The government has so far failed to explain why it did not pursue discussions with the European Investment Bank to obtain cheaper finance for the new power station project.
At the same time, the government insists that “no formal due diligence” on the project was carried out by the EIB even though internal Enemalta documents seen by the Times of Malta show the contrary.
Recently it was revealed that the EIB did not grant loan facilities in connection with the new gas power station project after conducting its own due diligence process.
Energy Minister Konrad Mizzi denied this was the case, saying it was the government that had decided not to pursue discussions and instead seek financing from private banks and financial institutions.
Asked to explain why the government had chosen not to pursue discussions with the EIB, Energy Minister Konrad Mizzi did not reply.
“The EIB demonstrated a keen interest in the project but discussions were not pursued further by the government of Malta,” his spokesman reiterated.
Financing from the EIB is normally much more advantageous than any other financing from private institutions, due to better terms and lower rates.
Asked to state the result of the EIB’s due diligence of the project, the government said that “no formal due diligence was carried out since discussions were not pursued”.
However, this newspaper can confirm that the EIB did perform due diligence.
Discussions were not pursued further by the government of Malta
This is demonstrated by correspondence between Enemalta and bidders vying for the multi-million gas project.
“Enemalta is still holding discussions with the EIB who are carrying out their own due diligence process,” Enemalta’s document stated.
“Bidders need to note, however, that Enemalta cannot guarantee the availability of financing from the EIB since the latter would need to make a case specific due diligence to be submitted by each individual bidder in the process.”
The documents also reveal that bidders for the project were urging Enemalta to conclude talks with the EIB in order to decide how they could raise the necessary finance.
They warned the government that “ongoing negotiations with the EIB are having a chilling effect with other banks and financial institutions since the latter will not incur the costs of diligence or entertain negotiations with bidders on the project until the EIB’s involvement is determined.
“These institutions do not believe they could compete with terms potentially offered by the EIB”, the bidders had cautioned.
The new gas power station is being built by the Electrogas consortium made up of three private investors, including the local Gasan and Tumas groups.
The original lead partner of the consortium, Gasol, encountered major financial difficulties and has since left the project.
Financing for the project was only concluded earlier this year following an unprecedented State guarantee of €360 million so that four banks, KFW, HSBC, Societe Generale and BOV, could issue the necessary loans.
The new plant was meant to have been finished by March 2015, based on Labour’s promises, but its completion has now been moved to the middle of next year.