Standard & Poor's ratings service has removed Enemalta Corporation from its Credit Watch and affirmed its BBB+ long-term corporate credit rating.

The debt-ridden corporation had been placed on the Credit Watch on February 9, 2004. The outlook is stable.

But the credit-rating agency warned that the perceived weakening in the government's support for Enemalta would, however, likely result in a downgrade, particularly if tariffs were not to become fully cost reflective.

A downgrade was also on the cards if Enemalta were not to improve the efficiency of its operations, S&P's credit analyst Monica Mariani said.

"The rating actions reflect the explicit credit support that Malta has provided to Enemalta, in particular through electricity tariff increases and the initial implementation of the company's restructuring."

Enemalta's rating reflects the company's 100 per cent ownership by and support from the government.

The rating approach is based on the electricity sector's critical importance for the country; Enemalta's key public-policy role; the low likelihood of privatisation in the short-to-medium term; and the strong direct financial support provided by the Maltese government, which guarantees more than 80 per cent of Enemalta's debt.

These strengths are offset by Enemalta's very weak underlying credit quality, which, on a stand-alone basis, would be non-investment grade, reflecting the company's extremely poor financial performance and "very aggressive financial profile."

The stable outlook is based on S&P's expectation that the company will continue to be supported by the Maltese government, and also reflects the stable outlook of the island in general.

In a statement, the Government Investments Ministry patted itself on the back and said that its efforts were paying off.

Last year, Enemalta started collecting its dues from its creditors, a measure which has "substantially" improved its financial situation.

This was also leading to a reduction in bank lending and interest.

The ministry said a new measure would come into effect later this year, which would tackle electricity theft effectively. Furthermore the government would be doing its utmost to substantially increase workers' efficiency and the corporation's operations, the ministry promised.