Electrogas directors have failed to provide details, in the company’s annual accounts, of an LNG supply deal with Socar Trading SA that has been questioned by multiple energy experts.

An analysis by The Guardian estimated that Socar Trading SA made around €32 million from the deal in 2017, as it leveraged differences in market prices and the fixed price at which Electrogas, and ultimately Enemalta, buy LNG from it.

According to notes annexed to Electrogas’ annual accounts, its directors deemed that disclosure of the monetary value of its LNG purchase commitments with Socar Trading SA would not be meaningful in assessing Electrogas’ liquidity and cash flows.

These purchases will be offset in the same periods by cash received from the related sales transactions to Enemalta, the notes said.

Disclosure would not be meaningful in assessing liquidity and cash flows

One of Electrogas’ directors is 17 Black owner Yorgen Fenech. A leaked e-mail from the Panama law firm Mossack Fonseca said 17 Black was going to pay up to $2 million into Panama companies formerly owned by the Prime Minister’s chief of staff Keith Schembri and Tourism Minister Konrad Mizzi.

Electrogas received revenues of €36 million for gas supply and €93.3 million for electricity it supplied to Enemalta during its first full year of operation. It declared a loss of €23 million in 2017.

The role of Azerbaijan’s State-owned energy company as an LNG supplier to Electrogas has raised eyebrows, not least because Socar Trading SA does not have its own LNG supply chain.

Instead, it buys LNG from suppliers like Shell, then sells it on to Electrogas at a fixed price. The same LNG is then sold on to Enemalta as part of a 10-year contract.

Reluctance to disclose any details about the Socar Trading SA deal is also evident in leaked e-mails and documents from Electrogas. These documents were leaked to slain journalist Daphne Caruana Galizia a few months before her death and later acquired by the Daphne Project. Multiple energy contracts signed in April 2015 bind Enemalta to buy €131.6m worth of LNG from Electrogas yearly.

Three energy experts who spoke to Daphne Project partners The Guardian said if Malta had dealt directly with Shell, it could have struck a better deal and saved money.

Electrogas’s own advisers questioned Socar’s involvement in the LNG contracting, the leaked files show.

“The arrangement is unusual,” UK consultancy Poten noted, “and typically one would expect the LNG supplier, in this case Shell, to contract directly with the project”.

The government has said the value of Enemalta’s gas purchase agreement with Electrogas, including the initial five-year fixed price term, became apparent when one considered the volatility in the oil price.

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