The government has issued an €85 million guarantee to one of its companies so it can buy Enemalta’s petroleum division, this newspaper is informed.
It also emerges that Enemalta then used the money to settle some of the outstanding dues it has with the government, which, in turn, led to a lower national deficit.
Details of this ‘financial engineering’ exercise were given by Finance Minister Edward Scicluna when replying to a written question tabled by Nationalist MP Chris Said.
More than €900 million worth of State guarantees were issued by the Finance Ministry since March 2013. Prof. Scicluna said Petromal Ltd, a fully-owned government company set up in 2014, was issued with an €85 million guarantee “to secure a loan facility to finance the takeover of Enemalta’s petroleum division”.
Finance Ministry sources said the transaction followed a government decision to sell a stake in Enemalta to the Chinese government in a bid to lower the energy supplier’s accumulated debts.
Under the previous Nationalist administrations, Enemalta had accumulated hundreds of millions of euros in debts, particularly due to energy generation losses mainly fuelled by exorbitant fluctuations in the price of oil on the international market and inefficiencies.
To prepare the debt-ridden corporation for the eventual partial sale to the Chinese State-owned company, Shanghai Electric, the government had hived off the only money-making section of Enemalta, the petroleum division, to a new government entity called Enemed. The transaction was made through another new State company – Petromal.
Since Petromal did not have the funds to finance the takeover operation, a State guarantee was issued so it could obtain an €85 million loan from Bank of Valletta to buy Enemed.
When Enemalta received the €85 million payment from Petromal, it passed the money back to the government’s coffers to set off part of a €135 million debt it had, consisting of outstanding excise tax revenue from the sale of fuel.
According to the latest National Audit report, Malta has a total of €1.5 billion in State guarantees. More than €950 million were issued since Labour was returned to power in March 2013, including an unprecedented €360 million state guarantee to Electrogas – a private entity – to obtain the necessary financing for the gas-fired power plant in Delimara.
ivan.camilleri@timesofmalta.com