Electrogas Malta today reacted to calls by the PN for explanation of a €88m loan guarantee it was given by the government, by saying that there were “absolutely no shortage of funds” and that the issue was related to pending approval for the final deal from the European Commission.

The issue turned into a ping-pong match after the PN first issued a statement asking for clarifications before the government countered and Electrogas issued a statement just one minute later.

Electrogas, which is building the new power station in Delimara, said it had raised all funding required to construct and deliver the project in full accordance with the contract signed with Enemalta.

It said project financing debt was provided by a consortium of international and local lenders.

It said that the financing structure relies on a 'Security of Supply' agreement, where the government would have the right to step in under certain circumstances and secure the supply of electricity and gas for Malta and Gozo. The Security of Supply Agreement was part of the original tender.

It said that the government has entered into discussions with the European Commission to seek clearance from the EU that the agreed Security of Supply Agreement satisfies the EU's requirements and does not constitute incompatible state aid.

The company said: "The Government and the Electrogas Shareholders believe that it is good practice and prudent business to seek EU clearance and are confident that the Security of Supply Agreement will be approved, therefore until EU clearance is given, all parties agreed to temporary bridge financing"

This arrangement, Electrogas said, was permissible under EU regulations provided that Electrogas paid a fee to the government for issuing the guarantee that was approximately equal to any savings that could result from the guarantee. This was done in December 2014.

PN calls for explanations

Electrogas was reacting to the PN which called for explanations, saying the facility was not mentioned in the Request for Proposals issued for the building of the power station.

The PN also said the Prime Minister tied his political future with the timely delivery of this project and consequently, what is really at stake here is the Prime Minister guaranteeing his own political promise at the expense of taxpayers. 

The PN also said the information was made public not by the government but through the efforts of the independent media. The Government keeps resisting all calls for transparency and to publish the documentation relative to the award of contract to build a new power station in Delimara."

Questions to the government 

The PN put the following questions- What led Government to go against precedent and guarantee the financing of works awarded to a private consortium through a public call for proposals? When was the guarantee issued by Government? Who authorised the issue of the guarantee by Government? What aspect of the new power station project is covered by the guarantee? What are the terms and conditions of the guarantee? Under what circumstances can the guarantee issued by Government be called upon by the Bank? Under what circumstances can Government be released from such guarantee? 

The PN said in the interest of transparency, and to avoid further ambivalence on this project, the Opposition is calling on government to publish all the documentation pertinent to the commissioning of the new power station, including the documentation relating to this €88 million bank guarantee granted by Government with respect to this project.  

Government reacts

One minute before Electrogas’ statement was issued, the government issued one which said the agreement was complimentary to the power purchase and gas supply agreements entered into by Enemalta and Electrogas.

"On the basis of these Transaction Agreements and the Security of Supply Agreement, Electrogas has raised all debt and equity required to build the project."  

Clearance for the Security and Supply Agreement - which was part of the original tender -was being sought from the EU to ensure that it satisfied the EU's requirements and did not constitute incompatible state aid.

It said the Security of Supply Agreement was an integral requirement for the banks to finance the project and until it was approved by the EU,  Electrogas, the lenders and the government agreed to temporary bridge financing. 

The PN also said the information was made public not by the government but through the efforts of the independent media. The Government keeps resisting all calls for transparency and to publish the documentation relative to the award of contract to build a new power station in Delimara."

Electrogas statement in full

ElectroGas Malta Ltd. would like to make the following statement with respect to recent articles carried in the media. This statement is made solely to clarify its position through the following facts:

1.  ElectroGas Malta has raised all funding required to construct and deliver the project in full accordance with its obligations tied to the contract signed with Enemalta.

2.  Project financing debt is provided by a consortium of international and local lenders.

3.  The financing structure relies on a 'Security of Supply' agreement, under which the Government would have the right to step in under certain circumstances and secure the supply of electricity and gas for Malta. 

4.  The Security of Supply Agreement was part of the original tender.

5.  Further to consultation with ElectroGas Shareholders and the Bankers, the Government has entered into discussions with the European Commission to seek clearance from the EU that the agreed Security of Supply Agreement satisfies the EU's requirements and does not constitute incompatible state aid.

6.  The Government and the ElectroGas Shareholders believe that it is good practice and prudent business to seek EU clearance and are confident that the Security of Supply Agreement will be approved, therefore until EU clearance is given, all parties agreed to temporary bridge financing.

7.  This arrangement is permissible under EU regulations provided that EGM pays a fee to the Government for issuing the guarantee that is approximately equal to any savings that could result from the guarantee.  This was done in December 2014.

In Conclusion:  There is absolutely no shortage in funding for the project and long-term project financing is readily available following EU clearance of the Security of Supply agreement. The need for the government guarantee is part of the process put in place simply to avoid any delay that would result from waiting for the EU approval process to take its due course.