Electrogas shareholder Paul Apap Bologna told the board of inquiry that he only realised that there was a “misdrafting” in the agreement two weeks ago.
An agreement between GEM and New Energy Supply, the latter which is fully owned by murder suspect Yorgen Fenech stated that the two companies worked together on developing the project in 2007. Apap Bologna claimed that this was a “misdrafting” of which he noted only now as he only got Fenech involved in January 2013.
This emerged while he was being questioned on the matter by lawyer Dr Therese Comodini Cachia.
It also transpired that despite having zero experience in planning, Apap Bologna was appointed to the MEPA board after he was approached by Michael Farrugia whom he knew since he is involved in the pharmaceutical industry and Farrugia is a doctor by profession. Apap Bologna told the board that he had taken up the role since he could learn on the job and it was a new experience for him.
The Electrogas shareholder continued to testify during the public inquiry into the murder of investigative journalist Daphne Caruana Galizia.
The public inquiry into the murder of journalist Daphne Caruana Galizia is tasked with, amongst other things, determining whether the state did all it could to prevent the murder from happening.
The next sitting is on Friday at 9.30am.
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AB: I was in no chat with PEPs.
JA: You and Yorgen Fenech had a group chat. Are you in the position to exclude any PEPs in the board?
Dr Azzopardi asks the witness to produce documents which would show the timeline.
AB: I'd imagine so. We had one-year time to get insurance cover.
JA: Were the costs of the insurance cover factored in?
Apap Bologna says he has no idea.
Dr Azzopardi asks whether his family (in reference to his wife) was given a direct order by Michelle Muscat to redesign Girgenti.
The board is pressing the witness, he replies that "things could always have been done better".
"I would certainly hope that those emails were not the motive," Apap Bologna continues.
"All the work that we've done. The forensic audits we've done. And very much likely Electrogas had nothing to do with it," Apap Bologna says.
"Yes of course those emails would bring up concern," Apap Bologna now says.
Apap Bologna: I don't think so.
Madam Justice Lofaro asks the witness: Have you heard the emails which have been read out to you? Do you still don't think so?
Apap Bologna says: "I don't believe that Caruana Galizia's murder is related to the project."
The forensic audit cost €7 million.
He denies introducing Siemens to Mizzi reiterating that he only met Mizzi years later at a social event.
Apap Bologna says that they had approached Rolls Royce and Mitsui, adding that as MNC Siemens had the technology and the financial standing.
Apap Bologna says that he met Siemens in London and in Malta. Siemens started out as suppliers and then ended up as equity shareholders, Apap Bologna explains as he confirms that he was involved in negotiates with them.
Siemens came into the picture very late in the day, Apap Bologna replies to a question by Chief Justice Emeritus.
Apap Bologna says that SOCAR and Gasol came in together, with SOCAR guaranteeing for both. He adds that he did not check Gasol's accounts when it was agreed for it to join.
Comodini Cachia asks if they checked Gasol's financial standing.
Apap Bologna does not know when they signed their consortium agreement with Gasol.
"He obviously felt that I could contribute something," Apap Bologna replies.
Chief Justice Emeritus notes that this is strange that the witness was given this appointment, adding that it would be understandable if Gasan had to be appointed.
AB: Zero to none.
CC: Why were you appointed to MEPA board?
AB: I'd learn on the job. I thought it was a good experience.
CC: Who approached you?
AB: Michael Farrugia. I knew him because I am in the pharmaceutical industry.
CC: What is your experience in planning?
Apap Bologna says that these would be passed to him possibly from "SOCAR, etc" and he would accompany them when he was in Malta.
Comodini Cachia reads out an email sent by Apap Bologna on 20 March 2017 to Halpin informing her that these investors to organise a site visit.
AB: At some point the shareholders were exploring this. But there was nothing of substance. At some point, they were discussing. I was not directly involved.
CC: Were there investors interested in investing in Electrogas?
Apap Bologna confirms that Gasan did not accept to be appointed in Fenech's stead.
CC: Were you aware that Mr Gasan and Siemens wanting Fenech's resignation? Are you aware that Fenech resigned in May and Gasan refused?
