Minister quizzed on hedging as oil price reaches 14-year high

Labour MP Joe Mizzi said in parliament yesterday that the government was responsible for the disaster Enemalta Corporation was currently in, because it had lacked direction for the whole energy sector in its 15 years in office.

Mr Mizzi was speaking immediately after Public Investments Minister Austin Gatt had described the corporation as a "dinosaur" and listed the problems it was facing.

The people who had been politically responsible for the corporation should shoulder their responsibilities, Mr Mizzi said during the debate on the corporation's estimates.

He also insisted that the government should explain how Enemalta would meet its costs in the future, especially after the importation of petroleum, its only profitable sector, was liberalised in less than two years' time.

Mr Mizzi said the government could not act like somebody else had been in office for the past 15 years. After all, it was the minister himself who had complained that Enemalta lacked a management structure and everything depended on the minister and the government-appointed chairman. Indeed, the corporation's finances had continued to deteriorate over the past year and the minister's speech indicated that the people were in for a tough time.

The losses of the electricity division had risen to Lm11 million from Lm9 million the previous year and the losses of the gas division had gone up to Lm948,000 from Lm908,000. At the same time, the profits of the petroleum division were down.

The problems Enemalta faced were shown in an S&P report, reproduced in The Times business section, which described the situation as alarming.

Had the present government followed Labour government policies of hedging of oil purchases this situation would not have resulted. And the situation would not have deteriorated had restructuring started in 1997 by the Labour government, including the appointment of a CEO - Arthur Tua - been followed up. This man was not a yes man and when the Nationalist government took over, he left because he got fed up.

What would happen when Enemalta's monopoly of petroleum imports ended? Would there be an increase in the price of electricity?

Mr Mizzi criticised the way appointments were being made, saying experienced managers were being replaced by inexperienced foreigners.

The problems Enemalta was facing had not cropped up overnight. There were serious problems in the power distribution grid and there was hardly any spare power generating capacity. Plant which should only be used in an emergency was not efficient and was costing the company a lot.

Work on the strengthening of the distribution system in the north was late and, apparently, over-budget. Similarly, work on the tunnel to take the cables between Marsa and Delimara had been repeatedly delayed. When would it be finished? What was the cost so far?

Mr Mizzi said there were still no serious plans for the setting up of power generating plants from alternative sources of energy.

Labour MP Leo Brincat recalled that as minister responsible for the corporation in 1996, he had commissioned a Pricewaterhouse study of Enemalta. This study had been passed on to top and middle management for action against practices which were leading to waste and abuse. The resistance this had been met with was horrifying.

As part of the drive to weed out abuse, the Tax Compliance Unit should investigate the lifestyles of certain top people in the corporation to see if they could be financed from their salary.

Indeed, if this unit wanted to enjoy the people's confidence, it should also investigate current and past ministers. It should see if certain people made their money through their professions or through abuse of power.

Mr Brincat recalled that when he was minister, Enemalta had also commissioned a human resource audit. Indeed, the government should investigate the operation of top and middle management. For government corporations could no longer continue to be managed as a fiefdom of the government of the day.

It did not make sense to have an overtime system where certain people were paid overtime only because their subordinates were given overtime.

The government, he said, should also investigate and if necessary take legal action on the basis of allegations made recently in the journal Bunker Spot, which were damaging to Enemalta subsidiary MOBC.

Mr Brincat observed that oil prices were going up and had just reached a 14-year-high of $40 per barrel. Had Enemalta made hedging agreements on oil purchases ahead of this price hike as the Iraq crisis simmered?

The minister also needed to explain the government's plans for the future of Enemalta. Would parts of it be privatised? If MOBC (Mediterranean Oil Bunkering Co) was not sold, would it be amalgamated in the corporation? What would become of MOBC's workers? This, he said, was a small but strategically important company and the government should take its decisions about it without any undue delay.

He said Enemalta needed to become environmentally friendly. It had the duty to see that energy saving measures were implemented and that energy audits of energy intensive enterprises were carried out. This would increase cost effectiveness in the use of energy.

He asked for the reason behind a projected 2.5 per cent drop in the sale of petroleum products and why it was being forecast that the surplus before taxation was to go down by more than Lm1 million.

Losses in the electricity division, he pointed out, were expected to be 24 per cent higher than in 2002. Why would that happen when the sale of electricity was increasing by more than 10 per cent?

Turning to alternative sources of energy, Mr Brincat pointed out that the corporation, on paper, was encouraging the installation of solar heaters. But how many households were estimated to have installed such systems?

He criticised the corporation's customer care section, pointing out that this had always been one of Enemalta's weak spots.

What were the corporation's medium and long term plans to meet future electricity demands?

With oil being a dollar denominated product, what would the impact be when Malta adopted the euro? Indeed the government should monitor possible developments in OPEC for oil to start being charged in euros. The government should conduct a feasibility study as this would surely have an impact on the corporation.

What had become of a pilot project aimed at curbing electricity theft?

Mr Brincat also asked how many Enemalta workers were on light duty and said it was important to develop and motivate human resources.