Ministry kept out of discussion on urgent meeting it requested on Electrogas default

Miguela Xuereb

Tista' taqra bil- Malti.

Alfred Camilleri, the permanent secretary at the Finance Ministry, highlighted that he was highly concerned with the issuing of the bank guarantee to the Electrogas consortium.

Testifying on Friday morning, during the public inquiry into the murder of journalist Daphne Caruana Galizia, Camilleri was questioned by Dr Jason Azzopardi about emails which were sent after he had requested an urgent meeting after hearing from the banks that Electrogas was defaulting on its loan repayments.

The emails exchange between the stakeholders including the then Minister of Tourism Konrad Mizzi but excluded the finance ministry.

In one of the emails, which was read out in court by Dr Azzopardi, Yorgen Fenech told the other partners in Electrogas that ‘I think this is a good wake up call for GoM [Government of Malta]’. When asked what Fenech meant by that line, Camilleri could not reply, saying he was unaware of the emails and that finance ministry was doing its work.

In Brief:

  • The public inquiry has been informed that its mandate has been extended until 15 December;
  • The Board of Inquiry received a heavily redacted copy of the bank guarantee agreement from the Minister of Finance
  • The banks did not accept the Security of Supply Agreement because it did not have clearance from the European Commission;
  • The state guarantee to Electrogas Consortium was only issued in the absence of the Security of Supply Agreement;
  • The bank notified the Finance Ministry that Electrogas was defaulting on its payments.

Just over a month before Daphne Caruana Galizia was assassinated, Bank of Valletta informed the Finance Ministry about the ‘existing and continuing’ default and that the Electrogas consortium had asked for a waiver of this default.

The bank also informed the ministry that the Security of Supply Agreement and the Conversion Term Agreement were not signed and therefore a condition of the Facility Agreement was not satisfied. Camilleri told the court that he took immediate action, calling an urgent meeting for Wednesday morning.

12:03 Thank you for following us.
Monique Agius
12:02 The board and the lawyers are in agreement that this is not enough.
Monique Agius
12:01 The board of inquiry have received an extension until 15 December.
Monique Agius
12:01 Camilleri will continue testifying on 4 September.
Monique Agius
11:57 Chief Justice Emeritus Said Pullicino remarks that the witness was open. He adds that the Board of Inquiry has requested the documents concerning the bank guarantee and the loan agreement but they are not the original. He remarks that if such documents should not be held by the board, then they should be provided with the original and this would be returned.

"It's so redacted that we can't read anything," Judge Mallia remarks.

The witness says that he did not give any advice to this effect.
Monique Agius
11:56 The urgent meeting was still held on Wednesday morning, Camilleri says. He does not recall who was present for the meeting.

According to the emails read out in court, the stakeholders held a meeting with the bank [the Mandated Lead Arranger – MLA – a bank which brings other banks together] a day before the meeting with Camilleri.
Monique Agius
11:55 Camilleri says that he was very concerned about the bank guarantee and could not wait until it is lifted off.
Monique Agius
11:48 Camilleri had sent out an email to his secretary to schedule a meeting for Wednesday first thing in the morning saying that it is a "serious and urgent matter". He also told his secretary that everything else could wait. The tourism ministry, the bank and the partners in the consortium were copied in that email.

The email by the bank was received on 4 September 2017, just over a month before Daphne Caruana Galizia was killed.

Camilleri, had requested the urgent meeting within minutes after hearing from the bank, Dr Azzopardi points out.

Now, Dr Azzopardi moves on to a thread of emails which did not include the Ministry of Finance, but included Ralph and Markus from Siemens, the Minister of Tourism Konrad Mizzi and his permanent secretary Ronald Mizzi, Thurab Musayev, Gasan, and Catherine Halpin among others.

Markus from Siemens sent an internal email asking how they should react to the email sent out by Camilleri. He also suggested that they hold a meeting with MLAs.

Half an hour later, Yorgen Fenech replies to Siemens, keeping Catherine Halpin among others.

