REVEALED: Konrad Mizzi’s secret agreement with Azerbaijan’s SOCAR

Tista’ taqra dan l-artiklu bil-Malti hawn.

• Before today, this agreement had not been made public. Requests for copies, even in parliament, have been repeatedly stonewalled.

• Electrogas got an open cheque for SOCAR – taxpayers would make up for debts if the private company failed. This was in addition to the previously reported guarantees to Bank of Valletta which ballooned to €432 million.

• Joseph Muscat, Keith Schembri and Konrad Mizzi got their poster project on taxpayers’ backs while the private ‘investors’ received millions in ‘success fees’.

A secret energy agreement being revealed for the first time shows that the Maltese government gave what is effectively an unconditional guarantee to SOCAR Trading that it would step in to cover any of Electrogas’ debts.

ElectroGas, the consortium selected to supply a power station that was the party in government’s poster project for the 2013 general elections, appears to have received the benefit of this secret State guarantee without charge, raising serious concerns about its legality under EU law.

The long-hidden LNG Security of Supply Agreement (GoM LNG SSA) that disgraced former minister Konrad Mizzi signed in April 2015 and which the government has gone to great lengths to keep hidden from public scrutiny, was, in effect, an open cheque to SOCAR Trading – a Swiss subsidiary of Azerbaijan’s government-owned SOCAR – that was kept hidden from the European Commission.

Before today, this agreement had not been made public. Requests for copies, even in parliament, have been repeatedly stonewalled.

A copy of this agreement was obtained by the Daphne Caruana Galizia Foundation after a year-long FOI battle with the energy ministry following The Shift’s reporting in October 2020 on the existence of this agreement and its significance.

The Shift has previously revealed it was former Minister Konrad Mizzi who personally signed the agreement between the government and SOCAR Trading for the supply of liquified natural gas (LNG) to the ElectroGas power station, based on the findings of an FIAU report leaked by MEP David Casa.

The Shift also revealed that Latvian authorities were investigating money laundering in connection with €28 million in suspect payments relating to an agreement concluded between Malta and SOCAR Trading in 2015 “concluded in a manner contrary to the interests of the [Maltese] State”.

At the time that the GoM LNG SSA was signed in April 2015, ElectroGas, and with it, the viability of disgraced former prime minister Joseph Muscat and Konrad Mizzi’s poster LNG project, was in a dire situation.

Three months after the Maltese government bailed out ElectroGas with, on the one hand, the free GoM LNG SSA guarantee to SOCAR and, on the other, a further bank guarantee towards Bank of Valletta.

The promoters behind ElectroGas, including SOCAR, Tumas, Gasan, Paul Apap Bologna, Siemens, and Yorgen Fenech, paid themselves a further €12 million in “success fees”.

Apap Bologna, testifying before the Public Accounts Committee, said he couldn’t recall receiving the success fees, apart from saying he felt “intimidated” by the questions from the parliamentary committee last year.

The secret agreement they tried to bury

Although the GoM LNG SSA is a brief 14 pages and contains no financial information, it’s easy to see why the Maltese government went through significant lengths to hide or even deny the very existence of this agreement, including with the European Commission.

The project had suffered multiple delays, and Electrogas was fast running out of cash. The government had already extended a last-minute €88 million guarantee for ElectroGas to obtain bridge financing from Bank of Valletta.

The guarantee would later, amid the hubris of a snap election, balloon to €432 million, but it seems SOCAR was still not comfortable with ElectroGas’ financial situation and ability to obtain financing.

In April 2015, as part of the initial financial arrangements being put in place, SOCAR signed a gas supply agreement with Shell under which SOCAR was undertaking to buy LNG from Shell. Then, under a separate gas supply agreement between SOCAR and Electrogas on the same date, the latter was undertaking to buy that LNG from SOCAR at inflated rates.

SOCAR seemed unhappy to take on ElectroGas’ credit risk. Further, the Maltese government had just gotten wind that aspects of the proposed power purchase agreement and related security of supply agreements may require the European Commission’s approval under State Aid rules or risk being challenged.

Faced with the prospects of the entire deal being delayed further or even falling apart, it seems the government covertly stuck its neck out and acted as a guarantor for ElectroGas, without compensation.

The Maltese government got away with it. With ElectroGas’ LNG supply liabilities effectively guaranteed by the Maltese government, the project was given a lifeline until the European Commission’s approval was obtained in January 2017.

It would later transpire from emails included in the Panama Papers that Yorgen Fenech’s offshore company 17 Black was due to pay millions to secret Panama companies owned by Konrad Mizzi and Keith Schembri, Joseph Muscat’s then Chief of Staff and a known close collaborator of Yorgen Fenech.

European Commission in the dark

The guarantee provided by the Maltese government was neither included in the scope of the original tendering process for the power station nor approved by the European Commission for State Aid purposes.

In fact, based on submissions seen by The Shift, the Maltese government failed to disclose the existence of this GoM LNG SSA and the resulting State Aid to the European Commission. This was also a critical concern raised by the lawyers advising ElectroGas’ lenders in 2017.

Yorgen Fenech, a director and indirect shareholder of ElectroGas, appears to have been aware of its confidential nature. Leaked emails show that the agreement signed by Mizzi in early 2015 was not to be shared with anyone, least of all Electrogas’ lenders.

“The government (GOM) said that under no circumstances it is true (sic) that the government would allow the [GoM LNG SSA] to be divulged to the lenders,” Fenech wrote.

Amid pressure from the lenders, driven by serious concerns that such unlawful State Aid and its non-disclosure to the European Commission risked placing ElectroGas’ State Aid approval and with it the entire deal in jeopardy, the GoM LNG SSA was terminated through an agreement dated 7 December 2017, a copy of which is also being published.

Mere days later, less than two months after journalist Daphne Caruana Galizia’s assassination, ElectroGas received its €450 million refinancing, and ElectroGas organised a lavish celebratory party.

EU law generally prohibits governments from granting selective financial advantages (called State Aid) to firms that may distort competition unless an exemption applies or the Commission approves the State Aid under strict conditions.

Breaches of State Aid laws may incur hefty fines and measures, including the unwinding of transactions and forced repayment of any unlawful advantage.

ElectroGas and the machinations behind this multi-million-euro deal remain of interest to journalists and investigators alike due to its alleged links to the assassination of journalist Daphne Caruana Galizia as one of the last stories she was working on before she was brutally killed by a car bomb in October 2017.

Yorgen Fenech, a director and indirect shareholder of ElectroGas, stands accused of conspiring to assassinate Caruana Galizia. Konrad Mizzi and Keith Schembri have been sanctioned by the US Government through a travel ban concerning corruption involving ElectroGas.

All persons involved deny any wrongdoing.