[LISTEN] Delay on Electrogas security of supply down to voluminous docs for banks

Former energy minister says banks financing Electrogas have doubled in number and require voluminous documentation before financing can be cleared and security of supply agreement signed

Tourism Minister Konrad Mizzi (Photo: James Bianchi/MediaToday
Tourism Minister Konrad Mizzi (Photo: James Bianchi/MediaToday

Former energy minister Konrad Mizzi has insisted a delay in securing a security of supply agreement for LNG plant operators Electrogas, is down to voluminous financing documentation that is still incomplete.

The Maltese government is providing the private company a guarantee of some €360 million on a €450 million loan agreement, but the guarantee was granted without notifying the public of the House of Representatives.

“There is no issue of financing. It was a matter of documentation, which has increased now that some eight banks are involved, up from four previously. A credit committee had to be approved, and documentation provided for each institution,” Mizzi, now tourism minister, told MaltaToday.

The security of supply agreement is essential for Electrogas to secure its financing, but although the European Commission has given Malta its clearance, the agreement remains part and parcel of the finance package from banks.

Until that documentation is complete, the security of supply agreement cannot be signed.

“During the company days the finance documents will be finalised and as soon as they are signed, the security of supply agreement will be finalised with Enemalta, the banks, and the government,” Mizzi said.

The Times on Monday 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 the €450 million loan agreement.

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.

On Tuesday evening the government said the bridge loan agreement between Electrogas had already prepared “technically complex and voluminous” documentation for the original consortium of financial institutions.

But as the project progressed, more financial institutions were required to finance the project, requiring to familiarise themselves with the details and documentation relating to the project.

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

Given that the government is guaranteeing part of the bridge loan, the lenders cannot simply extend the maturity date for the bridge loan refinancing without government approval.

This means Electrogas can be granted an extension to the maturity date for the bridge loan refinancing, considering the additional financial institutions involved.

Electrogas is a three-way partnership between Maltese investors GEM (Gasan-Tumas), Azerbaijan’s State-owned energy company Socar and German company Siemens.

Electrogas has 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,” the government said on Tuesday.