Updated | MFSA carried out due diligence of Sadeen's financial strength

Members of parliament met in the parliamentary national audit office accounts committee to discuss the draft emphyteutical deed which the government is sent to sign with Jordanian construction company Sadeen Group.

The government wants the land transfer resolution approved by parliament this week, before the House of Representatives breaks off for the Christmas recess.

Flanked by Education Minister Evarist Bartolo, backbencher Charles Mangion, a notary by profession, answered questions raised by the committee members, including government whip Godfrey Farrugia and PN MPs Jason Azzopardi and Marthese Portelli.

The first issue raised was that relating to the unhindered public access to a zone in Zonqor which Sadeen Education Investment Limited will embellish. Azzopardi insisted that the contract should be clear in stating that the public will have free access.

Mangion explained that the landscaped area at Zonqor Point will fall under the responsibility of the American University of Malta.

In the case of the Dock 1 promenade and the foreshore at Zonqor Point, the committee noted that the contract gave the general public “an unhindered right of pedestrian passage, free of charge”.

'Tarxien is viable alternative'

The Labour MP was pressed by Portelli to explain why the government had still opted for Zonqor Point, when the Malta Environment and Planning Authority had identified an equally suitable, within development zone in Hal Tarxien.

“The government, after carrying out its studies, found that the Zonqor Point was the most feasible option. Let us not forget that the original project covered an area of 90,000 square metres but government reduced the footprint,” Mangion said.

He added that 13,000 square metres is within development plan while a further 18,000 is ODZ – 80% less ODZ site than the original plan.

Mangion insisted that the contract “protected” the public interest.

Portelli insisted that this did not justify why the government wanted to keep Zonqor in the equation at any cost, when the Tarxien location respected the parameters requested by the government.

The Opposition noted that the parliamentary secretary for planning Michael Falzon should have been present for the debate: “Mangion is neither a Cabinet member nor is he responsible of MEPA.”

Azzopardi argued that the Opposition could not understand why the government had not respected the regulations set out in the Strategic Plan for the Environment and Development (SPED) in the identification of Zonqor point.

The SPED allows for projects to be developed in ODZ areas “as a last resort”. Portelli and Azzopardi insisted that a viable alternative to Zonqor point existed, as identified in a site selection report carried out by MEPA.

Nationalist MP Tonio Fenech reiterated that the government was “acting in breach of the law” for forging ahead with developing 18,000 square metres in ODZ when an alternative existed.

“Why the insistence?” he asked, to which Mangion replied that the land was fully owned by the government.

He added that the inclusion of the ODZ area was determined by the feasibility project, not solely restricted to the site being located in the south of Malta. The Opposition argued that Marsaskala was not “the only location in the south”.

“The government embarked on a rigorous process before reaching its decision,” Mangion said.

The whip later commented that the Tarxien site will be used for "social housing purposes".

Financial due diligence

In reply to Fenech, Mangion said a rigorous due diligence process on the investors’ financial capacity was carried out. He went on to list the obligations as listed in the contract, including the events of default and cure period.

Fenech then went to complain that the questions should be answered by Bartolo - as the minister responsible from the project - as opposed to Mangion, "who is not a Cabinet member". Defending Mangion, Bartolo accused Fenech of disrespecting the MP.

Fenech went on to ask which company or entity carried out the financial due diligence, adding that Mangion was not in a position to provide the answer. "Who is politically responsible of the financial due diligence carried out?"

Azzopardi went on to request a copy of the due diligence report to be tabled in parliament, along with an audited financial statement of the company. Asked what was the net asset value of Sadeen Education Investment Limited, Mangion said he did not have such a detail "but it would have definitely been taken into consideration during the process".

"This is a sham," Azzopardi replied angrily, adding that such questions were basic when discussing such a deed.

Bartolo later confirmed that due diligence was carried out by the Malta Financial Services Authority with the support of an international company.

Aiming at generating 300 jobs, attracting 4,000 students

With a statement of intent to generate “direct employment in the region of 300 physical persons at full capacity”, Azzopardi said this was not an obligation on behalf of the investor but merely “a wish” to do so.

The Opposition went on to request that the contract should include a clause that would penalise the investor in the case that the target is not reached.

Bartolo explained that the project “would fail” if it does not attract approximately 4,000 students at full capacity. If Sadeen becomes insolvent, the government can dissolve the grant and shall be entitled to operate the AUM directly.