Surcharge worry

The Deloitte and Touche report on the fuel surcharge is worrying.

We are told that "(Enemalta) has and is still effectively absorbing a substantial part of the fuel increase burden, which should technically be passed on to the consumers". The report estimates this as over Lm38 million for the year 2005/2006, compared to the income from the surcharge of Lm27 million.

While at first sight we should be happy with Enemalta's (imposed) generosity, it would be foolish to ignore the fact that the corporation is following a fast spiral towards bankruptcy.

In the year 2004 (the last published report) the Enemalta electricity division made a loss of Lm12 million. The corporation as a whole made a loss of Lm7.5 million, but under EU law, the separate divisions should be financially independent. By the end of that year Enemalta had accumulated debts of Lm113 million and the same report announces further loans of €300 million in 2005.

So Enemalta is not "absorbing" the fuel burden in its profits, but is borrowing ever increasing sums of money. Since with such arrangements Enemalta can never conceivably have an operating profit (unless the fuel price goes back to the baseline figure of 1999) the end is not far away.

The last investment Enemalta made in new power station plant was in 1998. All the steam turbines at the Marsa power station are over 35 years old with an overall efficiency of only 26 per cent. New investment is desperately needed as the only way Enemalta can be profitable is by converting to fuel efficient plant.

If Enemalta fails, Malta's economy will collapse and we will all suffer.