30% shareholder in power station company is technically bankrupt

Gasol, whose fully-owned subsidiary Gasol (Malta) Ltd owns 30% of Electrogas Malta Ltd, the company pre-selected by the government to build a liquid-natural-gas-fired power station in Delimara, is on the skids.

Its published accounts revealed disastrous results already in 2013 when Gasol plc, then listed on the alternative list of the London Stock Exchange, was chosen for the job. It has since been delisted from the exchange.

It is now technically bankrupt and industry media reports reveal that it has had to borrow US$1 million from Azerbaijan’s state-owned Socar Trading South Africa (its co-shareholder in Electrogas Malta Ltd) to be able to pay its most pressing bills.

Its latest annual report puts its negative equity at €12.8 millionand its accumulated losses at €96 million. Its independent auditors have said that “the group does not currently hold sufficient cash or liquid assets in order to meet its commitments as they fall due in the next 12 months” – hence the Azerbaijani loan.

Gasworld.com reports that the bailout is in the form of an unsecured sterling convertible loan note, with a term of two years, at an annual interest rate of 4%. It further reports that the loan was drawn down in full upon signature and that it will be used for working capital purposes.

Translation: Gasol is in dire financial straits. It is desperate for cash, can’t pay its bills, can’t get a bank loan or overdraft, and has had to turn to Azerbaijan for a bailout.

Azerbaijan’s not taking any chances. Under the terms of the convertible loan agreement, Socar Trading South Africa can convert the loan into direct ownership any time after the end of the first year and seven days before the two-year term elapses, unless Gasol refunds the loan plus interest beforehand.

That means Gasol has exactly one year, less the time it takes to push through an international payment, to drum up a million US dollars from revenues it doesn’t currently have. If it doesn’t make the deadline, Socar Trading South Africa – which means the state of Azerbaijan – will take over the company. Socar Trading South Africa already owns 20% of Electrogas Malta Ltd.

Just last week, Malta’s Minister for the Economy, Chris Cardona, said he isn’t worried about Gasol’s “cash flow problems”. He is confident that the power station will be built regardless, he said. He then went to The Stable with his chief of staff for a much-needed drink. The Minister for Energy, meanwhile, has said nothing at all.

Whether the power station will still be built or not is hardly the point. The point here is that a company registered in Malta has been given a loan of €101 million by the Bank of Valletta when its 30% shareholder is technically bankrupt, has accumulated losses of €96 million and is having to borrow money from its co-shareholder to pay its bills on the fly. And the government of Malta has stood as guarantor to that loan up to €88 million while refusing to publish the terms of the agreement by saying that it would cause economic turmoil (panic) and “leave us unable to manage the economy”.

There’s more to it that that. If (when) Gasol fails to meet its US$1 million payment deadline for its debt to Socar Trading South Africa, Socar will take over Gasol’s shares in whole or in significant part, giving the dictatorship in Baku a far bigger chunk of ownership of Malta’s Delimara power station. This will give Ilham Aliyev an even greater ability to yank the Maltese government’s chain, along with China, which already owns the other main power station and a controlling stake in Enemalta.

If Joseph Muscat and Konrad Mizzi still think this is all worth “cheaper water and electricity bills”, then they’re not just pig-ignorant but irresponsible on a Greek scale.

Muscat struts around posturing and preening, thinking he’s playing among the gods. What do Azerbaijan and China care about Malta? To them, Malta is just a staging post for their self-serving, grandiose ambitions and Muscat’s just a tool in their dictators’ hands.

It’s not just Malta’s power supply being in the hands of two totalitarian states that we’ve got to worry about here. It’s also that Bank of Valletta loan, guaranteed by the Malta government, which will have to shell out €88 million in public money and public property if Electrogas Malta Ltd is unable to pay its debts to the bank.