Maltese taxpayers being inordinately burdened

From state guarantees to the possibility of having to purchase an entire private power station, and from having to pay higher prices for electricity to being saddled with an 18year power purchase agreement, it seems the Maltese taxpayer is being inordinately burdened by a power station that they arguably do not even need.

By this newspaper’s count, the man on the street is exposed to the deal in at least four ways.

Firstly, the state guarantee on the power station’s debt. This had started out with a secret €88 million loan guarantee that was only brought to light by the media. That €88 million was later increased to a whopping €360 million state guarantee.

That guarantee, The Times has reported, was extended just days before the June snap general election, and it was extended yet again in September.

The delay, according to the government’s version, is down to an increased amount of paperwork necessitated because the number of banks wanting to participate in the power station loan has doubled from four to eight.

The government’s version is that the project and financial vehicles are so great that more institutions wanted a piece of the action. That could very well be true, but, on the flipside, it could also very well be the case that the original four lenders caught a case of cold feet and wanted to reduce their

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And in the meantime, it has also been reported that the loan itself is at serious risk of default. That means that the Maltese taxpayer is looking at a more plausible possibility of having to dig deep and purchase the entire power station, should the company that built and runs the power station default on its loan, which is guaranteed by the state. That Share Call Option Agreement (SCOA), which was written specifically into the contract the government signed with the company, remains in place until the state guarantee is lifted. This heavy exposure the government has left itself open to in the form of a Share Call Option Agreement commitment stands over and above, but is related to, the government’s controversial state guarantee of €360 million for loan facilities amounting to €450 million that it had granted to Electrogas.

Added to all this is the price of electricity purchased from Malta’s interconnector to the European electricity grid compared to that of the new power station. Recent figures showed how in 2015, the year in which the interconnector was commissioned, Malta had sourced 47 per cent of its electricity from the European grid while last year that amount had increased to no less than 68 per cent.

As a study published earlier this year by this newsroom showed, in 2016, when close to 70 per cent of the country’s energy needs were purchased from the interconnector, the sole use of the Delimara power station would have cost the country €84 million more in 2016 than it had using the interconnector.

The study based its findings on the agreed price that Enemalta will purchase electricity from the Delimara facility, 9c5 per unit, compared with the cost of electricity from the interconnector rate (€0.03-€0.06, and using an average price of €0.045 per unit).

The government has contracted the country to purchase its electricity from Delimara at 9c5 for the first five years of the installation’s lifespan and for a total of 18 years from the Azerbaijani state corporation SOCAR for a presumably still-to-be-negotiated unit price.

Moreover, given that the government chose to tie the country in to purchasing its natural gas for the power station from SOCAR, what would happen should Azerbaijan fall foul of international human rights, or other, norms? Will we still be constrained to do business with them? It would appear so, but such considerations will be pleasures for another day.

The long and short of it is that the Delimara power station may be running on cleaner natural gas, but something nevertheless certainly does stink.