Updated 12.30pm with government reaction

A total of €1.4 billion in state aid will be paid throughout the 18-year period of the government contract with the power station consortium Electrogas, according to the European Commission.

The information of the amount emerges from the European Commission's official journal.

Commission documents published last week show that Electrogas will get paid €77.56 million a year by the government. The overall budget for the state aid will amount to €1.4 billion, they show.

This means Electrogas will recoup the cost of the €450 million power station in under six years.

The aid will be paid through the long-term power purchase and gas supply agreements agreed with Electrogas.

Brussels said the state aid took the form of payments that provided an economic advantage to Electrogas as they ensured a certain rate of return and a steady revenue stream.

It said the rate of return for Electrogas was in line with similar projects and the company would not be overcompensated for the services provided.

Opposition leader Simon Busuttil tore up sections of the contracts during a parliamentary debate two weeks ago.

The state aid for the new gas-fired power station was approved by the European Commission in January. In an official letter to the government, the Commission expressed its regret that Malta had put the aid in question into effect in breach of article 108(3) of the Treaty on the Functioning of the European Union.

An image taken from the official EU journal.An image taken from the official EU journal.

The provision says that the Commission should be informed of any plans to grant state aid in sufficient time to enable it to submit its comments.

No mention of this breach or the extent of the state aid being given to Electrogas has ever been made by the Minister within the Office of the Prime Minister, Konrad Mizzi, who handles energy projects.

A spokesman for Dr Mizzi earlier this month told Times of Malta no state aid had been granted yet.

In its decision, the European Commission flagged the fact that when an expression of interest for the power station project was published by the government in 2013, no mention was made of the security of supply agreement.

Government 'will not pay' any money

In a reaction ths morning, the government said the claim was wrong, and factually incorrect.

"The government will not pay any money to Electrogas Malta Ltd. It is to be clarified that the 'state aid' concept should not be interpreted in the sense that the company will be receiving any subsidy in the classical sense, neither from government nor from Enemalta plc. The only money that will be paid to Electrogas is that for the provision of power and gas by Enemalta. This is as per contractual agreements."

It said the agreements in question are between Enemalta plc and Electrogas Malta Ltd.

The implication that Electrogas will be given an ‘advantage’ of €1.4 billion is misleading, it said.

"Having made its financial and economic analysis, the European Commission concluded that the rate of return to be made by Electrogas Malta Ltd is in line with similar investments, and that there would be no overcompensation," the OPM said. 

"This excludes the possibility of recovering investment in the six-year period indicated in the article," it added. "The Investment Rate of Return (IRR) would typically correspond to a payback which is at least twice as long as that claimed."

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