricity to select on the open market the going prices which can be as low as 3 -6 cents or as high as 15-17 cents per KWH.

In fact, the price paid by the consumer is higher than the price of electricity on the spot market since between the spot market and the user at home or in a factory or shop there is the intermediary- the electricity suppliers in each country. These suppliers have to bring the service from the power station to the grid and from the grid to the home and for this service they need to charge and to make a normal profit.

However as I look at my own bills here in Malta and compare them to the bills I receive in my other properties in Sweden and in Germany as well as in the rented flat that I had in Belgium when I lived there I see that that the Swedes   and the Belgians pay around 4 -6 cents per KWH, the Germans 22.30 cents per KWH and in Malta I pay an average of 30 cents per KWH based on the mix of low price at 11 cents and high price bands at 60 cents.

Part of the higher prices in Malta’s electricity when compared with  Germany’s or Sweden’s can be explained away as a result of the size of the local market and the overheads required to manage and run the production and distribution. Yet there is another reason why we pay so much more and the difference is too large to be explained away.

The recent events following 2013 have drastically changed the picture and the number of red flags that appear in the events that took place since the election in 2013 indicate that , instead of being able to charge the consumer an average of the going interconnector price and the production costs of the Maltese power stations which would be something in the region of 15-20 cents per KWH, we are being charged double that amount.

Why has this happened?

My professional experience tells me that the policy changes made in the years 2006-2012 when the gasification and extension of Delimara was shelved and the interconnector and BSWC plants chosen was one cause.

This was a policy and political decision that can be discussed, questioned or disagreed with but it was a decision good or bad that changed the pricing of energy.

The second and much more serious changes that caused this change to the price of energy to remain ten times that of Sweden and 50% higher than that of Germany ( countries where the minimum wage is triple or double that of Malta ) was the daylight robbery of the Maltese people by the politicians and businesses responsible for the Energy sector in Malta during the period 2013 to today.

The Minister and the chief negotiator, as well as the selection committee head, who, coincidentally, was also the financial adviser to the Energy Minister and the Chief Adviser to the PM opening their secret Panama accounts, should have known that contracts for gas, of sale of existing power stations to China and of selecting to mothball a power station that was ready to be transformed to gas, that worked perfectly that was only 20 years old when power stations have an industrial lifetime of between 55 and 75 years, was a crime. It was just throwing away a valuable asset for no reason.

For no reason?

I think that my internal auditor experience and my knowledge of the Energy business in Europe tells me that there was a very clear reason. This reason was criminally motivated, and it was clearly to carry out a plan that included secret companies and trusts in Panama , Dubai and New Zealand through which to obtain kickbacks. It included a planned new construction through investment by a consortium of Maltese and foreign businessmen, of Siemens and of the Azerbaijani gas supplier for a long-term agreement that would take out of the Maltese coffers as much cash as possible over an 18-year period.

The fact that no proper tender was issued for the new power station nor for the gas supply or the rental of the gas supply vessel is one flag. The fact that the supply of energy produced by the newly built power station was guaranteed to be purchased by Malta at a price that was double or even triple that of the going rate of electricity on the European grid at the time was a  second red flag.

That Siemens, once found guilty of having a slush fund for bribery, who was caught and condemned for bribery of foreign public officials and whose management had to resign, actually joined this consortium on the conditions of the redacted contract that was made public should have raised red flags within that company. Why did Siemens join despite these red flags? Where were the Siemens’ lawyers and management?  Had GE been approached to build this replacement power station on the conditions that have been made public ( possibly other even better conditions are still secret or in the redacted parts of the contract) GE lawyers would have stopped the deal because of US law and European Conventions prohibit such a contract. Yet Siemens joined and is still a partner. Of course, having a power station over priced to begin with, bank guaranteed by the Government of Malta itself , the buyer, this reducing all capital risks for the supplier, and paid with guaranteed prices for all energy it produces over 18 years at prices double or more than the market spot price is a fool- proof agreement. Such an agreement can only be criminally tainted. It is not a normal standard.

Why did Malta enter into such an Agreement that is loaded in favour of the seller? Why did Malta buy gas from Azerbaijan at inflated prices paying above the spot market prices. ?

Well the 17 Black information that has just come out through Reuters gives us the answer.

The plan was to suck out of the Maltese coffers as much money as possible through commercial contracts, charging the local population 30% or even 100 % more than the going spot price for energy over several years and using Malta sovereign guarantee to reduce all risks for the consortium.

I have only mentioned Siemens and Socar until now. Socar I imagine does not care nor does it submit itself to the same controls and ethical standards like the rest of us . We know its owners and their history. We know that the heads of the Maltese government met with the Azeri leadership in private meetings without notetakers nor any civil servants or press present some time before this deal was entered into.

Siemens on the other hand has taken a grave risk with this consortium partnership and , I am sure, that the German authorities will investigate the agreement and the 17 Black information and force Siemens to either leave the consortium or compensate the Maltese people for the robbery. Where were the internal controllers and the lawyers of Siemens ahead of this deal.? Why have they remained silent? This is a serious breach within the very EU of which Germany and Malta are members.

But what about the Minister and chief negotiator and what about the Maltese members of the consortium . One of the partner companies is directly involved as the owner of 17 Black. The red flags that should have applied to Siemens, the red flags that would have forced GE lawyers to block the deal had GE been invited to join, the same red flags should have and probably did flutter in the offices of the three Maltese consortium partners too.

These are seasoned businessmen and financiers and they do not loosely place their capital at risk. Apart from the guarantee of the Maltese government  which reduces their risk , the conditions of the deal are so favourable to them that it is beyond normal business conditions . Something is very smelly and the entire deal stinks of corruption. Are the consortium partners party to the corruption or just innocent businessmen who have fallen prey to political manipulation?

