New Twist in Electro Gas Malta Investigation - Consortium with SOCAR Trading

The French National Financial Prosecutor's Office (Parquet National Financier or PNF) has received a request from Maltese non-governmental organizations (NGOs) to “initiate an investigation into money laundering, corruption, complicity and aggravated cover-up” against four French banks (BNP Paribas, Société Générale , Natixis and CIC) and the investment fund Rivage, which provided loans totaling approximately € 300 million for the Delimar liquefied gas (LNG) power plant near Marsaxlokk in southeastern Malta.

The essence of the accusations of Maltese NGOs is the provision of loans by French credit institutions to the consortium Electro Gas Malta Ltd (EGM), part of whose management was convicted of corruption in Malta at the end of 2019, and one of the shareholders, businessman Jorgen Fenech, has been under arrest since December 2019 on suspicion of involvement in the murder of journalist Daphne Caruana Galizia in the fall of 2017 due to her investigation into the work of the EGM consortium.

Note that the French PNF, created on December 6, 2013, has jurisdiction to prosecute three types of offenses: 1) offenses (corruption, abuse of influence, embezzlement of public funds, etc.); 2) serious financial fraud, money laundering and tax evasion; 3) offenses related to financial markets.

PNF has officially confirmed that it has accepted a request from Maltese NGOs, which believe that “financial intermediaries have obligations to combat money laundering and should, in particular, identify the beneficial owners of the companies with which they do business”.

It is worth noting that the scandal around the "dark cases" of the EGM led in early 2020 to a change of government in Malta, the initiation of several criminal cases, the arrest of Fenech and three others, the recent detention of Keith Schembri (former chief of staff of the Prime Minister of Malta).

Fenech, who has a hotel business in France and owns racehorse stables in that republic, also came to the attention of PNF in 2019, which is trying to find out if the economic activities of this businessman in France could lead to funds for the possible bribery of Keith Schembri and Konrad Mizzi (former Minister of Energy of Malta).

Malta's NGO Repubblika, as well as a foundation created by the family of the deceased journalist Daphne Caruana Galizia, also recently asked EGM's European shareholder, Germany's Siemens (33.33% in the consortium), to clarify “the company's awareness of possible money laundering when working with EGM."

Siemens head of corporate communications, Clarissa Haller, recently sent the following response to a Maltese NGO: “After repeated internal and external audits, Siemens is currently not aware of any indications of misconduct by Siemens, Siemens employees or Electro Gas Malta.”

As for Fenech, according to a Siemens spokesman, “when it turned out that Fenech owned the Emirati company 17 Black, which was involved in the financing of offshore structures created by Schembri and Konrad Mizzi, Siemens insisted on Fenech's dismissal from the Board of Directors of Electro Gas Malta."

EGM shareholders

In addition to Siemens, the consortium's shareholder is SOCAR Trading (33.33%) and the remaining 33.34% is owned by the Maltese GEM Holdings, which consists of several companies of this island state - Tumas Energy (headed by Jorgen Fenech) and Gasan Enterprises (they have 35 each in GEM Holdings, 17%), CP Holdings (a company of the Apap family of Bologna - 21.5%) and a separate company owned exclusively by Fenech - New Energy Supply Ltd (8.17% share).

It is noteworthy that immediately after Fenech's arrest, the representative of SOCAR Trading Turab Musayev was recalled from his post in EGM (he appeared in the correspondence with Fenech that appeared in the media), and later this year he was fired from SOCAR.

Since the investigation has not been completed and new details are revealed along the way, some members of the consortium are getting nervous.

So, on September 23, 2020 Gasan Enterprises (one of the Maltese members of the consortium) announced its desire to withdraw from the project and sell its 35.17% stake in GEM Holdings (the total share in the Electro Gas Malta consortium is 11.72%) due to the “current the situation related to the investigation of the murder of the journalist Ms Galicia”.

In the official statement of this company, it was argued that a small share in the consortium actually left Gasan Enterprises "overboard" important decisions of Electro Gas Malta and the company did not participate in any way and did not know about possible corruption steps, and was ready to assist the investigation.

It is noteworthy that following this statement, a Siemens delegation visited Malta, and the heads of CP Holdings and Tumas Energy were summoned to testify to the law enforcement agencies of Malta.

SOCAR did not comment on the progress of the investigation, but in the second decade of September it published the results of an internal investigation by Electro Gas Malta, according to which “no signs of corruption were revealed at any stage of the implementation of the project for the construction of a gas power plant in Delimar with the participation of Siemens Projects Ventures and SOCAR Trading.”

Project

The project worth 510 million euros for the construction of a new power plant with a capacity of 210 MW and a terminal for regasification of liquefied natural gas (LNG) has been implemented since 2013 by the consortium Electro Gas Malta - the winner of the tender of the Government of Malta.

At the end of 2019, following the resignation of Jorgen Fenech and his arrest, the consortium was headed by three new directors.

According to the consortium on September 11, 2020, Electro Gas Malta did not profit from the sale of LNG Enemalta (the state-owned electricity distribution company in Malta), as reported by the European media.

“We make money by charging a fixed fee for the electricity generated by the new power plant, and the fee is independent of the amount of energy that Enemalta buys from us. This kind of deal is an “independent power producer” business model and is common in large-scale energy projects. LNG prices were fixed until April 14, 2022, in accordance with the requirements of the tender, with the transition to a floating price based on a pre-agreed formula after that date,” the press statement says.

Note that in 2015 Electro Gas Malta signed a contract with SOCAR giving exclusive long-term rights to supply liquefied natural gas to Malta to supply the power plant.

The first batch of LNG was delivered to the island in January 2017. Electro Gas Malta will supply electricity and natural gas to the state energy company Enemalta for 18 years.

Earlier, the Guardian wrote that already from the beginning of LNG supplies, a corruption scheme was traced, because SOCAR bought the first volumes of liquefied gas from Shell (confirmed by SOCAR Trading) for $ 113 million, but Electro Gas Malta sold all this gas for $ 153 million, that is, 40 millions of dollars went "to the side" and so it went on for a long period.

As for the financing of the project to create the station itself, 80% of the coverage was provided by French, British and German banks under the guarantees of the Government of Malta. The banks prefer not to comment on the situation around this project.

The Maltese media wrote that during a certain period of the project implementation there were problems with the return of part of the loans and the payment of taxes and duties, but the consortium itself did not clarify these aspects.

As it became known to ASTNA from an informed source, “passions” around Electro Gas Malta do not scare away investors from it.

In particular, one of the Russian energy funds, as well as a number of Maltese companies, are claiming the share of Gasan Enterprises (11.72%), which it is selling.

The scandals surrounding the Delimar power plant project, which provides up to 50% of Malta's energy supply, do not interfere with the operation of this strategically important facility.

The contractual terms are also tight and the new government of Malta is not going to revise them to avoid fines.

All this makes it difficult to quickly and effectively investigate the facts of possible corruption, despite the efforts of Maltese NGOs and the calls of the Council of Europe.