Updated: EU letter belies government on rule changes during power station tender - Muscat

Add government's reaction

Labour leader Joseph Muscat said today that a letter sent to the government by the European Commission in June belied the government's excuses about why emission thresholds were changed while the tendering process for the power station extension was in progress.

Speaking at a press conference this afternoon, Dr Muscat said European Commission vice president Michel Barnier on June 3 wrote to the government expressing serious concerns about the tendering process and saying that the Commission had started procedures which could lead to legal action.

The government kept this letter secret, and the fact that a letter had been sent was only revealed in The Sunday Times.

The Opposition, he said, was now publishing the correspondence sent by the Commission on June 3 and demanding that the government publish its reply. (The government in a separate statement later turned down the request).

The EU letter, Dr Muscat said, expressed concerns over how, at a late stage of the tendering procedure, somebody in the governemnt decided to change the law to raise the emission thresholds for oil and diesel-firing power stations. Had the thresholds not been changed, it would have been impossible for BWSC to win the contract.

The changes to the law, the commission said, involved "an important aspect of the technical specifications."

The commission asked the government to explain its actions.

Dr Muscat said that while the government repeatedly claimed that it changed the rules to bring them in line with EU regulations, the Commissioner said that the change was not needed for Malta to conform to EU legislation.

Therefore, Dr Muscat, the government's excuse was 'a lie'.

The commission also noted that the exemption given by the government through the change of rules applied only to power stations using heavy fuel oil and diesel, but not gas. The changes thus gave a clear advantage to those companies which submitted a tender for an oil-fired power station.

Furthermore, the commission said, this change was made only a few days before the call for tenders closed. The call was then extended by four weeks until, coincidentally, the eve of the general election.

The commission said this change in technical specifications could constitute a breach of equality and non-discrimination rules and violated various other directives.

It was of the view that such late changes to the technical qualifications discriminated in favour of bids for oil firing power stations to the detriment of those companies that offered gas-firing power plants.

Dr Muscat said the Commission's letter also pointed out that the Department of Contracts was undermanned at this crucial time and the Contracts Committee had not notified the tenderers about its decision.

It was important that they should have been informed, in line with EU directives, and also to allow them sufficient time to appeal.

No one had appealed because no one knew that the tender decision had been taken, Dr Muscat said.

As a result, in this case too, the commission was warning that EU directives may have been broken.

Dr Muscat said the people had a right to know the government's reply to the Commission's letter. He hoped that the government would not try to weed out the whistle-blower but would give serious replies.

Labour MP Evarist Bartolo said the Labour Party has submitted new information to the Auditor General about the contract awarded to BWSC for the extension of the power station at Delimara.

He said that since the auditor had submitted his report on BWSC, the PL had received new information, mostly on the basis of the recent annual general meeting of Mitsui Engineering Shipbuilding Co Ltd.

Mr Bartolo explained that BWSC Malta was a subsidiary of Mitsui Engineering. So too was MANN, which was runner up for the Malta contract and which builds power station equipment for BWSC.

Yet another subsidiary was Sumimoto Bank (SNBC) which in mid-2005 lent €210 million to Enemalta.

Mr Bartolo said all this was like an octopus with many tentacles ultimately leading to the same beneficiary.

He noted that audit agency KPMG, which drew up the government report on the power tariffs, was also used by BWSC.