On 11 April 2013, Enemalta published a call for Expressions of Interest and Capability (EoIC) for the
supply and delivery of natural gas and electricity. Following the shortlisting of candidates, Enemalta
issued a Request for Proposals (RfP) on 6 July 2013. The ElectroGas Malta Consortium was selected
as the preferred bidder on 12 October 2013. Subsequently, ElectroGas Malta Ltd entered into a
series of contracts with Government and Enemalta. On 30 July 2015, the National Audit Office (NAO)
was requested to investigate the process leading to award and the contracts entered into.
The issues raised in this press release only present the essence of the complexities that
characterised this audit. This review covered all aspects of the project, from conceptualisation to its
eventual execution, its financing, state aid implications and comparison to rates charged for
electricity sourced through the interconnector. A far more comprehensive account of all these
aspects, and others, is provided in the full report that is being published. In order to make the report
more accessible, an abridged version is also being issued.
The key concern that emerged from the NAO’s review of the EoIC evaluation process 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 RfP despite similar shortcomings. Notwithstanding the positive aspects noted with
respect to the RfP, the NAO’s attention was drawn to major changes effected during the bidding
process, such as revisions to take or pay obligations and the concept of security of supply, which
shifted risk from the bidders to Enemalta and Government. In terms of RfP evaluation, although the
NAO identified points of divergence in the allocation of marks, these bore no effect on the outcome.
However, of concern 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
From May 2014 onwards, ElectroGas Malta Ltd, Government and Enemalta, as well as other parties,
entered into various contracts, including the Power Purchase Agreement, the Gas Supply Agreement
and the Implementation Agreement. The term of these Agreements was for 18 years from
achievement of the first phase of construction of the energy facilities. Although the project was to
be completed by 14 April 2017, this target was not achieved until 28 September 2017. Delay charges,
capped at €18,000,000, were levied by Enemalta on ElectroGas Ltd. In terms of supply, Enemalta was
to pay for energy and gas made available, thereby compensating ElectroGas Ltd for capacity, and
amounts delivered. Fixed rates were to apply for the first five years of the term, following which
indexed pricing was to come into effect. Energy was to be sourced from the new plant, Delimara 4,
while gas was to supply Enemalta’s converted Delimara 3 plant.
Shortly after the signing of the supply agreements, Gasol plc, the lead member of the ElectroGas
Consortium, withdrew from ElectroGas Ltd, transferring its shareholding to the remaining members.
Although the change in shareholding was authorised by the Ministry for Energy and Health, and
Enemalta, the NAO established that this was not in line with the prevailing contracts in force at the
time and specifically breached provisions stipulated in the Implementation Agreement.
Government’s involvement in assisting ElectroGas Ltd secure financing for the project first emerged
in mid-2014, when it became evident that for ElectroGas Ltd to obtain funding, the Security of
Supply Agreement (SSA), whereby Government would assume Enemalta’s role in the supply
agreements in particular circumstances, was to be in effect. Until the European Commission’s
clearance of the SSA in terms of state aid, Government consented to provide a guarantee to assist
ElectroGas Ltd. Government guarantees were entered into with respect to the €110,000,000 bridge
loan facility, later revised to €450,000,000. Fees charged by Government exceeded €11,000,000.
Following the Commission’s clearance, the SSA was entered into, which led to financial closing in
January 2018, repayment of the bridge loan by ElectroGas Ltd and the release of Government from
From April 2017 to June 2018, ElectroGas Ltd invoiced Enemalta €13,800,000 for gas availability and
€45,900,000 for gas delivered. In terms of energy made available and energy delivered, invoiced
amounts were €53,600,000 and €111,500,000, respectively. In excess of 1,410,000MWh were
delivered through Delimara 4, which resulted in a rate of €78.96/MWh. During the same period,
Enemalta sourced over 930,000MWh from the interconnector for a total cost of €57,400,000 which,
when adjusted for other costs, implied a rate of €61.75/MWh. In addition, the NAO identified ample
scope for improvement in purchasing decisions when sourcing energy through the interconnector.
To view full report (.PDF) please follow link.
To view abridged report (.PDF) please follow link.