[WATCH] €360 million ElectroGas bank guarantee ‘only temporary solution’

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Energy minister Konrad Mizzi has played down fears over an unprecedented bank guarantee granted to the private company building the LNG plant at Delimara, explaining that the bridge loan is a stop-gap solution until the European Commission issues clearance over the Security of Supply Agreement (SSA) it had entered into with ElectroGas.  

The state will be guaranteeing €360 million of a €450 million bank loan issued by four banks for ElectroGas to build the new gas power station in Delimara.

The government will be guaranteeing 80% of the 22-month bridge loan, while the consortium will guarantee 20% (€90 million) of the loan. In return for the bank guarantee, ElectroGas Malta paid government a market-oriented guarantee fee of €8.8 million.

The loan will go to pay a number of contracts, including the construction of turbines, the jetty and the conversion of an LNG vessel by Malaysian company Bumi Armada, Mizzi said. 

“We have had positive talks with the European Commission and at most we might be asked to tweak the agreement,” Mizzi said when asked whether the government had a Plan B in case it does not get clearance from the Commission.

Finance minister Edward Scicluna said the Opposition had distorted the significance of the new power plant and insisted that unlike past projects, such as the Freeport and the energy interconnector, the was is not shouldering any costs in the construction of the power plant. 

“The Opposition is making a fuss over a loan which will benefit families… I have full confidence that the project will be successful and that is why we have approved the bridge loan.” 

Scicluna added that the original €88 million state guarantee to cover a Bank of Valletta loan had been replaced by a €360 million guarantee because negotiations were protracted, and government wanted to ensure that the deal is secure.

Pointing out that the construction of the power plant in Delimara and the manufacturing of the turbines in Sweden were at an advanced stage, Mizzi said that by next summer the plant will be up and running. 

While underlining the economic benefits of Enemalta’s partial privatisation to Shanghai Electric, a Chinese government-owned company. Mizzi said the company was in a much better shape than it was before the 2013 election. “We have managed a complete turnaround,” Mizzi said, adding that the new power plant will see a complete conversion of energy production to gas.

Now, ElectroGas’s bridge loan will be equally funded by Bank of Valletta, HSBC Bank plc, Société Générale and KFW IPEX-Bank GmbH – a German bank.

The agreement was reached near the end of last month but was only announced this week.

Pointing out the precarious state of Enemalta in 2013 and Malta’s complete dependency on oil, Scicluna said the loan guarantee, which has been cleared by the State Aid Monitoring Board, should not be taken out of context.

Nationalist Party, Alternattiva Demokratika reactions

On Wednesday, the Opposition issued a strong condemnation of the decision, which it said was “irresponsible.”

“This colossal burden will be borne by the Maltese without any form of prior consultation... After issuing an €88 million guarantee behind everybody’s backs, now it has the gall to raise the burden to €360 million. This guarantee for a private company is a first for Malta,” the Nationalist Party said.

Alternattiva Demokratika chairperson Prof Arnold Cassola remarked that the guarantee was worth one-third of the whole value of Enemalta.

"Since when does government guarantee for private investors with public money? Is government in some way indebted to these investors to give such preferential treatment?  Will these investors be further facilitated to build towers in Sliema and Mriehel?

"The private investors should guarantee with their own assets. Siemens has loads of assets world-wide; Tumas Group can use the Portomaso Development (including the Hilton) and its large number of hotels such as The Dolmen at Bugibba as guarantee while Gasan Group could make use of Townsquare Development and other assets. Joseph Muscat and Konrad Mizzi should stop playing Russian roulette with the Maltese taxpayers' money."