Updated | €360 million ElectroGas loan guarantee 'grave irresponsibility' - PN

Video is unavailable at this time.

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, Energy Minister Konrad Mizzi and Finance Ministers Edward Scicluna have confirmed.

The Maltese 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.

An original €88 million state guarantee to cover a Bank of Valletta loan has been cancelled.

Now, ElectroGas’s bridge loan will be 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. The State Aid Monitoring Board cleared the government guarantee.

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.

The PN said that after delaying the LNG power plant by a year, the Labour government had failed in guaranteeing private investment for the construction of the plant. "It will be the Maltese people's taxes that will be propping up a project that they don't even need," the PN said. "The government has no mandate for this guarantee, which is the only way Joseph Muscat can save his skin. The Opposition will not allow this grave act of irresponsibility unchecked and it will insist on accountability from the government."

Edward Scicluna said that the project was now at an advanced stage and the company needed to make full use of the loan. In return, he added, the government charged ElectroGas €8.8 million, which were paid upfront.

The finance minister played down Malta’s exposed risk over the bank guarantee, arguing that the bank guarantee was “not an issue”.

“The bank guarantee is not an issue: irrespective of the cost, this project was needed. The government could have bought the plant, forking out €450 million and increasing debt by 7% of GDP. We however chose to let the private sector build it. Instead of paying it all at once and increase our debt and deficit, we’re spreading it over 18 years to allow cost recovery," Scicluna said, referring to an agreement between Enemalta and the consortium to buy electricity from ElectroGas for 18 years.

The guarantee is being described as an interim measure while government awaits clearance from the European Commission over the Security of Supply Agreement (SSA) it had entered into with Electrogas. Confident that the (SSA) satisfies EU requirements and does not constitute incompatible state aid, Scicluna and Mizzi said that the private sector would have never launched itself into such a project without an SSA serving as a guarantee.

After partner Gasol dropped out of ElectroGas Malta, Siemens Financial Services, Socar Trading SA, and GEM Holdings become equal shareholders in the power station consortium.

Mizzi said that the project had not been affected negatively by Gasol’s removal: “What concerns us is that the project is delivered and, as long as the three partners are able to deliver, we are happy. The government obtained all the assurances it required before giving its clearance.”