AB: Fenech did not action his resignation.
CC: Did Ray Fenech give you a reason for Yorgen Fenech's November resignation?
Apap Bologna says that the fundamental principle behind increasing board members was to have quorum.
Comodini Cachia reads an email sent out a few days after the assassination. The email deals with "Frederick being difficult" and questioning whether "Mizzi still had the political power to influence" as Electrogas was having difficulties to reach financial close.
Apap Bologna confirms he was not aware of Mizzi's support of the project.
Apap Bologna says he did not know about this and would have questioned if he knew.
She reads out an email where the competitor asked lower than the one suggested by the government. Fenech had asked them to hold because the more expensive service provider was suggested by the government of Malta and he "didn't want to upset them".
CC: Were you aware that the interference by the government led to it influencing / selecting your service providers?
He is not aware.
In an email sent in 2016, the government was involved in the merchandise by Electrogas including recycled pencils and bags.
Comodini Cachia asks whether he is aware that OPM instructed Electrogas on how to reply to the media, which interview requests should be accepted, how to reply from The Guardian, among other things.
He says that he was not aware.
Apap Bologna says he does not know who Lindsey Gambin is. He does not even know the other individuals listed are. He says that he only got to know now that the Office of the Prime Minister had interfered.
Comodini Cachia will read one email of a series of emails. This one was sent by Siemens in which it was suggested to blame Frederick Azzopardi until Mizzi gives go ahead.
Apap Bologna says he only met Konrad Mizzi "much much later" and "on a different subject" when asked if he was aware that there was reliance on Konrad Mizzi to receive such concessions and approvals.
He says that he has not asked for any concessions and he is not aware whether Electrogas asked for more concessions.
Comodini Cachia asks about an email which subject is "idea".
CC: What was the impact of having Malta paying the excise tax on your rate of return?
If the excise tax had to be included in the financial model this would have a decrease on return, Apap Bologna says. He needs to check when liquidated damages to Enemalta need to be paid if its during the 18-year agreement or once it is concluded.
"Are you aware that in the original agreement it was to be paid by Electrogas?" Comodini Cachia asks.
"Then go back and read the agreement," she replies.
Apap Bologna says that the exemption on Excise Tax on each and every shipment was to be paid by the consumer, i.e. Enemalta.
Apap Bologna denies being at a dinner or a lunch at Portomaso for which Muscat was present pre-2013 election.
Dear all, the attached exchanged of emails is the inland revenue agreement €30m upfront payment is tax deductible, the VAT – Enemalta paid directly to government (rather than being billed to EGM and apply for a refund), any compensation to Electrogas would not be taxable on gas and is outside the scope of VAT.
AB: I'm not aware. I have to go back to the accountant.
CC: Are you aware of this:
AB: What I understand is that this was going to paid for by Enemalta [on excise tax].
CC: Were there other tax concessions.
AB: Not that I believe.
CC: Was that [the excise tax] the only concession on tax given to Electrogas?
Apap Bologna says that he attended Electrogas board meetings in 2017 as an observer and not as a director. He says that this not as frequent as he should have.
AB: No. I thanked her for everything she did for the group as Chief Operations.
CC: How did you know it was a "challenging and exhausting" year?
AB: Because it was a challenging project.
CC: So you write this every year?
AB: I was referring to the project.
CC: If you were not involved why did you write this email to Catherine Halpin?
AB: No I was not involved.
CC: Were you involved in the administration of Electrogas in 2017?
Ocean Installer had placed a garnishee order on their accounts and this led to certain financial constraints, Apap Bologna says after the lawyer reads out an email sent out by Siemens to Fenech and Turab Musayev relating to serious funding problem. The issues related to Garnishee order by Ocean Installer, a waiver letter and the government's letter, and the urgent funding of EGM through the shareholder loan.
He is not aware whether GEM received interest fees on the shareholder's loan.
The shareholder's loan was probably to pay some service, Apap Bologna replies. He adds that there could have been a period when it was needed. He does not know the amount given to Electrogas. This would be money from GEM loaned to Electrogas.