Dr Azzopardi reads out:

"Dear Markus, Mark [Gasan] and I are away.

I think this is a good wake up call for GoM"

The lawyer points out that in this case GoM would mean government of Malta, asking the witness what Yorgen Fenech might mean by the last line.

Camilleri says he would not know since he does not know about these emails.
Monique Agius
11:42 Dr Azzopardi reads out from an email from Fiona Brinkworth from BOV, about the 'existing and continuing default' of Electrogas.

Camilleri, says that it concerned the loan agreement. He says that it was at the end of the bank guarantee, adding that he was always afraid of default.

The witness says that one would not expect a default in such an advance state.

In the email, Brinkworth had pointed out that Electrogas had requested a waiver from the banks, Dr Azzopardi reads out. Further in the email, Bank of Valletta informs the government that the security of supply agreement and the conversion term agreement were not signed.

Dr Azzopardi asks whether he was given a reason why the security of supply agreement was not signed.

Camilleri says that those were a commercial decisions. He adds that he had acted immediately because he was concerned about the email he received from the bank.
Monique Agius
11:39 Dr Azzopardi asks about a meeting between Finance Minister Edward Scicluna and then Tourism Minister Konrad Mizzi on Electrogas after the 2017 Election.

The meeting was sometime in August, he replies.

Camilleri says that he was never given an explanation as to why Mizzi who was no longer responsible for the project since it fell under a separate ministry, met with the Finance Minister.

"It was a political decision," he says.
Monique Agius
11:39 Dr Azzopardi starts questioning the witness now.
Monique Agius
11:36 Dr Comodini Cachia asks for a timeline.

Camilleri says:

"The security of supply agreement was promised in September 2013.

It was cleared by the state aid monitoring board.

The banks did not accept it because the EC was not notified and had not approved it.

The Energy Ministry was involved, not the ministry of finance

The security of supply agreement was signed after approval."
Monique Agius
11:35 Camilleri says that state aid monitoring board in Malta had approved the security of supply agreement, however, this was yet to be approved by the EU Commission.

The EU Commission approved it in August 2014.
Monique Agius
11:31 Dr Comodini Cachia asks whether he took action when he got to know that 17 Black belongs to one of the Electrogas director – Yorgen Fenech.

Camilleri says that he believes that by then the bank guarantee had been lifted.

Dr Comodini Cachia asks when was the bank guarantee lifted.

30 November 2017, he replies.

She remarks that the owner of 17 Black was revealed on 30 October 2017, a month before.

Camilleri says that the investigative officers were handling it. He reiterates that he always had his concerns regarding the issuing of a bank guarantee.
Monique Agius
11:31 Camilleri is asked to exhibit his communication with Halpin.
Monique Agius
11:30 Camilleri says that he would meet with Electrogas representatives. He mentions Catherine Halpin.
Monique Agius
11:28 Dr Comodini Cachia asks whether he held meetings with Electrogas.

Camilleri says that the ministry would receive reports on the project's progress while the banks would receive other reports.
Monique Agius
11:27 Camilleri says that the finance ministry was monitoring the project closely.
Monique Agius
11:24 Dr Comodini Cachia asks what he meant by 'incident'.

Camilleri says that on 4 September 2017, he was informed that Electrogas was defaulting on its payments. He held a meeting on the 6 September with all the stakeholders.

The bank guarantee was extended around the snap election.
Monique Agius
11:23 Camilleri says he was not present for any meetings regarding two memorandum of understanding.
Monique Agius
11:21 "Shouldn't Minister Mizzi have sought the finance ministry's approval for the security of supply agreement since it posed a financial risk for the government?" Dr Comodini Cachia asks.

The buck always stops with the government, he replies.

Dr Comodini Cachia remarks that this is not the question.
Monique Agius
11:20 The finance ministry was not involved in the security of supply agreement.

He says that the finance ministry is only involved if the government is made to pay.
Monique Agius
11:17 Dr Comodini Cachia asks whether Camilleri held meetings with Minister Konrad Mizzi alone without Minister Scicluna.

