ElectroGas will take more than six years to recoup investment, OPM insists

Office of the Prime Minister insists no state aid would be paid to ElectroGas and that the European Commission had concluded that company’s rate of return on investments was in line with other investments

The ElctroGas power plant and LNG tanker in Delimara
The ElctroGas power plant and LNG tanker in Delimara

There would be no overcompensation in the rate of return to be made by ElectroGas Malta Ltd and it would therefore be impossible for the company to recover the investment in six years, the Office of the Prime Minister has insisted.

In a statement issued Monday, the OPM dismissed a report carried in The Times of Malta – which claimed ElectroGas would be receiving €1.4 billion in state aid and recouping the cost of the €450 million power station in under six years – as “wrong, and factually incorrect, on a number of fronts”.

The newspaper said that the European Commission’s official journal revealed that a total of €1.4 billion in state aid would be paid throughout the 18-year period of the government contract with the power station consortium ElectroGas.

“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,” the report claimed.

“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 Enemalta.”

But the OPM pointed out that the European Commission had concluded that the rate of return to be made by ElectroGas was in line with similar investments, and that there would be no overcompensation.

“This excludes the possibility of recovering investment in the six year period indicated in the article,” the OPM said.

“The Investment Rate of Return (IRR) would typically correspond to a payback which is at least twice as long as that claimed by the article in question.”

The OPM said that the implication that ElectroGas would be given an ‘advantage’ of €1.4 billion was “definitely misleading” and stressed that the amount to be paid to ElectroGas was as per contractual agreements between the two companies.

“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,” it said.

“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. The agreements in question are between Enemalta plc and ElectroGas Malta Ltd.”