The State guarantee to cover a massive bank loan for the private consortium selected to build the new gas power station has shot up to €360 million.
In June, this newspaper exposed the fact that the government had authorised an €88 million guarantee for a private loan from Bank of Valletta, needed by Electrogas to finance the power station.
While it was acknowledged this was “unprecedented”, the government yesterday announced the guarantee has quadrupled.
The information was put forward during a briefing session in which journalists from different media outlets were called in separately. The Nationalist Party media were excluded.
The guarantee for the initial €88 million from BOV has been cancelled and replaced by a guarantee of €360 million – this is 80 per cent of the financing needed.
The Opposition reacted immediately, with PN leader Simon Busuttil tweeting: “The people will have to shoulder a colossal €360 million burden so that [Prime Minister] Joseph Muscat can save his skin.”
The full loan of €450 million is 20 per cent financed by the consortium’s shareholders. The loan is being provided by four banks: BOV, KFW IPEX-Bank Gmbh, HSBC Bank plc and Société Générale.
The guarantee is for 22 months. In return, Electrogas paid the government a market-oriented guarantee fee of €8.8 million.
The agreement was reached at the end of last month. The State Aid Monitoring Board cleared the guarantee, the government said.
When the Times of Malta revealed the initial temporary guarantee, sources close to the Finance Ministry confirmed that a government bank guarantee to cover the loan to a private entity was “unprecedented”, as the government normally only issues such guarantees to entities in which it has a shareholding.
Electrogas Malta Ltd is fully owned by private interests, among them Tumas Group and Gasan.
The guarantee is until the European Commission approves the security of supply agreement with the consortium under which the government is committed to buying electricity for the next 18 years, according to Finance Minister Edward Scicluna.
‘Debt spread on 18 years’
In order to benefit from the rates obtained by Enemalta through the competitive process and provide additional certainty to the banks with respect to payments due to Electrogas, the tender document provided for a Security of Supply Agreement.
In the interim, the lending banks have provided funding to Electrogas through a bridge facility, which enables it to progress with the project schedule.
“The bank guarantee is not an issue because the project was needed,” Prof. Scicluna said.
“The government could have bought the plant, paying €450 million. Instead, we chose to let the private sector build it. Instead of increasing our debt, we’re spreading it over 18 years to allow cost recovery.”
The Opposition condemned the “colossal” guarantee saying it was an “irresponsible decision” and a burden on the people after agreements made behind closed doors.
The new power plant, a key electoral promise, was meant to start producing energy last March but has been delayed by 18 months.
The PN said the government had now also failed on its promise to use private funding and it had no electoral mandate to place the burden on the people.