He says that when he would Mizzi, Minister Scicluna would be present. He was involved in technical meetings.

Asked if they had discussed the financial stability of the investors, Camilleri says no.

The consortium's financial standing report was prepared independently by an auditor and was not provided by the Energy Ministry.
Monique Agius
11:15 Camilleri says that according to the technical report, the investors had the financial clout at the time.

Chief Justice Emeritus Said Pullicino remarks that we are in situation where there have been several incidents in major projects.
Monique Agius
11:13 Dr Comodini Cachia remarks that it was difficult to understand how the government could guarantee for a company which did not have the financial strength and for the government to get to know about this from the press.
Monique Agius
11:11 Camilleri says that the issue was settled over two days. He adds that the media report revealed that Gasol was experiencing financial difficulties and it was still in the consortium.
Monique Agius
11:09 Dr Comodini Cachia asks about when the €110 million was given, and Gasol had left the consortium while the government was guaranteeing for the company.

Camilleri says that he got to know that Gasol had dropped out of the consortium from the press, and they acted immediately.
Monique Agius
11:08 The witness says that the terms of the guarantee were discussed with the bank.
Monique Agius
11:07 Camilleri says that he never discussed the bank guarantee with Electrogas.
Monique Agius
11:06 "We didn't want to give a bank guarantee to Enemalta," he says.
Monique Agius
11:04 Dr Comodini Cachia continues reading from the minutes cited in the NAO report.

Camilleri says that the guarantee mentioned in that minute concerns Enemalta which was later discarded.
Monique Agius
11:03 Dr Comodini Cachia reads out from the minutes of 2013. Camilleri says that in 2013 there were no guarantee instruments, but options.
Monique Agius
10:59 There were two bank guarantees:

One bank guarantee: €110 million – this was from 19 December 2014 until 30 August 2015. The loan was extended on 28 May 2015 with 27 million to amount to a total €110.

A second bank guarantee was issued 28 July 2015.
Monique Agius
10:56 Chief Justice Emeritus asks whether Keith Schembri was present for the cabinet meeting when the bank loan was discussed.

Camilleri says he wouldn't know because there were many people present.

"He was present at the meetings concerning the budget," Camilleri says.
Monique Agius
10:53 After this lengthy description of how the bank loan was issued, Chief Justice Emeritus Said Pullicino asks whether the bank guarantee was issued because of the bidder.

Camilleri starts narrating again from 2013. He says that on a security of supply agreement not a penny would be paid.

"We were left with the bank guarantee option," he says.
Monique Agius
10:50 Camilleri says that the government had two strategies in relation to the guarantee.

He says that the government had a credit line from one of the Maltese bank involved of €150 million, a €100 million buffer from the treasury, and €110 million from various government accounts, in case something happened.
Monique Agius
10:47 The witness says that he feared default.
Monique Agius
10:45 The witness says that the government had issued a €450 million bank guarantee.
Monique Agius
10:43 Camilleri says that he would seek advice from the Attorney General.

He says when discussing the guarantee, the banks – HSBC, KFW, Societa Generali and BOV – 'had an army of lawyers'.
Monique Agius
10:42 Camilleri says that the first guarantee was meant to be given for the first 6-7 months, with the government aiming to have the security of supply agreement cleared.
Monique Agius
10:40 'Had the security of supply agreement been cleared from the EU, there was no need for a bank guarantee,' Camilleri says.
Monique Agius
10:39 Said Pullicino asks if the loan was needed because the investors lacked the financial clout.
Monique Agius
10:36 First interim bridge loan was of €110 million subject to various criteria and conditions, the witness says.

Criteria:
1. Credit worthiness – which includes a technical test carried out by an audit firm.
2. the amount
3. a time limit
4. state-aid approval
5. a market price – to compensate for the aid given by the state.
6. For a €110 million loan, the government can only guarantee 80% of the loan.
Monique Agius
10:34 The Finance Minister shared my feelings and concerns, Camilleri says.