Apap Bologna: I need to check with the accountant.
Comodini Cachia: Are you aware of the issue raised by the banks about the interest on the loan? And HSBC's query on the issue of double counting? [She reads an email from December 2017]
Apap Bologna: Yes.
Comodini Cachia: Was it an interest free loan?
Apap Bologna: Am not aware.
Comodini Cachia: Am I correct to say that GEM had to provide a shareholder's loan to Electrogas?
The fees paid to New Energy includes all the services provided he says.
Apap Bologna says that no lawyers were involved because they had "mutual trust and respect". He does not remember who drafted the agreement.
"Mr Yorgen Fenech did not know about the project until January 2013," he tells the board.
Apap Bologna says that himself and Mark Gasan started going through all the agreements.
"Obviously there is an invoice for it," he says, adding that there is €1.5 million still to be paid to New Energy.
The witness says he does not know. He does not remember if the payment under the 2014 agreement to New Energy was paid.
Apap Bologna is warned by the board, saying that "we're now on a slippery slope". He says that it was only two weeks this was noticed by him and his partner. The witness is reminded that he is testifying under oath.
She reads out, it relates to working with NES owned by Fenech and which was rejected by the then government back in 2007.
Apap Bologna says that there is a misdrafting in the agreement. To which, Comodini Cachia says that finally there's one agreement he has read.
In 2007, Apap Bologna says that Fenech was not involved.
Apap Bologna says that his friend ( Constantine Obermay) from during his study abroad is Gasol's legal.
Comodini Cachia asks about an agreement between GEM and New Energy Supply Ltd dated 1 June 2014.
"Yeah," he replies.
Earlier Comodini Cachia pointed out that they would have set the terms of references, she adds "I understand it did not go into whether Electrogas would have been at a risk at losing the aid".
He says that he is not sure that forensic audit went into whether Electrogas would have lost state aid.
He explains that it is sitting in London and that it has a client confidentiality report, to which Comodini Cachia points out that he is the client.
"Do you read everything very briefly?" she asks.
Dr Comodini Cachia asks whether he read it in full. Apap Bologna says in brief.
The witness says that the audit went into project documents, financial documents, statutory, due diligence, original tender process and full forensic review, among other things.
Apap Bologna: We've gave the auditors carte blanche and they had unfettered access.
Comodini Cachia: Did the forensic audit verify whether this would have made a difference to the European Commission?
Dr Comodini Cachia explains that €20.20 are marked down as "development costs" in the accounts which included the fees for the shareholders. This was hidden away from Oxera.
Dr Comodini Cachia explains that Oxera were assisting the government for the state aid request. Overcompensation would have prevented the upholding of the request. From the emails it emerged that this detail was omitted and not divulged to Oxera.
He is pressed further and says he cannot elaborate whether this information was given to Oxera.
Apap Bologna says that Oxera, the consultants engaged by the government were given this information.
The financial model in April 2016 included pre-construction and development costs.
“In the €20.20m (pre-construction / development costs) we have €16.86m development fee for the sponsors. What should we say about this… as this might be “overcompensation”?”
Comodini Cachia reads out an email from Siemens April 2016 sent out to a number of people. The subject is the financial model.
PwC signed the audited accounts after the forensic audits since this was a condition.
10 days GEM had its annual general meeting.
Apap Bologna says that the development / success fee were a one time payment and that he does not know what Halpin refers to in her email.
"In the next drawn down the revised success / development fee is to be paid" the email reads.
Apap Bologna says he does not know about it.
Comodini Cachia is reading out from an email by Catherine Halpin she mentions a refund.
The witness says he does not know.
Comodini Cachia asks about reservation cost related to the EPC reservation cost.
Apap Bologna: Not that am aware of.
Comodini Cachia: Was the success fee or development fee ever revised as an amount?
Apap Bologna: I don't know off the cuff.
Comodini Cachia: What was the €2 million development fee for?
Apap Bologna: No because it was financing other things.
He is asked to bring the documentation next time.
