Shanghai Electric Power will be a shareholder in Enemalta by year’s end since the government yesterday signed a €320 million deal with the Chinese company.

Shanghai will pay €100 million for a 33 per cent stake in Enemalta and €150 million for a 90 per cent shareholding in the Delimara BWSC plant that was hived off to a separate company called D3 Generation Limited.

Energy Minister Konrad Mizzi said the money was expected to be paid by the end of the year and another €70 million would be spent over the next 18 months by the Chinese company to convert the BWSC plant from heavy fuel oil to gas.

Dr Mizzi said that while Enemalta would enter into a power purchase agreement with Shanghai over the BWSC power station there was no obligation to buy electricity produced by the plant. Enemalta would retain dispatch rights, meaning the company would determine from where it buys electricity and in what quantities. He said Shanghai had initially asked for a minimum purchase commitment, which Enemalta rejected.

Although Dr Mizzi acknowledged this was one of the reasons that the deal was delayed by three months – it was originally planned to be sealed by September – he insisted the major stumbling blocks were of a technical nature, which involved the Electrogas consortium.

Electrogas, a private company, is to build a new gas power station and liquefied natural gas terminal. It will also be responsible for supplying gas to the BWSC plant.

Dr Mizzi said technical talks focused on how Electrogas would supply gas to BWSC and the quality of the fuel, both of which had an impact on design.

Even if Enemalta had no obligation to buy electricity from the BWSC plant, Dr Mizzi said Shanghai was bound to keep the plant in full operational mode. Two of the engines should also be able to run on both diesel and gas as a precautionary measure.

Konrad Mizzi and Yun Dan Wang sign the Enemalta deal. Photo: Matthew Mirabelli

The Chinese investment in Enemalta would cut debt to below €300 million, with the government retaining guarantees equivalent to its shareholding in the company.

Dr Mizzi said the reduction in debt guarantees would cut the contingent liabilities for the country, which have often been questioned by credit rating agencies.

Enemalta’s board of directors will be made up of four government nominees and two members appointed by Shanghai Electric. The chairman will be appointed by the government and Shanghai will nominate the vice chairman. The management team will remain Maltese but Shanghai will appoint an assistant financial controller and assistant distribution manager.

The agreement also provides for the setting up of two companies with joint shareholding between Shanghai and Enemalta.

International Renewable Energy Development will see Shanghai hold a 70 per cent stake in a company that will invest in renewable energy projects in Europe.

A second joint company will be the Energy Services Centre in which Enemalta will have a 70 per cent stake. It will offer maintenance and design services and act as the first port of call for Shanghai’s plants in Europe, Africa and the Middle East.

Dr Mizzi said this was Shanghai’s first investment in a European country and a stepping stone to explore renewal energy options in the European market. “This is a strategic investment for Shanghai to gain a foothold in Europe,” he said.

When asked about his wife’s involvement in the deal, Dr Mizzi said she was not part of the negotiations and this to avoid a conflict, since he was handling the investment.

Ms Mizzi was appointed special envoy to China by Malta Enterprise with a view to attract Chinese investment. She reports to the Economy Ministry, which was not involved in the Enemalta agreement.

The agreement was signed at Auberge de Castille in Valletta as university students celebrated their graduation outside, a coincidence that did not go unnoticed by Prime Minister Joseph Muscat.

“While students celebrate, we also celebrate this agreement,” he told the Chinese delegation, adding it was an important day for Malta because the energy sector was put on a sound footing.

The agreement is expected to be debated in Parliament on Wednesday.

Chinese cash

• €100 million: the investment to buy a 33 per cent stake in Enemalta

• €150 million: the cost to buy a 90 per cent shareholding in BWSC

• €70 million: the cost to convert BWSC to gas