Government lifts multi-million euro guarantee after gas project secures bank finance

Electrogas will no longer need a state guarantee after securing finance to the tune of €550 million from several local sponsors and partner and nine international companies.

Former energy minister Konrad Mizzi, who piloted the shift to gas in the last legislature, said this afternoon that the project was now financed on a “standalone basis”.

“Today represents the financial close of this project as we also sign the security of supply agreement between the government, Enemalta and Electrogas,” Mizzi told a news conference at Castille.

Prime Minister Joseph Muscat said the transition to gas was a “landmark national project” and the government’s decision to provide a temporary financial guarantee was a wise one.

Prime Minister Joseph Muscat announced that the turnaround in the energy sector was complete

He said Malta reached a nationwide demand of 374MW on Tuesday evening, which meant the country would have been short by 11MW had it not invested in the gas power plant.

Muscat said the lifting of the guarantee meant the turnaround in the energy sector was complete.

He said families and businesses were now benefitting from lower utility bills, cleaner air and security of supply.

“Through today’s financial close we are also cutting loose a state guarantee to Electrogas Malta… the signing off gives us greater economical assurance,” Muscat said.

Muscat said the security of supply agreement will be published in the coming weeks.

Finance Minister Edward Scicluna said Electrogas had to pay the government a premium amounting to €11.4 million, adding that as a result of the closure, the country was now in a much stronger financial position.

The project was stooped in controversy after the government had given a bank guarantee of more than €400 million to ensure the company could start tapping bank finance in the absence of a security of supply agreement.

The agreement required clearance from the EU, which came earlier this year. However, the guarantee had to be extended just before the election since Electrogas had not yet completed the necessary paperwork with the banks after several financial institutions chose to invest with the project.

The gas power project included the construction of a gas-fired power station and a liquefied natural gas terminal at Delimara. It was also controversial because of a floating storage unit for LNG berthed inside Marsaxlokk port.

The project had been an electoral battle horse in 2013 as the Labour Party pledged to stop the country’s dependence on heavy fuel oil for its energy needs and in the process lower electricity tariffs.