Camilleri explains his concerns and says that he ascertained that it was a legal move.
Monique Agius
10:31 For a security of supply agreement was stalled before the EU institutions.

In mid-2014, the 'nuclear option' was mentioned. A bank loan to the chosen company, he explains, adding that first the idea of a bridge loan was floated around.

The first bank guarantee in December 2014 – an interim bridge loan, which was approved by the Cabinet.

Camilleri says that he was concerned about giving out a bank guarantee to a private company and a project which was not under government's control, and he would insist that such decisions would be approved by the whole cabinet.

"These risks always worried me," Camilleri says.
Monique Agius
10:30 Camilleri says that credit rating agencies continue to come to Malta.
Monique Agius
10:28 Camilleri said that this guarantee was issued to all bidders, not the chosen bidder.

The chosen bidder could have worked using the security of supply agreement and the state aid clearance, the witness says, the banks required that it is cleared with DG Competition.
Monique Agius
10:22 Camilleri explains that in the context of credit rating agency was telling the government to reduce the contingency liabilities, one would not give such a bank guarantee.

The witness says that he got to know about the Programme Implementation Board from the NAO's report. He explains that in September 2013, the Programme Implementation Board issued a security of supply agreement. This, he explained, that since the country would always need energy, then the government would step in.

A bank guarantee would need clearance from a state aid perspective either through the monitoring board or the EU Commission. For legal certainty, it would land before the the EU Commission.
Monique Agius
10:21 "As a ministry, once we gave a 'small' guarantee to a NGO. Sometimes we've given these 'letters of comfort' to NGOs ensuring co-financing," he says.
Monique Agius
10:21 Camilleri says that the government can issue various types of state guarantee.
Monique Agius
10:19 Camilleri says that the context was necessary.

He explains that the tendering process then started. Those bidding, noted that Enemalta which was in precarious financial state, was proposing to give an 18-year contract for the buying of fuels, however the bidders were questioning Enemalta's financial strength. Camilleri explains that bidders wanted some peace of mind.
Monique Agius
10:18 Said Pullicino explains that the board has no issue with having a gas-fired power station. He asks the witness directly if there was any wrongdoing in the execution of the project.
Monique Agius
10:17 Camilleri says that the credit rating agencies were warming up to a gas-fired power station.
Monique Agius
10:15 He now turns to the new gas-fired powerstation. Camilleri says that there were different proponents for this project before 2013. He adds that one proponent was asked to do a feasibility study between December – January 2012. But these were not carried out.
Monique Agius
10:15 "Everyone knew of Enemalta's financial difficulties, including banks," he asserts.
Monique Agius
10:14 Enemalta's debt was restructured in December 2012 using a special purpose vehicle.
Monique Agius
10:13 He now moves on to Enemalta. Camilleri says that prices were high. The government was subsidizing Enemalta, but the company was still making a loss.
Monique Agius
10:13 Camilleri remarks that when one speaks their mind, they are not popular.
Monique Agius
10:12 He says that his advice was not always taken on board.
Monique Agius
10:11 He says that 2013, the government had an excessive deficit.

Camilleri adds that the government had a stock of €1.6bn.
Monique Agius
10:10 In 2012, two credit rating agencies had downgraded Malta, he says.

"Downgrade means downgrade," Camilleri tells the board.
Monique Agius
10:09 Camilleri starts by giving a context.

He says that in 2013, there was a global financial crisis and the oil prices were high.
Monique Agius
10:09 Camilleri will now explain the state guarantee which was given to Electrogas.
Monique Agius
10:08 Chief Justice Emeritus Said Pullicino notes that the finance ministry is more tasked with the day-to-day running rather than major projects.
Monique Agius
10:06 Camilleri explains that when there was the extension of the SVDP, the project had to come before the finance ministry but it didn't. Since then, the Finance Ministry and Contracts Department which is autonomous from the former, they would communicate more frequently to approve or disapprove the direct order.
Monique Agius
10:05 He tells the board that if they want to ask about the state guarantee he would give a blow-by-blow account. He says he was concerned and that he had voiced his worries.

