Brussels has not yet given the green light for the security of supply agreement between the government and the company building the gas power station.
But the Energy Ministry has reported “positive” exchanges with the European Commission as it evaluates the agreement for State aid. The government had to act as guarantor 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.
The Energy Ministry said the Commission had reviewed all information related to the Delimara gas and power project for any State aid matters. “This is a normal process for projects of such magnitude and the exchanges on matters like this with the European Commission have been positive and are in progress. Further information is being provided,” a spokesman for the Energy Ministry said.
The unprecedented guarantee, which came to light last year, caused controversy and gave rise to doubts as to the consortium’s ability to raise its own finance.
Electrogas insisted the security of supply agreement was “part and parcel of the original competitive process” and 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 “As soon as the EU has ratified the security of supply agreement, the [government] guarantee will be rescinded and the company will enter into long-term project finance agreements with its group of international banks,” Electrogas had said.
The Delimara project includes the construction of a power station, a floating storage facility for liquefied natural gas and a regassificator. The country should start receiving electricity produced from the gas-powered plant this July, 18 months after the target promised by the Labour Party.
Agreement explained
Enemalta and Electrogas have entered into a power purchase and gas supply agreement.
The terms of the deal are not known because the government has, so far, refused to publish the contract.
Through this agreement Enemalta is bound to buy electricity produced by Electrogas. The agreement also means that Electrogas will be the supplier of gas to be used in the BWSC power plant, which will be converted to gas by its new Chinese owner, Shanghai Electric Power.
As part of the bidding process for the gas power station and infrastructure, the government also had to enter into a separate security of supply agreement with Electrogas.
This agreement offers a guarantee to the private investor that the government would step in and buy the electricity itself if, for some reason, Enemalta reneged on the power purchase deal.