Govt to pay City Gate SPV €5m annually, Midi concession possible third revenue stream

The concession payable to government for the land at Tigné and Manoel Island to developers Midi plc, was originally touted as one of the possible sources of revenue for Malita Investments plc - the company that will finance the €80 million City Gate project.

Reacting to the Opposition's announcement that it will not support the transfer of the airport and cruise liner terminal leases to finance Malita Investments, finance minister Tonio Fenech said the two concessions had been deemed to be sufficient by the technical team that reviewed the special purpose vehicle (SPV) financing model for City Gate.

"Eventually, if the State needs more finance, the concessions payable to Malita can increase," Fenech told the press.

Fenech said the government will be paying Malita Investments €5 million a year for the use of the parliament building.

Malita Investments will take the rents from Malta International Airport and the Viset cruise terminal and also issue shares to the public to finance the project for Valletta's entrance.

Malita Investments has €150 million in authorised share capital, with €15 million having already been issued. A €40 million loan from the European Investment Bank will also be taken out for the SPV.

Labour leader Joseph Muscat said Tuesday morning that the government was clearly unable to finance the €80 million project for a new parliament and the open-air theatre, and had resorted to a special purpose vehicle that will "rob future generations of state revenues" over the next 20 years.

"Contrary to the impression given by the Opposition this morning, government has already given a detailed presentation on proposals to finance the City Gate project to the Opposition, last December 7," Fenech said.

"A similar SPV was discussed with the Opposition for the refinancing of Enemalta and it is agreeing on that. The Opposition's problem is not with the SPV but with the City Gate project," Fenech said.

The finance minister said talks on the SPV started in 2010, as part of a process to see that financing was in line with EC regulations.

"The European Investment Bank believes in the project, to the extent that it will be lending €40 million at a low interest rate of 3.7%."

€15 million have been injected by government in Malita Investments, and a further €10 million will be invested in 2012.

Fenech also said the land on which MIA and Viset stand will still be government property.

"SPVs guarantee that capital projects are paid in a set timeframe - in this case 20 years," Fenech said.

The minister also rebutted claims that the money invested in Malita would be 'robbed from future generations'. "The profits made by Malita will go to the State and the families that invest in the company," he said, referring to the fact that Malita Investments will be floated on the stock exchange.