Last summer, the government entered into a still-under-wraps agreement with the developers of the new Delimara power station, in which it has committed itself to the option to purchase the entire project if the European Commission does not approve the Security of Supply Agreement that the project hinges on, The Malta Independent on Sunday can reveal.

On 27 July 2015, the government entered into what is known as a Share Call Option Agreement (SCOA) with Electrogas.

Although the agreement has not been published, it is referred to in distinct terms in Electrogas’ Annual Report and Financial Statement for 2014.

The pertinent extract from the report reads: “In the event of a negative reply from the European Commission [to the Security of Supply Agreement], it is expected that government will exercise its right under a Share Call Option Agreement dated 27 July 2015 to acquire 100% of the shares of the company and assume full control of the project.”

As such, should Brussels at the end of the day not approve the Security of Supply Agreement, Electrogas would be expected to drop out of the project.

In that event, the government would realistically be faced with two options: to let the project collapse and face the political repercussions that would inevitably follow; or to exercise its option to purchase the company’s shares and take control of the project.

This heavy exposure the government has left itself open to in the form of a Share Call Option Agreement commitment stands over and above, but is related to, the government’s controversial state guarantee of €360 million for loan facilities amounting to €450 million that it had granted to Electrogas.

In fact, both the SCOA and the state loan guarantee were set in place precisely because the European Commission has not yet approved the Security of Supply Agreement.

But despite that, Energy and Health Minister Konrad Mizzi and Finance Minister Edward Scicluna concealed the existence of the SCOA last August when they convened a press conference to explain the rationale behind the government’s decision to increase the already contentious €88 million state loan guarantee for the project to €360 million.

On 13 August 2015, just before the Santa Marija weekend, the two ministers informed the media that the €88 million temporary state guarantee issued to Bank of Valletta in favour of the Electrogas consortium in 2014 had been replaced with a 22-month €360 million guarantee – representing around 80 per cent of the bridge loan facilities granted by four banks to Electrogas, which totalled €450 million, in July 2015. The four banks in question are Bank of Valletta, HSBC Bank plc, Société Générale and KFW IPEX-Bank GmbH. 

The ministers also referred to a still-unsigned “draft” Security of Supply Agreement to which the Electrogas deal is subject, and about how that agreement still requires the approval of the European Commission in terms of its state aid rules. The ministers argued that the term of the super guarantee was related to the period in which the Commission was expected to give its verdict.

But at no point during the press conference or at any point since then did the ministers disclose that the government had signed an SCOA for the entire share capital of Electrogas. When pressed by the media about what would happen should the European Commission fail to clear to the Security of Supply Agreement, Prof. Scicluna had expressed confidence that the outcome would be positive and cited feedback from the Commission that there appeared to be no conflict with EU state aid issues. 

Dr Mizzi also expressed optimism, and pointed out that the matter could, at worst, lead to some tweaks in the draft Security of Supply Agreement with Electrogas.