Government maintains stance on eligibility of EU funds to maintain boilers

Back-up capacity will also be provided by the investment in case of supply distortions, which is important to Malta given its isolation from the rest of the European energy grid.

In a statement the Ministry of Finance, the Economy and Investment said they intend to make further submissions about its position as it does not agree with the position taken by the European Commission. “Government is maintaining its stance on the eligibility of this aid in view of the fact that the Delimara Power Station only produces energy for the Maltese market and therefore it does not distort competition in the internal market.”

Technical discussions were conducted with the European Commission to ensure that no issues were raised relating to competition within the internal market prior to the aid being approved.

Enemalta is at present the sole operator licensed to distribute electricity in Malta and it also holds a near monopoly for electricity generation in the country. The situation is expected to change by 2012, when an interconnector with Sicily, partly funded by the EU, should be in operation. In that context, a public subsidy to meet already applicable environmental standards that competitors in Italy and elsewhere in the EU must meet is liable to distort competition between Enemalta and such suppliers.

EU environmental aid rules allow for such subsidies, however to much lower proportions than envisaged by Malta, only if companies reduce pollution further than what EU law requires. This is the case when the aid encourages companies to anticipate future applicable standards or to go beyond their legal obligations.

"The Commission does not find, at this stage, that the plans of Malta comply with these rules on aid to environmental investment," the EC said.

Malta also alleges that the investment would extend the useful life of the boilers and serve to provide back-up capacity in case of supply disruptions. "However, some of the investments considered seemed destined exclusively to reducing harmful dust emissions up to the requisite level, not to extend the life of the boilers. Moreover, the planned electricity interconnector with Sicily should also considerably increase the future capacity of supply in Malta," the EC said.