The European Commission has given Malta one month to reply to its charge that an investment on the upgrading of two boilers at the Delimara power station amounts to state aid.
The move comes as Brussels got wind that objections about the investment were heading its way by Italian energy companies, which feel the subsidies will give Enemalta an unfair advantage once it would be able to compete with them after Malta is connected to the European grid.
The government has defended itself already, insisting the investment on the boilers qualified for state aid because Enemalta was isolated and would not be competing with other providers.
But Commission sources said yesterday the issue “is not as simple” as the Maltese government is projecting it. “While the government is arguing Malta has an isolated system and, thus, Enemalta doesn’t really compete with other EU energy producers and distributors, the situation will soon change with the interconnector, also funded by the EU.”
The interconnector, which should be in place by 2012, will connect Malta to the European grid giving Enemalta access to energy from a swathe of suppliers on the Continent. The Commission is arguing this will also allow Enemalta to sell energy in Europe.
“This means that, while future suppliers of energy to Malta have to invest into their own technology out of their own pockets, Enemalta is planning to do so through subsidies and grants. Although we don’t want to prejudge this case, Malta also has to respect the rules,” the sources said.
When it was put to the Commission that the upgrades were needed for Enemalta to meet the new EU’s environmental rules, a Commission official said the same rules applied for everyone.
“If the Commission were to find the aid illegal, Enemalta would need to finance the planned investment out of own funds or through borrowing,” the official noted.
A negative decision from the Commission will mean Enemalta will have to borrow the €18.3 million necessary to overhaul its boilers so that emissions of particle matter, sulphur dioxide and nitrogen oxides, which surpass the limits allowed by EU directives, are significantly reduced.
As things stand, Enemalta only forks out €2.8 million, the remaining €15.5 million coming from EU regional development funds.