How Gonzi and Fenech will finance €80 million City Gate parliament

Who will run Malita Investments? | Company profiles

It's been two years in the making. Finance Minister Tonio Fenech's 'special purpose vehicle', a public company listed on the Stock Exchange, will be the new commercial entity that will run and finance Malta's costly parliament, the building re-imagined as part of the City Gate project by acclaimed Italian architect Renzo Piano.

A parliamentary resolution presented to the National Audit Office parliamentary committee is proposing that the government transfers the leases for the land and buildings of the Malta International Airport and Valletta Cruise Port (Viset) terminals, to a new government-owned company that will sell shares to the public in a bid to finance the €80 million project.

Malita Investments plc will be owned by the government and its investment management arm, Mimcol. It has an authorised share capital of €150 million.

The company will receive the annual rents from MIA and Viset, which are run by private consortia, but it will also invest in local and foreign stocks and shares as well as issue bonds to the public, raising money for the City Gate project as well as running the project.

MIA will pay €905,000 in rent this year, and €4 million between 2013 and 2016. By the end of its 65-year lease, it will have paid €120 million.

Minister Fenech says in the parliamentary resolution that government wants to "reduce its dependency on taxation to finance capital projects" by using Malita to manage government properties and City Gate, and invest in stocks.

By transferring the title of the Parliament's land to Malita Investments, any debt incurred on the City Gate project can be cleared from government's accounts.

In its crudest form, the SPV was used by corporations like Enron to finance large, specific projects without putting the entire firm at risk - and that also means hiding debt, giving the impression that the company doesn't have a liability.

The Opposition is likely to criticise the plan: Labour leader Joseph Muscat had questioned the financial underpinnings of the City Gate project, saying the government will be renting the parliament from the company that owns it, dubbing it "an unprecedented symbol of 'democracy in debt'."

Tonio Fenech had previously remarked in an interview to MaltaToday that the special purpose vehicle (SPV), which necessitated approval from the European Commission, is "not a case of creative accounting."

30% of the company will be open to public participatoin. Even MIA and Viset and their own shareholders, will be able to invest in Malita, although finance minister Tonio Fenech said private investment will be limited as to the size of investment.

Both companies have 65-year leases, on a non-renewal basis option.

41% of Malta International Airport's revenue - €21.5 million from €52.5 million in 2011 - was earned from government entities like Air Malta. In 2011, MIA paid €804,000 for its lease, which increases by 15% every five years. There is no renewable option once the lease expires.

The government also earns shareholders' dividends, as well as tax on profits, and national insurance and PAYE contributions.

Who will run Malita Investments?

Malita Investments will be headed by finance minister permanent secretary Alfred Camilleri and the CEO of Malta Government Investments, Vincent Mifsud, as well as PricewaterhouseCoopers partner Frederick Mifsud Bonnici.

But there is also a strong component of former and current Bank of Valletta bankers on Malita's board of directors:

Danny Rosso spent over 20 years at the bank before moving on to the Gasan group's holding company, and has today taken a directorship on the bank's La Valette Funds Sicav;

Anne Marie Tabone is the chief officer operations of Middlesea plc, which together with BOV owns insurance firm MSV Life plc;

Kenneth Farrugia is the director of Bank of Valletta's investment arm Valletta Fund Management.

Headquarters Clock Tower, Level 1, Tigné Point

Company secretary Noel Buttigieg Scicluna (former ambassador to Sweden and executive director of Nationalist Party think-tank AZAD).

Also: company secretary for ARMS, Grand Harbour Regeneration Corporation, Malta Government Technology Investments, Mediterranean Offshore Bunkering Corporation.

Company profiles

Malta International Airport plc

Upon privatisation in 2002, Malta International Airport plc was granted a 65-year concession to operate Malta's only airport.

Malta International Airport plc is a privatised company managing the operations of Malta International Airport. Malta Mediterranean Link Consortium Ltd owns 40% of MIA shares: the consortium is made up of Vienna International Airport, SNC-Lavalin, and the Bianchi group's Airport Investments Limited. The government of Malta holds 20%, whilst 40% of the company's stake are held by private investors.

In 2008, MIA set up a 100% subsidiary, Sky Parks Ltd, to take over and operate the car parks of the airport. Malta International Airport plc is also involved through a 10% shareholding interest in VISET Malta plc, a company set up to develop the Valletta Waterfront and operate a cruise liner terminal in Grand Harbour.

Valletta Cruise Port plc

Valletta Cruise Port plc (formerly VISET Malta plc) is a limited liability company which took over the cruise and ferry terminal operations following an international tender issued by the government of Malta in 1996. Valletta Cruise Port was awarded the project in 2001.

As part of the package the government offer included the lease of all the 48,000 square metres of land and buildings on the land side of the quays for 65 years.

The concept of the project is on a Build, Operate and Transfer arrangement. VISET took over the management of the cruise and ferry operations from government at the end of February 2002.

Valletta Cruise Port plc is owned by a grand consortium of Maltese investors: Anglu Xuereb's Aggregate Investments; Bank of Valletta; Lombard Bank (owners of Maltapost); Malta International Airport; FSG (owned by Simons Farsons Cisk and Salvu Grima Group); Perquisite Holdings; Checkout Developments; M. Demajo (Port Ventures) Ltd; Developort Inc (USA); and Infrastructure World International Ltd of Hong Kong.