Updated | Electrogas to finalise refinancing of bridge loan by end of year

Democratic Party MP Marlene Farrugia has asked Prime Minister Joseph Muscat to deliver a ministerial statement on reports about a multi-million euro State guarantee for a loan to Electrogas.

The Times has reported that the finance ministry’s top civil servant in September raised concerns about a “serious” default by Electrogas, the company supplying Malta with LNG, under the terms of a €450 million loan agreement which is covered by a multimillion-euro State guarantee.

Permanent secretary Alfred Camilleri was notified by banks in early September of a default in the agreement by the consortium behind the new gas-fired power station in Marsaxlokk.

Camilleri told those involved that the default under the loan agreement was a very “serious and urgent matter” requiring immediate attention.

Farrugia has now written to Muscat calling on him to make a ministerial statement. “Speculation on such a large financial guarantee, granted behind Parliament’s and the people’s backs, to a private company is surely no credit to the country’s financial credibility and security.”

But the government on Tuesday evening said the bridge loan agreement between ElectroGas and the original consortium of financial institutions, provided for a timeline within which “technically complex and voluminous” documentation was to be provided to the 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... requiring to familiarise themselves with the details and documentation relating to the project,” the government said in a statement.

The delay led to an extension of the maturity date for the bridge loan refinancing.

“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.”

The Times said Electrogas – a three-way partnership between Maltese investors GEM (Gasan-Tumas), Azerbaijan’s State-owned energy company Socar and German company Siemens – had failed to submit the documentation showing they secured long-term financing for the project by the stipulated deadline.

In September, the government agreed to once again extend what it had once termed a “temporary” €360 million State guarantee on the loan, in order to give Electrogas more time to secure financing.

This led to a waiver being granted, allowing the banks to continue extending credit to Electrogas until the end of this month.

The guarantee is intended to temporarily replace the security of supply agreement. Following clearance by the European Commission earlier this year, the government now said 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.

The government said Electrogas had given adequate security including the share call option agreement, which will be retained until the guarantee is released, and that guarantee was within EU state aid rules. “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.”

In a tweet, former PN leader Simon Busuttil said “no serious financial institution can grant long-term financing to this dubious Electrogas project when it knows that it is the subject of an FIAU investigation involving Keith Schembri and Konrad Mizzi.”

Former energy minister Konrad Mizzi had said the temporary guarantee would be withdrawn after the European Commission announced that Malta’s 200MW LNG power plant did not fall foul of EU state-aid rules, enabling it to obtain a security of supply agreement.

Mizzi and the PM’s chief of staff Keith Schembri were being investigated in connection to the LNG project, according to leaked excerpts of an unfinished FIAU investigation. The leaked notes surmised that a Dubai company set up by the owners of the LNG tanker that supplies gas to Enemalta, could have been planned to funnel payments to Schembri’s and Mizzi’s offshore companies in Panama.