Muscat ‘misled’ European Commission over Socar Security of Supply Agreement

Disgraced former prime minister Joseph Muscat misled the European Commission over the previously hidden Security of Supply Agreement signed by his former energy minister Konrad Mizzi and Azerbaijan’s state energy company, Socar.

While testifying before the Public Accounts Committee in August, Muscat was asked about the LNG Security of Supply Agreement signed in favour of Electrogas Malta. 

The undisclosed and hidden from public view state guarantee for Electrogas was obtained by the Daphne Caruana Galizia Foundation following a year-long Freedom of Information battle with the Energy Ministry. The Shift published the secret agreement.

In it, the Maltese government gave an unconditional guarantee to Socar that it would step in to cover any debts incurred by Electrogas, raising concerns about whether it constitutes illegal state aid.

Muscat said the Commission had “full visibility of all the information”. Yet, the government went through great effort to hide a critical agreement related to the Electrogas deal from the European Commission, according to leaked emails seen by The Shift.

When asked by the Daphne Foundation, an organisation set up following the assassination of Maltese journalist Daphne Caruana Galizia, who was investigating the Electrogas deal at the time of her murder, the Commission said they were not notified of its existence or content.

“A possible agreement between the Government of Malta and Socar was not part of the notification to the Commission and was therefore not assessed in the Commission’s decision,” the response said.

The Commission explained that in June 2016, Malta submitted a notification to DG Competition relating to the Malta Delimara Gas and Power Energy Project, under which Electrogas Malta Limited committed to supply electricity and gas to the state power company Enemalta.

They said a Security of Supply Agreement between Electrogas Malta and Socar was included, but not between the government and Socar.

The agreement in question effectively guaranteed Socar that it would step in to cover any of Electrogas’ debts using taxpayer funds. 

When the document was first made public, Maltese MEP David Casa questioned Commission Vice President on Competition Margrethe Vestager over the possibility of it constituting illegal state aid.

In a reply on 7 October 2022,  seen by The Shift, Vestager said: “Please let me reassure you that we are taking this very seriously, and I commit to keeping you apprised of any development with respect to this matter.”

Sinister dealings

Several months after the ruling Labour Party came to power in 2013, a major public contract was awarded to a consortium of companies, including Electrogas and Azerbaijani State energy company SOCAR. 

Electrogas’ previous director was Yorgen Fenech, a businessman currently in custody charged with commissioning journalist Caruana Galizia’s brutal murder by car bomb a few metres away from her home on 16 October 2017. He and his family members still own key stakes in the company.

At the time, the Auditor General raised concerns that “the selection committee had been inconsistent in assessing bids” for the energy project and that “changes to parameters were made during the selection process.” It was also noted that there were “concerns over the project’s design overall.”

A consortium of investigative journalists then discovered that the Maltese state energy company, Enemalta, would pay twice the market rate for natural gas through the deal, giving SOCAR at least $40 million in profit.

Omtzigt’s 2019 report stated that the “facts have given rise to widespread suspicions of corruption and money laundering”.