"Flexibilities" have been built into the power-purchase agreement between the government and ElectroGas – the consortium building the new power station – to account for the government’s plan to built a natural gas pipeline connecting Malta to Europe.
The government has obtained partial EU funding for a technical feasibility study for a gas pipeline between Delimara and Gela, Siciliy.
The government has committed itself to buy electricity from ElectroGas for a fixed price for five years, and the Security of Supply agreement guarantees that it will continue to buy electricity from the consortium for an 18-year period
Liquified natural gas (LNG) will be stored on a tanker that will be anchored in Marsaxlokk Bay – which was the source of much political controversy last year – with the government at pains to point out that this is only a temporary measure.
ElectroGas has invested in the upgrading of an LNG tanker as well as the required infrastructure for the mooring of the vessel. This will serve as floating storage unit (FSU), providing LNG to an onshore regasification unit that will then feed the fuel, in gas form, to three gas turbines.
The LNG will be supplied by Socar – the Azeri state-owned enery giants that form part of the ElectroGas consortium. The introduction of a gas pipeline may have potentially harmed Socar’s supply monopoly, although it would appear that this possibility has already been accounted for.
Asked what effect the gas pipeline will have on the power-purchase agreement between the consortium and the government, and whether the LNG tanker will be kept on standby, ElectroGas general manager Catherine Halpin said: “The future introduction of a natural gas pipeline to Malta is accounted for in our agreements with Enemalta. Currently, we are implementing a reliable gas supply via FSU as per requirements.
“Regarding the power purchase agreement with Enemalta, it has purpose-built flexibilities written into it to cater for the eventuality of a gas pipeline being introduced on the Island.”
Last year the government signed a memorandum of understanding with Socar, which will see strategic cooperation in the oil and gas sector. The main areas of this strategic cooperation are in the sourcing and logistics of petroleum products, the trading in energy commodities in the Mediterranean region, the development of new regional infrastructure and LNG services. This means it is likely that Socar will play a significant role in the supply of natural gas via the planned gas pipeline.
Government yet to publish ElectroGas contracts
The exact nature of the agreements signed between the government and ElectroGas is still unknown, as the government has rejected multiple requests to publish the contracts.
The Security of Supply agreement is still a ‘draft’ that has not yet been signed, and may be subject to ‘tweaks’ by the European Commission, according to Energy Ministry Konrad Mizzi.
Possible changes to the agreement imposed by Brussels could very well be met with opposition from ElectroGas. Such changes may include assurances that any higher profits emanating from the project beyond those currently expected, including any unforeseen lower construction or eventual production costs, will be shared with consumers and tax-payers.
In the interim, ElectroGas has been given a 22-month loan guarantee of €360 million by the government, with the consortium putting up a guarantee for the remaining €90 million of the €450 million loan.
The loan is being funded by Bank of Valletta, HSBC Bank plc, Société Générale and KFW IPEX-Bank GmbH – a German bank.
ElectroGas has paid the government €8.8 million for the loan guarantee, due to the advantageous rates obtained.
In a recent interview with this paper, Finance Minister Edward Scicluna accused the Opposition of having “brainwashed” people into viewing the €360 million loan guarantee as something negative.
He pointed out that the government has managed to leverage the long-term benefits of the new power station and translate them into immediate benefits by a 25 per cent reduction in energy costs.