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Government Guarantee for Electrogas

Government Guarantee for Electrogas
by
August 9, 2023
in Banking, Business News
120

In a recent parliamentary committee hearing, former Finance Ministry Permanent Secretary Alfred Camilleri shed light on the €360 million government guarantee provided to the Electrogas consortium. This guarantee was deemed necessary to kickstart the project while awaiting approval from the European Commission for the security of supply agreement, which Camilleri labeled as a form of state aid.

Laying the Groundwork

Alfred Camilleri appeared before the Public Accounts Committee to offer insights on the National Audit Office’s report concerning the Electrogas power station. Camilleri, who held the role of Permanent Secretary up until June, was among the longest-serving officials, having begun his tenure under the Nationalist administration in 2006 and retained his position during the Labour government’s rise to power in 2013.

Camilleri’s testimony delved into the rationale behind the €360 million government guarantee and the unique circumstances that warranted such a move.

Navigating Political Changes

When asked if his approach shifted between different administrations, Camilleri indicated continuity in his modus operandi. His testimony, therefore, carried the perspective of a technical expert rather than a political actor.

Camilleri highlighted his limited involvement in the Electrogas project, primarily related to the government’s guarantee to the consortium. This guarantee encompassed an €88 million bridge loan and a later substantial €360 million loan. He noted that a potential default could have left the government with a considerable financial liability.

While no default occurred, Camilleri acknowledged that he had reservations about the guarantee, mainly because it involved providing support to a private company. However, he emphasized that government guarantees are not uncommon, using the restructuring of Enemalta’s debt in 2012 as a precedent.

A Shift in Paradigm

What set this guarantee apart was its association with a private company rather than a state entity. Camilleri underlined that legal changes have been instituted to ensure parliamentary discussion before granting similar guarantees in the future.

Camilleri elucidated that the guarantee was essential due to the security of supply agreement’s classification as state aid, necessitating approval from the European Commission. Given the lengthy process to obtain European Commission approval, the decision to provide the guarantee was driven by the project’s urgency.

A Risk-Mitigating Strategy

Camilleri revealed his efforts to safeguard against potential risks. He established a contingency fund aimed at covering defaults, and he compelled banks to report any indicators of trouble to the government. Although only one such instance arose, his proactive stance aimed to prevent crises.

Unveiling a Leaked Email

Camilleri addressed a leaked email that brought attention to the power station’s viability. He clarified that the context of the email related to the progress of agreements for permanent financing, indicating that Electrogas was not registering sufficient progress. Despite the leaked email’s implications, the guarantee was eventually renewed, and Electrogas secured the necessary permanent financing.

Other Agreements and Oversight

Camilleri’s testimony covered other agreements related to Electrogas, such as guarantees with Azeri gas supplier SOCAR and an agreement for Enemalta to cover €40 million in excise duty. He highlighted that these agreements fell outside the Finance Ministry’s scope.

Challenges and Future Implications

When questioned about the Financial Intelligence Analysis Unit’s work and Manfred Galdes’ resignation, Camilleri expressed his lack of involvement and urged that these inquiries were beyond his purview.

In conclusion, Camilleri’s testimony shed light on the rationale behind the government guarantee for Electrogas, revealing the intricate balance between financial prudence and urgency in kickstarting essential projects. The ongoing Public Accounts Committee proceedings continue to uncover the intricacies of this complex matter.

Frequently Asked Questions about the Electrogas Guarantee

What was the purpose of the government guarantee for Electrogas?

The government guarantee, totaling €360 million, was provided to the Electrogas consortium to support the project’s financing and viability.

Why did Alfred Camilleri have reservations about the guarantee?

Camilleri’s reservations stemmed from the unique circumstance of providing a guarantee to a private company and the potential risks involved.

Why was the guarantee necessary despite potential risks?

The guarantee was deemed necessary due to the time-sensitive nature of the project and the required European Commission approval for the security of supply agreement.

How did Camilleri mitigate potential risks associated with the guarantee?

Camilleri established a contingency fund and implemented mechanisms to ensure prompt reporting of potential issues by banks.

What are the implications of this testimony for future guarantees?

Camilleri’s testimony underscores the need for a careful balance between government support and risk mitigation in providing guarantees for private projects. Legal changes now require parliamentary discussion for similar guarantees.

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