History, police investigations in Germany or via an Interpol/Europol independent investigation will one day disclose the extent of the robbery that Malta and its people have suffered in this Energy saga.

With hindsight the normal course of events would have been the following: First the existing 1994 plant should have been extended in early 2004-2010  and a gas supply via a pipeline or a gas tanker as today established. Then the Interconnector should have been built which it was. In this way Malta would have had a sufficient and much cheaper supply of Energy than it has today.

Moreover, this solution would have been less than one fifth of the price Malta actually paid to purchase the BWSC plants in 2012, the Electrogas plant in 2014 and the gas contract via Socar in 2015.

Malta would have owned a clean, modern plant and would have had the choice of buying from the European grid when the spot price was better than our costs. Today we have spent between 500 and 750 million Euros uselessly, are burdened with an 18 year obligatory purchase of supplies we may not need. We are burdened for 18 years with a gas supply contract at almost twice the price of gas which we could have purchased directly. We would not need to have recourse to China to buy out the unnecessary diesel based BWSC units . We, the Maltese Treasury, our own Government , is paying out all these extra monies to foreign and Maltese businessmen who either are making an abnormally and questionably high profit margin or are paying commissions , advisory service fees through accounts that have been made public or through accounts we do not know about.

We, the public, the final consumer is paying electricity at ten times that of Sweden or Belgium and has to keep paying through the nose unless something is done to correct the situation.

The items robbed, or the damage caused to Malta includes the following:

Bad Policy decisions costing millions and damaging health. Years of heavy fuel power production when the Delimara plant could have been run on gas. Damage is pecuniary since gas is cheaper than oil and is also moral since the health of the Maltese people has suffered by pollution and air particles,

Asset stripping and destroying valuable assets in order to create artificial need of replacement. Loss of Maltese National investment worth several hundred millions. Mothballing of Delimara power station after only 15 years of industrial life. It had another 50 years left . Damage is pecuniary.

Bad Policy decision or pre-agreed contract to favour certain investors to the detriment of the general public. Unnecessary purchase of a series of small diesel turbines which were later sold to China through intervention of a Chinese middle man who opened a Panama account at the same time as our Minister and chief negotiator in the Prime Minister’s office.

Investment and long-term agreement in new Siemens power station by Consortium . Cost includes Maltese Government bank guarantee. Over pricing of gas purchase, over pricing of gas vessel lease, over pricing of long-term energy supply agreement. This is probably the greatest premeditated robbery of all times in Maltese history. From the very start of the project, the tender process, the choice of suppliers, the gas long term supply agreement, the leasing and refurbishing of gas supply ship all point to the intention to defraud the Maltese public and to skim each contract involved to the tune of several hundred million Euros.

The latest NAO Report , the 17 Black connection between one of the Consortium partners and the Panama Accounts of Energy Minister of the time and the Governments chief adviser and Chief of Staff to the PM are just the few items of evidence that have reached the public eye. The NAO report is local and normal for a country that brags about the existence of the Rule of Law. The 17 Black disclosures , the Panama Accounts and the incriminating emails that link the Accountancy firm that opened these accounts, that sent these emails and that acted as adjudicator in the tendering selection process at the start of the gas power station crime have only reached the public domain through a leak of private company emails by an employee of the Panama Financial services law firm of Mossack Fonseca. Mossack Fonseca is disbanded, its founders and directors and many members of its staff are in jail. The world has been shocked by the Panama Papers revelations with Prime Ministers in Iceland resigning, Ministers resigning or being hounded in other countries. Many private citizens and companies which had been discovered by these links and many countries including just this week the raid on Deutsche Bank in Frankfurt and possibly also in Malta, have been discretely punished and fined by their national tax authorities and police forces.

Our Minister has not. Our Accountancy firm has not. Our Chief adviser has not. Our Businessmen involved in this asset stripping , contract skimming, attempted or planned bribery, whether paid or not is still unclear, have not. Why may we, the common citizen, whose assets have been plundered, whose energy costs could have been several hundred millions cheaper, not be entitled to a correction in the coming years. These crimes cannot be just swept under the carpet. The bad policy decisions by former governments and the planned heist carried out to their citizens’ detriment  by suppliers to government  and  by  members of the present government always get punished. The policy errors and maybe even collusion with industry to defraud by the previous governments were punished through the ballot box in 2013 and 2016. The policy errors and planned fraud and robbery by the present government and its suppliers abroad and in Malta have not yet been punished . The German supplier will soon be investigated by the German authorities, so we can rest assured of justice being done. The Azeri and Chinese suppliers and purchasers will probably be only punished if the Maltese Authorities will one day awaken . Their own Governments will certainly do nothing against these companies. They probably own them. The Maltese suppliers and the Maltese Government persons involved are at present protected . they are allowed to get away with a get Out Of Jail Free card offered by the Prime Minister. They are offered a fig leaf by the on-going investigations by magistrates. Whether they are being investigated by the police we do not know. The police should have investigated them already when the Panama Papers were leaked or when the gas agreement or the 18-year energy supply agreement were signed, or even when the 17  Black information was released. But here we have absolute silence.

Absolute silence does not equal absolution nor amnesia. Utterly rotten business transactions where National and common assets are plundered in the way described above in other countries are usually questioned , investigated and corrected through fines, imprisonment or other punishments and the obligation to repay the losses to the general public coffers which suffered the loss i.e. to us the general public. When will this happen? Must we have a  more obvious smoking gun than the ones we already have or clearer evidence of premeditated fraud than the circumstantial evidence that any good lawyer, good accountant, good business man recognizes immediately as a flawed deal?