Camilleri explains that major direct orders are approved by the Contracts Department.
Monique Agius
10:02 Camilleri says that he did some research, and found that every major project was mired in controversy. This has been so, throughout the ages.

It was always the same, he claims adding that the allegations were always the same – corruption and lack of transparency.

Camilleri sits on the Public Accounts Committee.
Monique Agius
10:01 Camilleri says that having worked under different administrations, he has never seen any decisions that was signed off by the kitchen cabinet.

He reiterates his reply, 'ask the person who made such claims'.
Monique Agius
09:59 'Kitchen cabinet doesn't mean that. When your minister was testifying, he was alluding to something else, ' Judge Lofaro reiterates.

'Don't ask me about kitchen cabinets, because I wouldn't know,' he replies.
Monique Agius
09:58 Madam Justice Lofaro points out that 'kitchen cabinet' does not mean what he understood.

Camilleri apologizes and says that questions should be directed at someone else.
Monique Agius
09:57 Camilleri is asked about Cafe Premier.

He says that the ministry provided the money.

Mr Justice Said Pullicino asks if the ministry just dishes out the money.

Camilleri says that the decision would be taken at a cabinet level.
Monique Agius
09:54 Chief Justice Emeritus Said Pullicino asks whether the finance ministry assesses the sustainability of the project and whether they would carry out a due diligence process on the investors.

Camilleri says that the due diligence is carried out by the ministry.

'I never attended kitchen cabinets. I only went to four cabinet meetings – these included the meeting on the powerstation state guarantee,' Camilleri says.
Monique Agius
09:52 Camilleri explains that projects are carried out by the respective ministries. Different ministries have different projects. The finance ministry is involved from a financial aspect.

'The finance ministry essentially facilitates the projects,' Camilleri says.
Monique Agius
09:51 He is asked to describe his career in the public sector.

Camilleri says he started off as a clerk, and then continued his studies at the university. He returned from the UK and given his background in statistics he was tasked with various work.

In 2006, ahead of the introduction of the Euro, he was appointed as permanent secretary to the Finance Ministry.
Monique Agius
09:50 Judge Mallia starts questioning the witness.

Camilleri has been a permanent secretary at the Finance Ministry since March 2006.
Monique Agius
09:48 Judge Mallia makes a sign that Camilleri's request to testify without a jacket has been approved.

The witness takes the stand.
Monique Agius
09:47 The members of the board of inquiry enter the courtroom. We're in session.
Monique Agius
09:32 Present in the courtroom, is today's witness Alfred Camilleri, as well as lawyers Dr Therese Comodini Cachia and Jason Azzopardi.
Monique Agius
09:31 Good morning and welcome to this live blog. We're reporting live from courtroom 20.
Monique Agius

On Wednesday, former Projects Malta chair Adrian Said and one-time Projects Malta deputy chair William Wait testified. The latter told the court that the government had paid €700,000 direct order to an architectural firm for a project at the former ITS site that was never carried out.

During the sitting both Said and Wait had told the board of inquiry that Camilleri would be present at Projects Malta board meetings on behalf of the Finance Ministry.

In a previous sitting, Finance Minister Edward Scicluna had described a “kitchen cabinet” under former disgraced prime minister Joseph Muscat as being responsible for the major controversial deals. Scicluna had lamented that Projects Malta lacked transparency.

The public inquiry into the assassination of journalist Daphne Caruana Galizia is tasked with determining whether the state did all it could to prevent the assassination.

The board of inquiry is chaired by Judge Emeritus Michael Mallia, and composed of Chief Justice Emeritus Joseph Said Pullicino and Madame Justice Abigail Lofaro.

Lawyers Therese Comodini Cachia, Jason Azzopardi, and Peter Caruana Galizia, assisted the family.