Enemalta faces EU investigation over €15.5 million investment

Enemalta faces an investigation by the European Commission into a €15.5 million investment the government made in the energy corporation for the upgrade of two boilers over a possible breach of state aid rules.

The Commission said yesterday it had doubts whether “the investment subsidy is necessary and well-designed to perform a service of general economic interest, as is argued by the Maltese authorities”.

The government is battling the EU on this but will now have to face an in-depth investigation.

The problem revolves around Enemalta’s plan to connect to the European grid through a cable to Sicily by 2012. In essence, the Commission is saying the subsidy will give the corporation an unfair advantage over other European energy providers with which it will be able to compete once hooked to the European grid.

After the connector, partly funded by the EU, is in place, “a public subsidy to meet already applicable environmental standards... is liable to distort competition between Enemalta” and foreign suppliers in Italy and elsewhere.

The project, which will upgrade two boilers at the Delimara power station, costs an estimated €18.3 million. About €15.5 million will come through the European Regional and Development Fund and the rest will be forked out by Enemalta through a commercial loan.

EU environmental aid rules do allow for such subsidies to meet emissions targets but not to this extent and only if the investment is used to go beyond EU thresholds and not simply to meet them as is Malta’s case.

However, speaking from Brussels where he attended a meeting of Finance Ministers yesterday, Tonio Fenech insisted the investment on the boilers qualified for state aid because Enemalta would not be competing with other providers.

The issue has been at the heart of a series of technical discussions with Commission officials over the past months but the government intends fighting its corner.

“The government intends making further submissions about its position as part of this process to explain why it does not agree with the position taken by the European Commission. We are maintaining this stance on the eligibility of this aid in view of the fact that the Delimara power station only produces energy for the Maltese market and, therefore, it does not distort competition in the internal market,” Mr Fenech said.