Issue link: https://maltatoday.uberflip.com/i/1505323
NEWS 5 maltatoday | WEDNESDAY • 9 AUGUST 2023 Government guarantee was necessary for Electrogas to have security of supply CONTINUED FROM PAGE 1 The government guarantee was necessary for Electrogas to have security of supply until it achieved both permanent bank financing, as well as the Euro- pean Commission's green light on the security of supply fi- nancing – a matter of state aid that had to be cleared by the DG Competition in Brussels. "Electrogas required bridge loans, until permanent financ- ing was made available to the company. The government is- sued guarantees of up to 80% of the loan," Camilleri said, noting that premium fees lev- ied on these guarantees netted the State €11 million. Camilleri said "an enormous team" was tasked with moni- toring the milestones achieved by Electrogas as well as pro- gress in obtaining private banking finance. He justified the State's role in issuing the guarantee as part of an industry aid to support the development of the energy sector. "Agencies such as Mal- ta Enterprise were always used to support industry. Today the Malta Development Bank sup- ports industry by issuing guar- antees for private industry, as we saw throughout COV- ID when private companies sourced banking guarantees from the MDB." Camilleri added that the risks of a government-backed gov- ernment were not necessarily determined by the size of the guarantee, but to whom it was given. "My experience is that far smaller guarantees were riskier in some cases. That is why issuing such a guarantee is not to be taken lightly. The moment that guarantee has to be called in, the default is on the whole stock." Camilleri admitted he had reservations on issuing the guarantee. "I did go overboard. I have no regrets however. My res- ervations were that we usual- ly issued guarantees on public entities. This time, this was a private entity. My fear was that if something happened, with- out additional safeguards, we would be exposed. Where were the risks? It was a big project that could have been replete with risks, such as delays, or other types of concerns. In this case, the risk that exposes you to a default of this size, was no joke. But I have no regrets on this matter – five years since then, there was no default on this guarantee." Camilleri says the govern- ment guarantee was suggested from the government's side. "During tendering, a secu- rity of supply agreement was promised to the chosen bid- der. Banks were aware of the financial history of Enemal- ta. This security of supply agreement was cleared by the State Aid Monitoring Board of Malta. When banks were presented with this approval, they demanded legal certainty through a ruling from the Eu- ropean Commission's DG on competition. Until this EC ap- proval was obtained, a security of supply agreement made the project bankable without stop- ping the development of the plant pending this decision." Camilleri spoke of Enemalta's storied debt and credit rating agency downgrades before a first restructuring carried out in 2012, using the special pur- pose vehicle Vault Finance, and then further restructur- ing after 2013 when Shanghai Power Electric acquired one of the Delimara power gen- eration units. Today, he said, the situation had come full cir- cle with the government once again subsidising the rising price of energy. Camilleri said he had taken measures to ensure the success of the guarantee by creating a contingency fund with enough money to pay out in the case of a default, with the State ready to take over the project from the private sector. Camilleri says no such risk ever took place thanks to close scrutiny of the project itself. "We mon- itored it diligently, on a daily basis." Camilleri also denied claims that Electrogas had default- ed on financing, answering a question from PAC chairman Darren Carabott on a social media missive published by journalist Matthew Caruana Galizia that included an email penned by Camilleri. Camilleri explains this was not a default on the guarantee, but a default on agreements between the parties, mainly on loan agreements. "We were close to the dead- line for the company to get its permanent financing, and banks were concerned about defaults. The default was not on the guarantee, because the bank was bound to inform us on the tiniest matter that could give rise to concern, but on the progress to achieve permanent financing. I then assured my- self personally that there was no default on the guarantee. We took stock of the situation, and we came to the conclusion that the guarantee had to be renewed again, for Electrogas to achieve permanent financ- ing; we got Cabinet approval, renewed it, and that is how we addressed the matter." Camilleri confirmed that En- emalta was reimbursing Elec- trogas for millions it pays in excise tax to the State utility on the generation of energy. Towards the end of the PAC session, Camilleri took issue with questions from Carabott requesting him whether he had ever been in receipt of in- formation from the FIAU over any investigations related to the Panama Papers. Carabott asked Camilleri if the resignation of FIAU chief Manfred Galdes in 2016 was related to the power station. "No, I don't know," Camilleri said. He then denied that any in- formation passed on from the FIAU to the police on reason- able suspicions of money laun- dering from Panama Papers data, had also reached his of- fice. "No this communication was never made to me," Camileri says. "The law precludes such information from the FIAU to be made available to us. Why are you asking me such ques- tions?... This is a serious mat- ter: there would be nothing that we as a ministry could know about the FIAU." Camilleri was a top civil servant who spent 16 years in charge of the government's purse strings, under both Na- tionalist and Labour adminis- trations. In his last year of employ- ment, he remained in office to oversee a task force charged with getting Malta off the Fi- nancial Action Task Force greylist. Camilleri was burnished by a reputation for having a tight grip on public spending, often having to be won over by min- isters and various government appointees to secure financial backing for an initiative or project. mvella@mediatoday.com.mt former permanent secretary Alfred Camilleri said "an enormous team" was tasked with monitoring the milestones achieved by Electrogas as well as progress in obtaining private banking finance "I did go overboard. I have no regrets however. My reservations were that we usually issued guarantees on public entities. This time, this was a private entity. My fear was that if something happened, without additional safeguards, we would be exposed."