The European Investment Bank turned down a government request to finance the consortium building the new gas power plant, The Sunday Times of Malta has learnt.
Confidential Enemalta reports obtained by this newspaper show that discussions between Enemalta and the EIB were held during the bidding process in 2013 “with a view to provide bidders with an option to various financing facilities that maybe available”.
However, the reports reveal that following a due diligence exercise on the project by the EIB, no funding was approved for the project.
Although the reports do not give any reason why the EIB decided not to finance the project, sources at the EIB told this newspaper that the project did not pass the rigorous due diligence test.
When contacted, a spokesman for the EIB declined to comment on negotiations with Malta over the new gas power plant, saying only that “the plant is privately financed and Enemalta and the EIB are not talking on the project”.
Energy Minister Konrad Mizzi did not reply to questions sent to him by this newspaper.
The largest multilateral borrower and lender by volume in the world, the EIB is the EU’s bank and issues loans at favourable rates and terms “for sound and sustainable investment projects which contribute to furthering EU policy objectives”.
During the past decade, Malta managed to obtain EIB financing for two energy projects.
In 2008, EIB granted Enemalta a €140 million loan for the building of the new BWSC power plant while another €100 million facility was given to Enemalta in 2010 for the interconnector project.
The government had selected Electrogas, a private consortium made up of four shareholders, to build the new power plant and supply gas and energy to Enemalta for the next 18 years.
The consortium was led by Gasol and included GEM Holdings, a Maltese company owned by the Tumas and Gasan groups.
Last December, when the project had not even started despite the fact that it was originally intended to be completed three months later, the government issued a unique State guarantee of €88 million for the consortium to obtain a loan of €101 million from Bank of Valletta.
It was only after the approval of this loan that the project could begin.
At the same time, the government announced an 18-month delay pushing the project’s completion date to June 2016 from March 2015.
It was a temporary measure until the EU gave the go-ahead for a security of supply agreement
In August, the government announced that it had quadrupled its State guarantee to €360 million to cover all the loans granted to the private consortium by four different banks including three foreign ones and BOV.
According to the government, the guarantee was for 22 months and, in return, Electrogas paid the State a market-oriented guarantee fee of €8.8 million.
Although it admitted this was the first time that a State guarantee had been issued for a private company, the government said it was a temporary measure until the EU gave the go-ahead for a security of supply agreement.
The European Commission is currently evaluating whether this agreement constitutes State aid, which is prohibited under EU law.
At the same time, the lead partner in the Electrogas consortium, Gasol, which was delisted from the London Stock Exchange, sold its stake in Electrogas to the other three shareholders.
Siemens of Germany, Socar of Azerbaijan and GEM holdings now have an equal stake in the consortium.