Enemalta paid BWSC €8 million extra for Delimara services never carried out

Enemalta paid Danish contractors BWSC an extra €8 million over and above its originally stated contract price for the Delimara power station extension, without ever verifying why the company was raising its price after it had been successfully selected for the installation of its turbines.

In a ministerial statement, energy minister Konrad Mizzi today revealed in parliament that BWSC had raised its original bid of €147 million to €164.9 million during tendering, to include strategic spares and a higher chimney.

However, Mizzi claimed, BWSC's additional €17 million failed to raise any protest from Enemalta as to why these additional items were not included in its original bid.

"Given that BWSC had already been officially selected as the winner of the tender, an agreement was carried out to halve the items added on by BWSC, namely amounting to €3 million for the chimney height and €5 million for strategic spares, which meant a final increased price of €8 million on the original BWSC bid," Mizzi declared.

"BWSC managed to charge Enemalta €8 million more for items that were not included in the original contract, and which were not even carried out."

Mizzi also said that the €5 million in strategic spares were hived off under the five-year maintenance and spare parts agreement, which however was not signed with BWSC. As for the €3 million paid to increase the 65-metre chimney to a height of 100 metres, Enemalta never claimed back this expense which it had paid for, when the work itself was not even carried out.

And yet, Enemalta still forked out an additional €1 million for the purchase of the strategic spares which were not provided by BWSC in the first place.

Mizzi also revealed that the Delimara contract gave the Danish firm a letter of credit of €16.5 million, according it the right to withdraw this money from the bank if it was not paid what it was owed by Enemalta. "It's an anomaly that a state corporation issues such a letter of credit, when BWSC's own guarantee in favour of Enemalta was of just €8.25 million," Mizzi said.

Mizzi also put paid to claims by former prime minister Lawrence Gonzi that BWSC had accepted to pay back any losses incurred in the repair of the damaged steam turbines that occurred during the testing phase for Delimara's extension in October 2012.

"Not only did this not take place. But it was BWSC that was claiming €13 million from Enemalta due to delays in issuing permits from the Malta Environment and Planning Authority, as well interest on late payments. Additionally there was €2.6 million paid for a warranty to be extended to December 2013," Mizzi said.

The minister added that an alleged claim €4 million Enemalta was preparing to make against BWSC was never even submitted, because there were no legal basis for it. "Enemalta's own legal consultants advised against it and no claim against BWSC ever took place. The consultants also advised against a claim of €8 million for liquidated damages and €700,000 for the purchase of chemicals, feeling the legal grounds were weak."

The reason for the lack of legal grounds resulted in the fact that Enemalta still had effective control of eight functioning machines, while the damage resulted in two turbines.

"It meant that the €8 million in damages that ensued - specifically calculated on a contractual agreement to pay Enemalta 1% of the contract value for every week that a delay occurs - were neutralised for the fact that it was only one steam turbine that was not working."

As it turns out however, Enemalta could not even seek for legal redress in Maltese courts because it was contractually bound to seek arbitrage in the London Arbitration Centre of the International Chamber of Commerce. "Today we know that BWSC was in a position of claiming far more money had Enemalta pursued its claim."

Mizzi announced in parliament that both Enemalta and BWSC would cease making legal claims that were planned to take place against each other, over damages incurred in the testing phase of the steam turbines and delays in the issuing of permits to BWSC, because of the expense involved in pursuing these claims.

"After having held discussions with both sides, BWSC has ceded its claims against Enemalta's late payment and accepted to pay a €700,000 claim."