Hedging policy direction taken on board by Enemalta, ‘no questions asked’

Welcome to MaltaToday's live blog of the PAC hearing into the Auditor General's audit of Enemalta's fuel procurement policy

EXPLAINER | Auditor General's report on Enemalta fuel procurement

6:45pm Welcome to the latest PAC meeting, which will see Philip Borg, manager of Enemalta's Petroleum Division appear in front of the committee for the second successive meeting. 

6:50pm In reference to Monday's meeting, Borg says that the analysis results of a particular consignment of fuel showed that the sulfur levels were above SPEC had in fact been caused by the testing of the consignment in three separate batches and after sending the results back for re-confirmation, new tests had showed that the fuel was within SPEC.  

6:54pm Asked what was the reason why the initial results had showed that the fuel was out of SPEC by Labour MP Luciano Busuttil, Borg says that he did not demand an explanation by Saybolt, the company carrying out the tests and explains that contemination could be one of the reasons why the fuel was out of SPEC. He adds that new tests were carried out on a new sample and only sulfur levels were tested. 

6:58pm Prompted by MP Justyne Caruana, Borg confirms that tests were also carried out, which tests showed that sulfur levels were off SPEC. He says that after reaching Malta, sulfur levels were above limits due to suspected contamination. The levels on the tanker reached 12%, while the levels of sulfur in the tank where the oil was deposited reached 13%. 

7:02pm Borg says that the level of sulfur in the oil was withing the limits set by EU directives. He adds he enver suspected any wrongdoing in the oil procuremnt process. 

7:05pm Borg explains the difference between repeatability is a test carried out twice by the same chemist on the same sample. Reproducibility, on the other hand is two tests carried out by two different chemists using different equipment. He adds that the tests in question, from the sample taken in 2011, were a case of reproducibility. 

7:28pm Borg admits that he knows George Farrugia through work and knows that hye was an agent for Trafigura and Tatsa. However he says he never spoke to the former agent who was granted a presidential pardon in connection with the Enemalta oil procurement scandal. 

7:30pm Probed by MP Justyne Caruana he insists that he was never invited to meet George Farrugia and that he had nothing to do with the fuel oil procurement. Asked whether he ever came in contact with Farrugia in connection with the purchase of fuels which were off SPEC, Borg says "no."

7:36pm Borg says that although he had been attending the procurement committee meetings in 2004, he only started attending the oil procurement committee meetings as a member in May this year. He adds that tender offers would normally be received by fax and given to the corporation's chairman.  He does not recall whether meetings held under Tancred Tabone's stewardship where held at the chairman's office or in the board room.

7:41pm The Enemalta manager says that tender bids were kept by the chairman, however managers and other board members were granted access to the bids, especially if they were asked to run the rule over the quality of fuels and other specifications. The areas which were deemed as crucial in the committee's decision on which bid to accept, included quality, shipment and credit terms, Borg says.  

7:45pm Following the appointment of Alex Tranter at the helm of Enemalta, bids were received by email and these were also sent directly to the, chairman, so much so that the email address was the chairman's.  

7:49pm MP Luciano Busuttil asks whether there were any suspicions over the fact that one company won the majority of bids, however, Borg says that the winning bidders would always have been of good quality. Negotiations with different bidders were held separately. Asked whether committee members were ordered to switch their phones, denying them the possibility to communicate with the outside world, Borg says that he does not recall any such orders. 

7:53pm These emails used to be viewed and stored on the chairman's office, Borg says, adding that the chairman had the facility to change the password to access the email address, which would normally be done before meetings commence. Moreover, he explains that in the incident which led to bid offer to be overlooked, the email was sent as a personal email. He however does not remember who had explained what had happened back then. 

8:09pm Quizzed by Parliamentary Secretary Owen Bonnici, Borg says that he was once "dragged" to a meal in Mdina by former Enemalta chairman Alex Tranter with representatives of either Trafigura or Totsa, of which George Farrugia was the agent. Borg adds that that was the only time he went to Mdina, however he could not remember where the meal was held in Mdina and who was present apart from Tranter and the company's CFO. The meal was held after a meeting in Marsa, and the lunch was paid for by the chairman." George Farrugia was probaly there since Totsa or Trafigura representatives were there, but I do not remember him being present."

8:20pm Its the Oppostion's turn to grill Borg and asked by PN deputy leader Beppe Fenech Adami to explain why in some instances Enemalta opted for contracts which were not the cheapest on offer, he says that the cheapest offers were not necessary the most favourable. He adds that the perception that at times Enemalta did not opt for the most favourable bid was wrong. The absence of the procurement committee minutes did not affect the committee's performance; however there is a lack of records on the committee's operations. This, Borg says, could have fomented wrong perceptions. 

8:30pm Borg says that following the publication of the Auditor General's report, Enemalta did not change its processes since these were already changed beforehand in previous years. He admits that informal talk had taken place between managers and other company employees. Among the subjects discussed informally, Borg says that the recording of committee meeting propped up. Probed by Fenech Adami, Borg said that one of arguments against having committee meetings recorded was that it could have an adverse affects on the procurement process. 

8:38pm The session with Borg is now over. The second witness this evening is Janice Mercieca. Mercieca was employed with Enemalta in 2006 as a financial analyst and in 2008 she was appointed Financial Risk Manager - a position she holds today. The Risk Management Committee was set up in April 2006 and Mercieca was a member. As the name shows, the committee's goal is to mitigate financial risks which the state entity might face especially when it comes to hedging. Mercieca joined the fuel procurement committee in 2011.

She had no comments to make on the Auditor General's report.

8:43pm Quizzed by Jason Azzopardi, Mercieca says she doesn't know why no minutes were ever taken and that no one had ever remarked why these were never taken.

8:47pm She says that meeting with other suppliers were normally held. Mercieca says that the last time she met Farrugia in 2011, the sulfur levels of a particular shipment were discussed at the Enemalta CFO's office. Trafigura trader Mark Russel and other Enemalta officers where present. During the meeting the possibility of imposing penalties due to the out of SPEC fuels were discussed. It was agreed that 250,000 euro fine would be imposed and if the incident reoccurred a fine of 40,000 dollars would be imposed.  

She adds that she could not recall whether Farrugia intervened in the meeting. 

8:55pm Asked to explain any particular occassion when off SPEC oil was procured, Mercieca cites two occassions, one involving the oil shipped upon the North Star, when a 250,000 euro fine was imposed. She adds that she never discussed other shipments with George Farrugia. Asked by MP Caruana whether Farrugia should have been present in these meetings, Mercieca says that Farrugia was Trafigura's agent and it was obvious that he would be present. She adds that she only met Farrugia during such meetings, which were the "normal course of business."

9:19pm Mercieca says that she does not agree with the Auditor General's conclusion that there was a lack of accountability and policy in the oil procurement process. She however says that the procurement strategy needed to be updated and this could not be set by a fixed policy. 

9:24pm On the email sent by former minister Austin Gatt in Novermber 2009, she says that the minister was not interfering but giving "political direction." Mercieca added that she has not formed an opinion on whether this email in any way was an interference. As a result of this direction, Enemalta saved 17 million euros in hedging.