Publishing the details of the €88 million state guarantee on a Bank of Valletta loan given to the private consortium tasked with building the new power station could have “a substantial adverse effect on the ability of the government to manage the Maltese economy”, the Finance Ministry said in reply to a freedom of information request filed by The Malta Independent on Sunday.

The Finance Ministry quoted a number of opt-outs in the Freedom of Information Act in order to deny this paper’s request for a copy of the €88 million loan guarantee agreement.

Apart from potentially creating turmoil in the economy, disclosure of the document may also “have a substantial adverse effect on the financial or property interests of the government or of another public authority”.

It was also deemed that “the public interest that is served by non-disclosure outweighs the public interest in the disclosure.”

The unprecedented €88 million loan guarantee – which was only revealed by the media – has raised questions as to whether this was a unique case or whether other big projects will also qualify for such a guarantee.

The Opposition has been quick to point out that Prime Minister Joseph Muscat and Energy Minister Konrad Mizzi both have a personal interest in seeing the project through and any further hiccups would be politically damaging, therefore the loan guarantee served their own political interests.

The new power station – which was supposed to be operational by March 2015 – is now supposed to be completed by June 2016.

The government argues that the €88 million loan guarantee was given in the “national interest” and is only a temporary measure, until the European Commission approves the security of supply agreement.

Government support through the agreement was an intrinsic part of the competitive process which eventually saw the contract being awarded to ElectroGas, the Energy Ministry said.

It said that the temporary financing mechanism is being supported by the government and by ElectroGas shareholders through a government guarantee and letters of credit respectively.

The guarantee, the ministry added, was issued in accordance with the Commission Notice on State Aid in the form of guarantees and was approved by the State Aid Monitoring Board.

“The shareholders of Electrogas Malta in accordance with regulations also incur fees payable to Government for issuing the required guarantee.  

“The project is progressing well and is contributing to the positive transformation of Malta's air quality, competitiveness and the energy sector,” the Ministry said last month.

Finances of lead consortium member in doubt

The €88 million loan guarantee is all the more worrying due to the precarious finances of the consortiums lead investor, Gasol, which holds a 30 per cent stake in ElectroGas.

For the second year running, the company posted a massive loss with negative equity of €12.8 million and accumulated losses of €96 million.

ElectroGas has already received a ‘subsidy’ in the form of a 50 per cent discount on the first 18 months of the lease for the Delimara site where the new gas-fired plant is to be built.

The 18-month ‘subsidy’ should see Electrogas through to the completion of the new power station by the revised target date of June 2016.

The 22-year lease sets out a rent rate of €11.65 per square metre per annum.

A total of 19,275 square metres (equivalent to almost three football fields) will be leased out to Electrogas, meaning a total yearly base rent of €224,553.

The rent is linked to inflation and will be increased annually by the cumulative increase in the harmonised index of consumer prices.

The rent will be reviewed once Electrogas has reclaimed land for the jetty where the LNG tanker will be berthed.

The Electrogas consortium has a one-off option to extend the 22-year lease by a further 12 years.

The consortium shall be responsible for the upkeep of the leased premises, and cannot carry out any additional work other than those agreed, without the written consent from Enemalta.