The European Commission’s assessment of the €360 million loan guarantee the government has given to a number of banks with respect to Electrogas’ financing of the new Delimara power station is still ongoing, and as such Brussels’ verdict on the government’s controversial support for what is a private sector project is still up in the air.
European Commissioner for Competition Margrethe Vestager stated this week that, “The Commission is in contact with the Maltese authorities as regards the measures taken in relation to the financing of the entire energy project to which the new gas power plant belongs.
“The Commission’s assessment of the information submitted by the Maltese authorities is still ongoing. Therefore, the Commission cannot take a final view on the compliance of the project with state aid rules at this time.”
In the meantime, blogger and Malta Independent columnist Daphne Caruana Galizia revealed in her blog on Friday night a report, which was only available in Chinese, by the Chinese state news agency Xinhua. That report said Shanghai Electric Power has taken out a €51.5 million loan from Bank of Valletta to fund the conversion of the BWSC Delimara power plant from being run on Heavy Fuel Oil to natural gas.
Funnily enough, the conversion of the BWSC plant from HFO to natural gas had formed part of the government’s energy plan, the cornerstone of its last election campaign. Then Opposition leader Joseph Muscat had branded the BWSC plant a “cancer factory” built by the previous administration, because of its use of HFO, and he had pledged to convert the power station to run on natural gas from day one of being elected to power.
This will, it seems, eventually take place but certainly not from day one as pledged. According to the Shanghai Electric Power Xinhua story, dated 30 September, the project is expected to last around 10 months – i.e. until the end of July, about a month after the new and neighbouring Electrogas power station is scheduled for completion.
By having arranged for Shanghai Electric Power to purchase the BWSC plant and to foot the bill for the €51.5 million conversion project, the government has effectively got the private sector to do what it perhaps could not have done: have the conversion financed, albeit by the private sector, without the need to grapple with thorny state aid rules.
Shanghai Electric Power had purchased a 33 per cent stake at Enemalta and has also acquired a 90 per cent stake in the BWSC plant. Xinhua also said that Malta and China plan to set up service centres as well as an International Energy International Renewable Energy Development Corporation.
Expected financing green light delayed
Commissioner Vestager’s comments this week, which came in reply to a European Parliamentary Question tabled by Nationalist MEP David Casa, indicate that all may not be rosy with the government’s Delimara financing arrangements. And given the Commission’s history of by and large approving state guarantees for private sector power station projects, the delay appears to be somewhat inordinate.
Sources in Brussels speaking with this newspaper recently had confirmed that the European Commission is “likely” to give the Maltese government the green light to the Security of Supply Agreement for the ElectroGas power station project.
That green light may, however, come with certain caveats that may not go down well with ElectroGas, the company building the new power station and contracted to supply electricity to the country for the following 18 years.
The Commission is said to be favourably viewing the SSA in that it largely satisfies the EU’s requirements and does not constitute incompatible state aid. They were unable, however, to specify when the green light would be given.
The timing of the green light may be largely dependent on ongoing talks in Brussels between the Commission, the Maltese government and ElectroGas itself.
Energy Minister Konrad Mizzi has hinted that the EU may tweak the Security of Supply Agreement, without specifying what tweaks were actually under discussion.
Possible changes to the agreement imposed by Brussels, as applied in other cases, could very well be met with opposition from ElectroGas. Such changes may include assurances that any higher profits emanating from the project, other than those currently expected, including any unforeseen lower construction or eventual production costs, will be shared with consumers and taxpayers.
Once the SSA is given the green light from Brussels, the government will be freed from the state guarantee it has given to the ElectroGas loan, which the government insists is only a temporary measure to satisfy bank requirements.