A foreign due diligence company carried out a risk assessment on the private consortium building the new power station weeks before the government stepped in to issue an unprecedented guarantee to cover a €101 million bridge loan.
A London-based financial institution had commissioned Alaco Ltd to draw up a report on whether it should provide financing to the Maltese gas project, The Sunday Times of Malta has learned. It is not known whether the assessment was positive.
However, this newspaper reported last week that the government had to intervene directly to facilitate Bank of Valletta’s loan to Electrogas just weeks after the fact-finding mission.
Sources said the due diligence had been going on for some months and culminated in a fact-finding mission by two top executives to Malta in early December.
The two Alaco specialists held a number of meetings in Malta enquiring about the project and also probed the financial strength of the shareholders involved in the project.
Contacted at their Knightsbridge office, a spokesman for Alaco declined to give any details of their mission conclusions, citing confidentiality. Electrogas has denied it encountered problems to raise the necessary finance for the project.
“The financing for the project is fully subscribed,” Michael Kunz, the project coordinator of Electrogas Malta Ltd insisted.
Electrogas declined to state which other banks, apart from Bank of Valletta, have provided finance for the project.
It is obvious that BOV was not comfortable to rest on the assurances given by the consortium
Sources said Alaco executives also asked why the project had been delayed and whether the shareholders involved were “solid”.
Financial observers said the fact the government had to intervene to enable Bank of Valletta to issue the required financing was “odd”.
“It is obvious that BOV was not comfortable to rest on the assurances given by the consortium. The fact the government had to make an unprecedented move and issue an €88 million State guarantee is not normal,” the sources said.
The sources said this did not mean in any way that minority shareholders – Tumas and Gasan groups – were facing financial problems. “We are sure they don’t. However there has been talk about problems particularly with Gasol.”
Gasol is the lead shareholder in the Electrogas consortium and questions on its lack of financial strength were raised many months ago. Germany’s Siemens and Azerbaijan’s Socar are also shareholders in the project.
Finance Minister Edward Scicluna underlined the State guarantee was only a temporary measure until the European Commission gives its go-ahead to a security of supply agreement. Such an agreement would practically give the project a guaranteed steady income through the provision of power and gas to Enemalta.
The European Commission is still analysing the project and assessing whether there are elements of State aid in the project.
The new gas power was meant to come into operation last March, but last December the government said it had been delayed until June 2016.
What they said:
The government explained that the guarantee was necessary for a temporary bridge loan facility given to Electrogas Malta Ltd until the EU ascertains that no undue advantage (State aid) was given to the private company.
The government said that members of the Electrogas Consortium were required to pledge their equity and letters of credit as their form of temporary guarantee and were also required to pay the government fees for having issued the temporary €88 million guarantee.
Electrogas Malta Ltd insisted all its financing is in place and that it is in constant dialogue with financial advisers to ensure the resources remain readily available to keep the operation financially healthy and maintain the construction schedule. Finances of the gas power project are based on a project-financing model supported by a consortium of local and international financial institutions. The consortium did not explain why it needed a State guarantee and declined to name the banks providing finances to the project.
The Nationalist Party called on the government to shed light on this unprecedented State guarantee describing it as highly questionable. It said the facility was not mentioned in the request for proposals and may mean other competing companies were disadvantaged. It called on the government to publish all the documents pertinent to the commissioning of the new power station including the letter of guarantee issued to BOV.
The European Commission said it is in contact with the Maltese authorities on this project, in particular with regards its compliance with EU state aid rules. The Commission insisted its assessment is still ongoing and no formal position has been taken yet.
The State Aid Monitoring Board confirmed that it had given its green-light to the state guarantee. However, its chairman, Paul Zahra, refused to give any details stating that all documents and information are “secret and confidential”.
Bank of Valletta declined to give any details, citing “commercially sensitive and confidential” information.
ivan.camilleri@timesofmalta.com