Finance Minister Tonio Fenech said today that the European Investment Bank has agreed to finance half of the City Gate/new Parliament project through a low-interest loan of €40m.

Speaking at a press conference this afternoon, Mr Fenech said the loan will be given to Malita, the investment company which the government has created as a special purpose vehicle to finance the project.

He said that other funding for the project will include €25m of government capital  investment in Malita and €15m through public subscription of shares in the company.

Malita will lease the parliament building to the government. He did not say what the company's revenue from this source would be.

The minister was reacting to comments made this morning by Opposition leader Joseph Muscat.

Dr Muscat said the creation of a special purpose vehicle (SPV) to finance the City Gate project did not make sense.

Addressing a news conference in front of the new Parliament building, Dr Muscat said that the government was committing future revenue to service this project, putting future generations in debt.

Finance Minister Tonio Fenech yesterday said that an investment company, Malita, had been set up as an SPV to finance the €80m City Gate project. The government will retain 70% shareholding in the company and open the remaining shareholding to public subscription.

The government will ring fence leases from MIA and Valletta Waterfront and divert the revenue from the leases to this company. The company will  administer the parliament building and lease it to the government, which will pay back the company. This will mean spreading the capital expenditure for the project over an extended period.

Photo: Mark Zammit Cordina

Dr Muscat said this morning there were major problems with this concept, since the government was not just giving the SPV the revenue from MIA and Valletta Waterfront  but was also handing over land.

Although the government would retain a 70% shareholding, there were grey areas in the law through which the privatisation of government land did not necessarily require parliamentary scrutiny.

Dr Muscat noted that there had originally been a third revenue stream, which made up for a substantial part of the money involved, but which had now disappeared. He refused to say, when asked, what this stream was and directed questions to the government.

He said that it was irresponsible that 60 per cent of the project had already been built but the government did not yet know how it would be financed. The financing should have been planned before the actual building.

"This is a narcissistic project of the Prime Minister, which he wants to inaugurate before the election," Dr Muscat said.

He said that although Labour was not against the concept of an SPV, which would make a lot of sense to restructure Enemalta's debt, for example, the public needed to benefit to justify its creation and there was nothing to justify it in this case.

He called on the government to move the motion on the SPV for debate in Parliament as soon as possible. However, he refused to go into whether it should be debated before or after that on the Justice Ministry, saying that both motions, as well as that to censure Richard Cachia Caruana, were of great importance and should be debated between this week and the next.

Labour MP Karmenu Vella said that while the government had in January said it was allocating €140 million for capital expenditure, this had now gone down to €112 million. He suspected the €28 million difference had been passed on to the SPV.

He said that the government was incurring a debt of €1.4 million a day as well as an interest of €630,000. A third of all government debt had been accumulated in the last legislature.

Mr Vella said he suspected the government was financing the City Gate project through an SPV as a last resort because the EU had not allowed it to go into further debt.

MINISTER'S REACTION

Finance Minister Tonio Fenech said  the government will not be transferring land to the SPV but it will transfer to rights for the leases from MIA and Valletta Waterfront to Malita. This was what needed parliamentary approval.

He said the government had originally also considering passing on revenue from leases from the Midi project but this was dropped for technical reasons as the project is still evolving, and because the revenue from the first two concessions is enough.

Mr Fenech said this type of financial instrument is encouraged in the EU since major projects can be developed without unduly burdening the government with new debt. He said no technical presentation has been made to the PN parliamentary group yet as it was not thought to be a matter of political controversy.

He said a similar SPV was being considered for Enemalta.