Gasol’s exit raises new issues over diligence

Gasol’s exit raises new issues over diligence

Works on the Delimara gas power station are in progress. Photo: Matthew Mirabelli

Works on the Delimara gas power station are in progress. Photo: Matthew Mirabelli

Gasol’s exit from the new gas power plant project has raised questions on the due diligence conducted on the company during the bidding process.

The financial strength of bidders was supposed to have been one of the assessment criteria, according to Energy Minister Konrad Mizzi when he addressed Parliament last October.

Answering a parliamentary question by Opposition spokesman George Pullicino about Gasol’s precarious financial statements, Dr Mizzi had said the consortium was “vetted for its financial strength” and selected on the basis of pre-established criteria.

Gasol, a UK-based company with interests in West Africa, was the lead partner in the Electrogas consortium that was awarded the tender to build a power station and gas-handling infrastructure in December 2013.

The consortium was selected after a multi-stage evaluation process that followed a request for proposals.

But with Gasol reportedly being pushed out of the project by its three other partners due to serious financial difficulties, questions are now being raised about the thoroughness of the due diligence exercise undertaken in 2013.

Can we... put our minds at rest that this chaotic consortium will give us what we will be paying for?

The Nationalist Party yesterday insisted the public had a right to know why Gasol’s poor financial state was not picked up during the vetting process and whether it was legitimate to allow the winning consortium to change its composition so early in the day.

The PN said Electrogas had found it difficult to raise the necessary capital to the extent that the government had to issue an unprecedented guarantee for €88 million on a loan of €101 million given by Bank of Valletta.

The government has so far refused to give details of the guarantee, prompting the PN to call for more transparency, made “more imperative” with the departure of Gasol.

“The taxpayer has now an even greater interest in having all the facts tied to this project [power station project], not least the facts surrounding the departure of Gasol, made public,” the statement said.

Criticism was also levelled by Labour MP Marlene Farrugia, who asked a series of questions on her Facebook wall.

“How can we... put our minds at rest that this chaotic consortium [konsorzju ta’ mgerrfxin] will give us what we will be paying for now and for the next 20 years?”

She questioned whether the government should pull out of the deal and called on the Auditor General to investigate the matter.

The bidding process kick-started soon after the 2013 election had been handled by Enemalta. But when contacted, former chairman Charles Mangion, now a Labour MP, said he had stayed out of the bidding process because one of the Maltese companies in the consortium had been one of his long-standing clients.

“I had informed the minister of a potential conflict of interest and kept out of all stages of the bidding process, which was handled by a purposely set up unit headed by the chief executive,” Dr Mangion said.

Attempts to contact then CEO Louis Giordimaina yesterday proved futile.

Meanwhile, in a statement the Energy Ministry reiterated the gas and power project was proceeding as planned.

Describing the latest changes at Electrogas as a “consolidation” exercise, the ministry said it demonstrated commitment by “world class organisations” to the project.

“The specialisation, skills and knowledge required to implement and operate the power and gas facilities have not changed and are still vested in Electrogas through Siemens and Socar,” the ministry said.

The government insisted Electrogas had strong financial backing and would deliver “a world class infrastructure”.

The statement made no reference to the vetting process at bidding stage and attempts to contact Dr Mizzi yesterday proved futile.

Industry sources have told The Sunday Times of Malta that although Gasol’s departure is politically contentious it is good news for the consortium. The three other partners – German company Siemens, Azerbaijani firm Socar and the Maltese investment company GEM, which includes the Gasan and Tumas Groups – have increased their shareholding and are now on an equal footing.

Earlier this month, The Sunday Times of Malta reported that questions were being raised over the financial strength of Gasol, as data emerged showing a bleak financial situation. Last year, the company reported a negative equity of €12.8 million and accumulated losses of €96 million.

The change in shareholder composition and Gasol’s departure were announced by Electrogas in a statement on Friday. It described the changes as a restructuring process “aimed at consolidating the company’s structure”.

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