Joseph’s transparency problem

Not publishing agreements with private entities is becoming the norm. No attempt is even made to justify secrecy with regards to agreements signed with private entities except to refer to the abysmal record of the previous Nationalist government. It is worth reminding that it was this lack of transparency which partly accounts for the PN’s trashing at the polls in 2013. 

The agreement with Henley & Partners (the concessionaires of the sale of passports scheme) and ElectroGas consortium  (which will procure our energy needs for 18 years) remain unpublished.

Now we have Shanghai Electric Power to thank for being given the opportunity to see a 15-page agreement, three pages of which consist of a long confidentiality clause.

For it was the Chinese company which actually allowed the Maltese government to publish the agreement in parliament.  “The parties consent to the government of Malta presenting this agreement to the Maltese parliament should it consider this to be necessary,” a clause in the agreement states.

Surely investment in Enemalta, especially in renewable energy, a sector where China is emerging as a global leader, is a positive development. So is a capital injection in an ailing company and the conversion of the BWSC power station from heavy fuel oil to natural gas.

But the agreement envisions something else” the privatisation of Malta’s state-owned power station. What this means is that Malta will now have two private power stations, the LNG plant owned by ElectroGas and the Delimara extension by SEP. These two companies will be selling energy bought from ElectroGas to Enemalta, which is partly owned by Shanghai Electric.

What the government seems to be forgetting is that it has no electoral mandate to privatise Enemalta and that it had promised greater, not less transparency than the previous administration.

Moreover one major reason why the government is privatising the BWSC plant (70% of which will be owned by Shanghai Electric) is that it had not factored the cost of the plant’s conversion to gas when it solemnly promised to do so. Simply put, without the Chinese the plant will continue working on heavy fuel oil, and Joseph Muscat would have lost all political credibility. It remains to be seen whether the Chinese rescue has come at a cost.

Moreover important issues are only dealt vaguely in the published agreement.  Positively, the agreement says that “D3 (the new company) shall make the necessary investment to convert Delimara 3 from Heavy Fuel Oil to gas” but no timeframes are given for the conversion, and no penalties are foreseen if this is not completed by a specific date.

Neither have we given any clue whether there are any obligations towards D3 with regards to the amount of energy it will buy from this privatised plant.

The agreement obliges D3 “to operate Delimara 3 at all times so as to ensure that its operation shall not have an adverse effect on the network and in accordance with the dispatch instructions of Enemalta.” 

Does this mean that Enemalta (which is partly owned by Shanghai Electric) can decide not to buy energy from Shanghai Electric  in those periods of the year (and at night) when energy from the Interconnector and ElectroGas will be enough? 

The answer is provided in Clause 2.8, which simply states, “Enemalta and D3 hereby declare that the commercial transactions between Delimara 3 and Enemalta are regulated by a Power Purchase Agreement which contains the commercial terms and conditions governing power purchase.”

Moreover since the purchase agreement with ElectroGas has not been published we do not even know how much energy we are obliged to buy from the other company.

What all this shows is that parliament has been left in the dark about an agreement, which binds not just this legislature but also all future legislatures.

This episode highlights the need of a legal framework to regulate the definition of commercially sensitive information. One solution is giving the parliamentary ombudsman the power to determine what is commercially sensitive or not. In this way the government will have to justify why any information is commercially sensitive to a higher authority.

As suggested by the Ombudsman in his annual report, a way can be found through which commercially sensitive information which cannot be disclosed can be shared with the Opposition. Governments should not limit disclosure to parliament when they sign agreements with private entities or foreign nations.

A bill regulating the publication of all agreements, memoranda and treaties signed by government and government owned entities should address this issue.

Moreover the appointment of a parliamentary committee, which can grill and scrutinise the energy sector would help restore confidence in a sector, which is still shaken by the oil procurement scandal. The current grilling of officials in connection with the oil scandal is a healthy exercise which could set an example for ongoing scrutiny to avoid a repeat of past abuses. This scrutiny should apply not just to government officials but also to the new private owners of the Malta’s energy supply. Corruption is also endemic in foreign companies especially but not exclusively those hailing from countries with weak transperency safeguards like Azerbaijan.

It was a pity that Opposition leader Simon Busuttil dismissed the latest revelations on the scandal as a “smokescreen” – shooting himself in the foot days before he effectively and correctly questioned the government’s opaqueness in the energy sector. Ultimately what is at stake is our model of national development. Should Malta be run like a private company or as a democracy where  full disclosure is the norm?