Judge Mallia: Excuse my ignorance, but you've started milking the cow before it started producing milk.
Apap Bologna: According to the invoice yes.
Comodini Cachia: So you were paid €4.16 million from the loan for having the bank loan approved?
After he explains, she asks whether they received €4.1 million for reaching the financial close.
Dr Comodini Cachia asks him what he understands by financial closes.
Apap Bologna: At the time, Yorgen, Mr Fenech was handling. The monies went out to pay the expenses.
Comodini Cachia: Why wouldn't you know why you received €6.1 million? Do you receive them every day?
"Off the cuff, I don't know."
The lawyer refers to two invoices issued, she asks about the milestones achieved on those dates.
Apap Bologna confirms that the success fee was paid for bringing together.
Apap Bologna says that the success fee refers to getting the consortium members together, among others.
Since the story broke by Times of Malta he has not checked saying that everything was in the contract.
Asked about an email sent by Yorgen Fenech to Catherine Halpin, Apap Bologna says that he is not privy why this was done with regards to success fees and said that he has documentation which stipulate what is a success fee and what is a development fee.
He clarifies that success fee refers to success for all the services provided, while development fee relates to the development of the project itself.
Dr Comodini Cachia asks about the success fees. She points out that the witness is differentiating between success fee and development fees.
The witness says that he has not given evidence before the auditor general and was not asked to give evidence to the police.
Apap Bologna says that everything is listed in the accounts.
Dr Comodini Cachia clarifies that there are two agreements – the one that is mentioned in the Times of Malta article is an agreement between GEM while the second agreement is relates to an agreement between Electrogas shareholders.
He says that these are in the agreements. Asked for the documents, he says that he did not bring them along.
Apap Bologna: Yes.
Judge Mallia: Is it good commercial practice?
Apap Bologna: In my understanding it's normal practice and it was approved by the banks.
Judge Mallia: Am I right to understand that the fees are paid through the loan?
The success fees were due against milestones of the project, he explains.
The development fees related to services rendered from 2013 onwards. This applied to the success fees, Apap Bologna confirms to a question by Chief Justice Emeritus.
Describing it as normal business practice he says that the lenders were aware. The success fees were paid through the loan against the guarantee of €11 million by Electrogas.
Apap Bologna: Indirectly, I would guess so.
Dr Comodini Cachia: Were the success fees paid out by lenders on a loan guaranteed by the government?
Apap Bologna says that these were included in the project financing.
Chief Justice Emeritus asks about 'success fees'.
He says that he does not know who would know about the need for government guarantee adding that he is not aware whether these included in the bid.
Apap Bologna: I was not aware of that.
Judge Mallia: Were you aware that the project needed a government guarantee at the beginning?
Apap Bologna: The government guarantee came in when the government got clearance for state aid.
Judge Mallia: Did you know about the need for a government guarantee at that stage?
The witness replies: We found out in July 2015.
Judge Lofaro asks when they found out about the precarious situation of Gasol.
Apap Bologna says that there was sufficient time for the project to be insured. The insurance had to cover the project from day 1 of its construction.
Dr Comodini Cachia says that he will be asked about other things too.
Dr Comodini Cachia asks the witness to clarify. The witness says he did not look into it and was not on his list.
Apap Bologna says that there was a one-year period by the time the construction was going to start.
Judge Mallia asks about the insurance cover on Electrogas.
Paul Apap Bologna takes the stand.
Dr Comodini Cachia has exhibited a reply for the application made by murder suspect Yorgen Fenech.
The board of inquiry has entered the courtroom. We're in session.
Apap Bologna was spotted waiting outside.
Lawyers Dr Therese Comodini Cachia and Jason Azzopardi are already in the courtroom.
Good afternoon and welcome to Newsbook.com.mt live blog. We're live from Hall 20.
The Board of Inquiry is composed Judge Emeritus Michael Mallia, who is chairing the inquiry board, and two other board members, Chief Justice Emeritus Joseph Said Pullicino and Judge Abigail Lofaro.
Lawyers Jason Azzopardi and Therese Comodini Cachia are appearing for the family.