Revealed: The underground metro study that raised billion-euro cost alarm bells

A study about the costs of a shelved underground metro system reveals how the project would have potentially strained government finances.

Depending on the type of financing model used, the government deficit in a single year was estimated by consultants PwC to balloon to between 7.2% to 8.2%, well above the EU-imposed limit of 3% of GDP.

Finance Minister Clyde Caruana warned last year that plans for a mass transportation system could "royally screw" Malta. 

The shelved project would also have entailed piling on significant debt if the initial €4 billion to build the three underground metro lines was borne upfront by the government, instead of a private metro operator.

Under this scenario, the government debt to GDP ratio would spike to 76.1% of GDP, up from 53.4% in 2022, which was used as the baseline year for the PwC study commissioned by Infrastructure Malta. 

This, too, would have seen Malta fall foul of the EU’s 60% debt cap.

According to the 2023 study for the project, which was shelved by the government on cost grounds, having the government fund the upfront construction costs of the project was the more financially viable model over a 60-year concession period.

Although this would entail high upfront costs, it would reduce the yearly outlay for the project over the concession term. 

Under this scenario, the project would cost the government €21.4 billion over 60 years.

If the project were financed by a private operator, whom the government would ultimately have to compensate for the construction costs, they were estimated to reach €45.5 billion over 60 years.

Details of the study, dubbed Project Hestia, which confirmed that a metro line could be built in five years, were first published by Maltatoday.

Transport Minister Chris Bonett admitted last month that ballooning costs made the underground metro project unaffordable.

“Having all our transport underground was the best possible plan. But after infrastructure costs blew up due to the war in Ukraine, the numbers went haywire, and it became unaffordable,” Bonett said.

“It was estimated to cost around €4 billion and ended up at €6.3 billion in a matter of a few months,” Bonett said.

Revised plans have since been presented by the government for a cheaper €2.8 billion 24km light rail system that will be completed over 15 years. 

The PN, in contrast, has opted for what appears to be a stripped-down metro project based on one line rather than the three initially envisioned by the government.

According to the PN’s projections, the first line would cost €1.4 billion, with around 30% of those costs financed through EU funds.

The PN will also seek funding through various financial instruments and the Malta Development Bank.

PN shadow spokesperson Adrian Delia said the financing costs will amount to around €34.5 million a year across 40 years.

The rail will be free for residents, but tourists will have to pay for the service.

The PN also envisages a second line that will be built once the first line is completed. The second line is estimated to cost €2.5 billion.

PN leader Alex Borg has promised to resign if a PN government fails to deliver the project within five years.