Updated at 8.30 with PD's reaction in Parliament
A top official at the Finance Ministry in September raised concerns about a “serious” default by Electrogas under the terms of a €450 million loan agreement, which is covered by a multimillion-euro State guarantee.
The Finance Ministry’s 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. Mr Camilleri told those involved that the default under the loan agreement was a very “serious and urgent matter” requiring immediate attention.
Sources said Electrogas were found to be in default of the agreement, as they had failed to submit the necessary documentation showing they secured long-term financing for the project by the stipulated deadline. The Electrogas consortium is a three-way partnership between local investors GEM, Azerbaijan’s State-owned energy company Socar and German company Siemens.
The banks informed the Finance Ministry that Electrogas had requested a waiver of the default, which they turned down.
After a flurry of meetings held 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 sources said.
All actions and decisions in this regard were taken in the public interest
The consortium signed a 22-month bridge loan agreement with four banks on July 28, 2015.
The Sunday Times of Malta this week reported how the State guarantee was already extended once before, on the eve of the June 3 election. No public announcement was ever made about either of the two extensions.
The European Commission announced in January that the Electrogas project did not fall foul of EU State aid rules. This paved the way for the signing of a security of supply agreement, guaranteeing that the government would buy energy from Electrogas if Enemalta were to go bust.
Then Minister Within the Office of the Prime Minister Konrad Mizzi said the Commission’s approval of the project would lead to the ‘temporary’ €360 million State guarantee being withdrawn.
Apart from the State guarantee, the government also signed an agreement to buy out the Electrogas shares if the security of supply agreement was not approved.
A Finance Ministry official confirmed to The Sunday Times of Malta that the security of supply agreement had yet to be signed.
Nationalist MEP Francis Zammit Dimech yesterday submitted formal questions to the Commission, asking if the government had informed it about the extension and if it was in line with State aid rules.
A spokeswoman for the Finance Ministry was asked what led to the September default, whether it endangered the €360 million in taxpayers’ money, and whether the government was considering exercising its share buyout option.
The spokeswoman replied: “The (share) call option agreement, as well as all other measures taken by the government to safeguard its position, will remain until the government guarantee is released. There is no default under the loan agreement.
“As previously stated, the financing agreements, including the security of supply agreement documents between Electrogas and their financiers are expected to be signed soon.
“In the last few months, the government was informed of the various technical delays arising due to the complexity and voluminous documentation to be provided by the numerous financial institutions including several international banks, and for this reason the bridge loan maturity date was extended.
“All actions and decisions taken by the government in this regard were taken in the public interest to ensure a successful closure to the project.”
PD challenges Prime Minister to explain
MP Marlene Farrugia on Tuesday morning challenged the Prime Minister in writing to make a statement in Parliament at the earliest possible opportunity, to explain what was happening with regards to the Electrogas loan and related government guarantee.
"Speculation on such a substantial guarantee, which was given behind the backs of the Parliament and people, to a private company, certainly does not have a positive impact on the credibility or financial security of our country," the PD member of parliament wrote.
PD again questions government in Parliament
PD MP Marlene Farrugia called on the Prime Minister to clarify the matter and was told this was a Cabinet issue.
In a statement, the party said it seemed the Prime Minister did not want the people to follow the case. It challenged the government to explain what it wanted to hide, and to say what stage the Auditor General's investigation of the Electogas contract had reached.
Government gives more detail
In a statement, the government denied that the waiver had been turned down by the banks.
However, the Times of Malta has been informed that the request for a waiver by Electrogas was in fact turned down by the banks, which is what led to the government being notified of a default under the loan agreement. As reported today, the default was subsequently waived by the banks after the government secretly extended the State guarantee, allowing for the bridge loan to be further extended.
In its statement, the government said it had 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 government said.
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