Steward: government will refuse €100 million termination penalty

Negotiations with American healthcare company reaching stalemate as government indicates it will not pay Konrad Mizzi’s penalty clause if concession stops 

Health minister and deputy PM Chris Fearne (left) and Steward CEO Armin Ernst
Health minister and deputy PM Chris Fearne (left) and Steward CEO Armin Ernst

The Maltese government is refusing demands by Steward Healthcare for an amended concession agreement for higher payments, and will refuse a potential €100 million claim by the American healthcare group.

Protracted negotiations between both sides are close to a stalemate, says a top government source who also revealed the Labour administration wants Steward to abide by the obligations it signed up to in 2017.

“There is no way the government will accept the terms of the deal that Steward was working on with the Muscat administration,” the source said.

MaltaToday understands the government is now adamant to fight any claim from Steward to cough up a €100 million penalty – inked in near secrecy by former minister Konrad Mizzi in the summer of 2019 as a side-letter to the original concession – should the concession for the Karin Grech, St Luke’s and Gozo hospitals be terminated.

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“Steward can go to court, but the Maltese government will contest the €100 million penalty. Steward has to deliver the goods but the government will not an extra penny for that,” the source said.

The government would still be liable to pay Steward its equity and debt, representing the investment it carried out in Malta throughout its tenure, should the concession be terminated. But with the negotiations still not achieving any result, it appears unclear which side will move first to call out the other for.

The concession was first handed to Vitals Global Healthcare. However, only 21 months after securing a 30-year lease to operate Gozo, St Luke's and Karin Grech hospitals, VGH sold the concession to Steward Healthcare.

Earlier this year, MaltaToday revealed that Maltese government was planning to 'take back' the three hospitals by stopping the emphyteutical deal, effectively returning the hospitals to the Maltese state.

However, government agreed that Steward Healthcare will be facility managers and responsible for the upkeep and equipping of the hospitals.