The government confirmed it has never before given a multi-million State guarantee, as questions are raised over its assistance to the private consortium selected to build the new power station.
However, Finance Minister Edward Scicluna insisted Malta is not breaching any EU State aid rules.
The Sunday Times of Malta revealed that at the end of December, the government approved an €88 million State guarantee to back up a €101 million loan issued by Bank of Valletta to Electrogas Malta Ltd.
Sources told the newspaper that the Maltese-registered company did not raise the necessary financing for the project and the government had to step in to guarantee its loan.
The power plant was meant to be completed by last March before the government said it had been delayed until June 2016.
Contacted for his first reaction, Prof. Scicluna admitted that the State guarantee was “a first” issued to a private company under his watch.
Sources said a government bank guarantee to cover the loan to a private entity is unprecedented. However, Prof. Scicluna insisted everything was above board including the green light from the local State Aid Monitoring Board.
Prof. Scicluna insisted everything was above board
He said there was no need to consult Brussels over this issue and added that parallel discussions are under way with the European Commission in connection with other aspects of the project’s financing.
Prof. Scicluna justified the State guarantee as a temporary measure until Brussels gives its green light to a power purchasing agreement between Enemalta and Electrogas.
Admitting that the State guarantee helped the private company to obtain lower interest rates, he said Electrogas was paying “a charge” and will have to pay back to the government the difference in premium.
The power purchase agreement basically guarantees the private company a steady income from the government for the supply of gas and energy.
Asked whether the government is ready to publish the letter of guarantee issued to the bank to cover its exposure, Prof. Scicluna said it “will have to give all the information”.
However, he said that some commercial sensitive information, such as the preferential interest rate given to the private company, cannot be divulged.
The minister said he did not know whether this State guarantee was possibility included in the original request for proposals issued by Enemalta.
Electrogas Malta won the €370 million project following a competitive process in which 19 different companies made offers.
It is not known yet what level of due diligence was made during the evaluation and adjudication process to ascertain that the bidders had sound financial facilities to complete the project.
Meanwhile, Bank of Valletta – chaired by a government-appointed nominee – would not reply to questions whether the government exerted any pressure to issue the €101 million loan.
A spokesman cited commercial sensitivity.