We pay for their mistakes

Enemalta (by means of a parliamentary resolution) has transferred on lease for 33 years to Gasco Energy Ltd a large plot of land at Bengħajsa measuring in total 77,376 square metres for the specific purpose of erecting a new gas storage and bottling plant for the sum of €57,234 a year.

By means of another two contracts, a servitude is to be erected to enable the passage of fuel pipes from the berth of the ship at the Freeport over Freeport property and over a stretch of land that is public property. For the creation of these servitudes, the contracts specify a one-time payment of €950 to Enemalta for the servitude over public land and €20,000 to be paid by Enemalta to the Freeport for the servitude over Freeport property.

The idea of relocating Enemalta's gas facility to Bengħajsa goes back many years. During the Labour Administration (1996-1998), Mepa was requested to locate the most suitable site for such a facility. Such a site requires to be located in close proximity to a port. The only possible site identified by Mepa was that at Bengħajsa but, at the time, Mepa had some reservations because the area was located in the flight path of aeroplanes landing at Malta International Airport. It was argued that this site posed a great risk in case of a forced landing of a plane.

In spite of this, the site at Bengħajsa was transferred to Enemalta for the specific relocation of the gas plant from Qajjenza on April 23, 2004. In this contract, the land at Bengħajsa is valued at €25,600,000.

In 2006, the government decided to privatise Enemalta's gas division. A call for interested parties was issued and two bidders submitted their offer. Gasco was chosen as the preferred bidder.

There are also two contracts between Enemalta and Gasco: a contract for three years during which Gasco would make use of the Qajjenza plant and construct a new plant at Bengħajsa, and a contract for 30 years for the site at Bengħajsa. When the 33-year lease expires, the new plant would revert back to Enemalta. The value of this "new plant" after 33 years is debatable because the technology would have changed so as to render this "new plant" obsolete.

The three-year contract for the Qajjenza site specifies that, to make use of this plant, Gasco would be paid €90,000 per month or a total of €3,240,000 over three years.

The other contract specifies that, for the transfer of its gas storage and bottling business as well as for its gas distribution organisation, Enemalta would receive from Gasco a one-time payment of €743,976. Hence, for the goodwill of the gas business built over many years, Enemalta is to receive Lm319,440. From this sum will be deducted the sum of €136,010, the price paid by Enemalta for a new cylinder-filling carousel, which is to become the property of Gasco. Hence, in fact, the sum paid for the goodwill is €607,966. This sum is less than what one would pay for a seafront apartment.

If one works out the amount of lease to be paid over 33 years and add the sum of goodwill, the total would be approximately equal to what Gasco will be paid for operating the Qajjenza plant for three years.

This means that after three years Gasco would have got the total lease and the goodwill for free. Definitely not a bad business deal... for Gasco, of course.

In this contract with Enemalta it is also specified that, during the three-year period operating at Qajjenza, the government might continue subsidising gas but such subsidies are to be removed after three years. The Labour opposition insisted on knowing how the government is proposing to ensure a fair price for gas to consumers. In our opinion this is a very important issue because, although the government is claiming that the gas business will be liberalised, in fact it would be extremely difficult to set up a similar gas plant on another site. What is now a public monopoly would become a private one.

The government's reply to our concern is that the Malta Resources Authority would be the regulator. To the best of our knowledge, MRA does not have the resources for such work.

We also asked whether the proposed pricing policies of the two bidders were taken into consideration during the adjudication of the tender. Apparently they were not.

In the circumstances, the Labour opposition could not vote in favour of the resolution. In our opinion, the price negotiated by Enemalta with Gasco is ridiculous and the tender was not awarded to Gasco in a transparent manner. The government did not explain whether it intends to continue subsidising gas and how it means to ensure a fair price for this commodity.

We have, once again, another example of the government selling Malta's assets for a pittance instead of ensuring a fair return that would go some way in reducing our deficit. And, once again, the government will be forcing us citizens to pay for its misguided policies by increasing the cost of another commodity.

Mr Buhagiar is the Labour Party's main spokesman on infrastructure and capital projects