A EUROPEAN Commission investigation into the collapsed. £4 million Celtworld project is nearing completion. The project received a £1.8 million EU grant but has now been sold for £380,000.

The European Commission report was "not entirely negative", a senior official in the Department of Tourism and Trade said yesterday.

Mr John Dully, assistant secretary at the Department, told the Dail Committee of Public Accounts he had made contact with the Commission and had been led to believe the report would "not be very negative". That was the most he could find out, he said.

Mr Malt McNulty, the director general of Bord Failte, which provided the assessment which led to the provision of the grants by the Commission, said the benefits sought from Celtworld could still he achieved from a tourism project at the site at Tramore, Co Waterford.

However he said that Bord Failte, the EU and BES investors in the project would have to "take a hit".

The Comptroller and Auditor General, Mr John Purcell, told the committee the Celtworld experience "shows there is a need for an improvement in Bord Failte's evaluation and monitoring techniques".

Mr Phelim McCloskey, of Butlins Mosney, has bought Celtworld for £380,000. The facility will be open this summer, with the theme changed from Irish mythology to a "world of dinosaurs".

Celtworld was opened in 1992 to fill what Bord Failte saw was a need for a wet weather facility at Tramore. It provided 15 full-time and 15 part-time jobs.

There were three investors in the project. The main investor was Bord Failte, which held shares worth £750,000. The second investor was a building company, the M.F. Kent Group, which had shares to the value of £500,000.

The third investor was the British company, International Tourism Projects Ltd, which had shares worth £250,000. A further £231,000 was raised by way of a BES scheme which it had been hoped would raise £500,000.

Loans of £100,000 were provided by Bord Failte and the M.F. Kent group prior to the opening of Celtworld.

After the first season was unsuccessful, a consultant examined the project for Bord Failte and, after he reported, the State tourism agency provided £313,000 to the South East Regional Tourism Organisation, by way of a grant, to be passed on to the operating; company.

1993 was a better season but, not sufficiently so and the company ceased trading in September 1995. The property was put on the open market but with the condition that it be used for tourism or leisure-related activities.

The summer Celtworld opened was very warm and dry. "It was a wet weather project but unfortunately we didn't have any wet weather," Mr McNulty said. The building had no air conditioning and was cladded with aluminium. On a hot day "it became like a frying pan. It was difficult to remain inside".

Mr McNulty said the building realised only £380,000 because it had to be sold as a tourism facility. "If you take the view that the grants were paid to achieve certain objectives, then you can take the view that the grants are not lost."

The chairman of the committee, Mr Denis Foley (FE), said he found it "completely unsatisfactory that public funds be expended in this manner". He said he would urge Bord Failte to be more selective in its funding arrangements in future.

Celtworld had around 60 BES investors. The building cost around £90 a square foot, making it one of the most expensive constructions in the Slate.