State aid approval paves way for ElectroGas 18-year security of supply deal

Legal certainty that Malta will not be in breach of state aid rules means that ElectroGas can now confirm its 18-year security of supply agreement • Publication of contracts expected in the coming days

European Commissioner Margrethe Vestager: ‘It means that no more questions can be asked on state aid… that there is legal certainty’
European Commissioner Margrethe Vestager: ‘It means that no more questions can be asked on state aid… that there is legal certainty’

The Maltese government and ElectroGas can now move to officialise an 18-year security of supply agreement after the European Commission gave its green light, confirming the legality of the deal.

It took the Commission over two years to assess and analyse the agreement, after which it formally declared the deal as being in line with state aid requirements.

“We ask a lot of questions and now we have the legal certainty that it conforms with state aid rules,” the Commissioner responsible for Competition, Margrethe Vestager said.

The agreement with ElectroGas Malta means that the consortium will supply electrical energy and gas to Enemalta for 18 years. In the Commission’s words, “the support takes the form of payments from Enemalta, which provide an economic advantage to Electrogas as they ensure a certain rate of return and a steady revenue stream”.

But the Commission concluded that ElectroGas will not be overcompensated for the services it will provide, as “the rate of return for ElectroGas Malta is in line with that of similar projects”.

Addressing a media brief, Ronald Mizzi, the permanent secretary at the ministry headed by Konrad Mizzi, said that all agreements signed with the private consortium were scrutinised.

The permanent secretary argued that the project does not distort competition internal market competition, especially where the interconnector is involved.

The Commission’s decision also means that the €88 million bank guarantee which the government issued, to allow ElectroGas to take out a €360 million bank guarantee, will be withdrawn.

EelectroGas has also signed a 10-year contract to procure its LNG supplies from Socar.

Konrad Mizzi, who remains in charge of the energy portfolio, said when asked by MaltaToday that all documents and agreements will be published and tabled in parliament “in the coming days”.

The Nationalist Party was unhappy with the Commission’s approval, with Simon Busuttil telling the College of Commissioners that the EU had ignored the “Maltese public sentiment against corruption”.

Commission President Jean-Claude Juncker replied: “I couldn’t disagree more. We are asked to focus on real European issues… we are not competent for legal and parliamentary matters of member states… that's a matter of subsidiarity.”

Malta yesterday received its first consignment of LNG: the Labour’s electoral pledge was to have a gas-fired power station up and running by March 2015.

The plant is part of the Labour government's plan to drastically reduce energy bills by using liquefied natural gas that will pass through a regasification unit at Delimara.

According to an Environmental Impact Assessment, the shift from heavy fuel oil to LNG will deliver overall positive health impacts for the population. The same report argues that a better use of the Malta-Sicily electricity interconnector would further improve air quality. The use of natural gas is expected to cut CO2 emissions by 28%.

The interconnector will ensure that Malta will be connected to the European electricity network.