(Adds government's reply)
Nationalist Party deputy leader Mario de Marco this afternoon called on the government to explain, in detail, the €88 million state guarantee it issued to cover the exposure of the private company building the new gas power project.
The Sunday Times of Malta revealed that the government issued a multi-million unprecedented bank guarantee to cover a €101 million loan to Electrogas from Bank of Valletta.
Dr de Marco said that it wasnot acceptable that the government continued to keep the information from the public.
"If the government has nothing to hide it should tell the electorate how it is using public funds. Come clean," Dr de Marco insisted.
Shadow minister Claudio Grech said the government should publish all the relevant documents related to the deal.
This unique government guarantee, he said, might have put private entities that wanted to carry out the project but did not have the backing of an €88 million state guarantee at a disadvantage.
Guarantee only a temporary measure - government
In a reply, the government said the Electrogas Consortium was selected through a competitive process which secured power and gas at a value for money pricing and would result in a reduction of 50 per cent in Malta's emissions and a 90 per cent reduction in particulate matter. The offering also resulted in a massive reduction in electricity prices in Malta.
As part of the competition process, bidders were informed that a security of supply agreement would be entered into between the government and the selected bidder.
The agreement would provide the country and the selected bidder with assurances for the provision of power and gas, it said, adding this was complimentary to the power purchase and gas supply agreements entered into by Enemalta and Electrogas.
On the basis of these Transaction Agreements and the Security of Supply Agreement, Electrogas raised all debt and equity required to build the project.
Following advice received, the government informed Electrogas and its lending banks that it would formally notify the agreement to the European Commission.
In this respect, the government decided to be prudent and follow due process and entered into discussions with the European Commission to seek clearance from the EU that the agreement satisfied the EU's requirements and did not constitute incompatible state aid.
"Until the European Commission provides clearance for the Security of Supply Agreement a temporary solution was required in the national interest.
"All parties including Electrogas, the lenders and the government agreed to temporary bridge financing."
The government said that in the temporary bridge loan, the agreement had to be replaced and instead the Electrogas shareholders were required to pledge their equity shareholding and also issue letters of credit to the banks as a form of guarantee. On the other hand, the government issued a temporary guarantee to the Banks.
The issue of the temporary guarantee was approved by the state aid Monitoring board in accordance with European Union rules.
The guarantee, the government insisted, was temporary until clearance was obtained from the European Commission for the security of supply agreement.
Electrogas shareholders also incurred fees payable to the government for issuing the required guarantee.
The project, the government said, was progressing well and was contributing to the positive transformation of Malta’s air quality, competitiveness and the energy sector.