The government said today that the conclusion timelines for documentation regarding Electrogas were expected to be exceeded due to more financial institutions becoming interested in financing the project and the maturity date for a bridge loan refinancing was extended as a result.

Referring to an article entitled ‘Electrogas in ‘serious’ default of €450 million loan deal’, which appeared on the Times of Malta, government said that the article “has a number of inaccuracies and misleading implications which appear to be intended to sensationalise a matter at a time when the project is successfully implemented and functioning, and this after it has been submitted to a thorough review by the European Commission services for state aid matters.”

The Times of Malta had reported that “ Electrogas were found to be in default of the agreement, as they had failed to submit the necessary documentation showing they secured long-term financing for the project by the stipulated deadline.” The article in question also reported that the banks informed government that Electrogas requested a waiver of the default, and after meetings in September, government extended the temporary €360 million state guarantee on the loan, so Electrogas could have more time to secure financing, thus leading to the waiver being granted and  banks to extend credit till the end of November.

Government in their statement, said that the bridge loan agreement between Electrogas and the original consortium of financial institutions provided for a timeline within which certain documentation was to be provided to the financial institutions. “This technically complex and voluminous documentation comprised various agreements, including finance documents between Electrogas and the relevant financial institutions. As the project progressed, more financial institutions were interested in financing the project, and the consortium of financial institutions increased substantially in number. This clearly led to more parties being involved in the discussions and the new financial institutions requiring to familiarise themselves with the details and documentation relating to the project.”

Given these developments, government said, “the timelines which were originally set for conclusion of the documentation were expected to be exceeded and the maturity date for the bridge loan refinancing through project finance was extended to accommodate this. It is not correct that the banks or the government turned down the waiver of the default.”

“Given that the Government is guaranteeing part of the bridge loan, it has built-in protection mechanisms whereby the lenders cannot simply extend the maturity date for the bridge loan refinancing without Government approval. In this context, the circumstances justified an extension to the maturity date for the bridge loan refinancing, considering the developments and additional financial institutions which were involved.”

“As previously communicated by the government, the guarantee on the bridge loan is intended to temporarily replace the security of supply agreement. Following clearance of the project—including the security of supply agreement—by the European Commission earlier this year, the Government and all other parties concerned have been working towards the refinancing of the bridge loan to occur at the earliest possible date, always taking into account the relevant circumstances and the best interest of the country. The finance documents for the refinancing of the bridge loan are expected to be executed by the end of this month.”

The security of supply agreement will be executed after the execution of the finance documents and the release of the guarantee, govermment said. 

“In granting the guarantee to secure part of the bridge loan, the government has taken adequate security from Electrogas, including the share call option agreement, which would ensure that the benefit of any funds which are expended by the Government would be enjoyed by the Government. This security will be retained until the guarantee is released.”

“The Government wishes to highlight that the guarantee has been granted in strict observance of the Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees, which provide the requirements for a guarantee to exclude State aid, including the portion of the loan which may be guaranteed and the payment of a market price as fee for the guarantee. The Commission services were also informed by the Maltese authorities on the parameters with which the Government guarantee was placed and no state aid concerns were raised.”

PD statement

Earlier, Partit Demokratiku MP Marlene Farrugia wrote to Prime Minister Joseph Muscat to request a parliamentary statement regarding the financial situation of Electrogas.

The letter, copied to the media, was sent after the Times of Malta report. 

Farrugia told Muscat that in the “national interest, he should make a parliamentary statement in the shortest time possible to inform the people’s representatives about the details” of this situation.

“Speculation about a substantial financial guarantee, which was given to a private company without Parliament and the people being informed, does not help the country’s credibility and financial security,” Farrugia wrote.

Issue raised in Parliament

The issue was raised this evening in Parliament by PD MP Marlene Farrugia, where she asked the Prime Minister to explain why the government has increased its exposure for the benefit of a private entity.

PM Joseph Muscat hit back by saying that this has already been explained in the above statement, and that the €350 million loan guarantee granted by government to Electrogas was not approved by Parliament, but a decision taken by the executive arm of the state (cabinet). 

In a statement following this, the PD said that it seems the Prime Minister does not want the people to follow why a third of Enemalta and the BWSC was sold to reduce the state's exposure to debt, and then issued a 360 million euro debt guarantee for a private company.