Almost a year later, the government has still not given any indication of whether the European Commission has any objections to the security of supply agreement between the government and Electrogas, the company building the gas power station.
The spokesman for competition policy of the European Commission declined to comment beyond confirming to The Business Observer that “the European Commission is in contact with the Maltese authorities on this matter”.
The government has also ignored questions about the procedure being followed, how many meetings, if any, were held, and whether the European Commission requested any further information.
It has also not given any indication as to whether the preliminary reaction to the agreement was positive or negative, let alone what the alternative would be if it were turned down.
The government was forced to authorise a temporary €88 million bank guarantee for a €360 million loan taken out by private consortium Electrogas last year pending the EU’s approval of the security of supply agreement.
The agreement stipulates that the government would step in and buy the electricity if Enemalta reneged on the deal with Electrogas to purchase electricity produced by the new gas plant. Since then, there has been no information about how the European Commission views this agreement in terms of compliance with State aid issues.
Electrogas insists the security of supply agreement is part and parcel of the original competitive process
Electrogas insists the security of supply agreement is “part and parcel of the original competitive process” and that the guarantee was only temporary, to cover a bridge loan taken out with four major banks, including Bank of Valletta and HSBC.
“As soon as the EU has ratified the security of supply agreement, the [government] guarantee will be rescinded and the company will enter into long-term project finance agreements with its group of international banks,” Electrogas had said.
Electrogas last December published accounts for financial year 2014, in which it confirmed that it has signed turnkey construction contracts worth €296 million and a €30 million contract with Enemalta for development fees and for “the right to supply gas and power”. It also explained that a bridge loan of €110 million for partial financing of the construction works was replaced by full project interim financing of €450 million in the third quarter of 2015.
Electrogas also said that it had signed a contract with Enemalta outlining the conditions of sale of gas and electricity for 18 years following the construction of the facilities. In April 2015, it also signed a 10-year contract for the purchase of LNG supplies from Socar for its operations.
The shareholders have guaranteed €90 million of the loan and the financial statements say that it was envisaged that this would be replaced by shareholder funding in due course.
It has not yet published its accounts for 2015.