Lm21.3 million subvention to Enemalta

Enemalta made a corporate profit of Lm2.5 million for financial year 2005/2006, but this positive result came about only because the corporation received a government subsidy of Lm21.3 million.

The corporation's audited accounts, laid on the table of the House by Investments Minister Austin Gatt, show that this government subvention was equal to a 195 per cent increase over the compensation paid in 2005 (Lm8.3 million). During that period the surcharge on electricity bills fluctuated between 17 and 67.5 per cent. The government payment was used so as not to pass to consumers the full impact of the increased fuel prices.

The report points out that Lm19.2 million were spent on fuel used in electricity generation and Lm2.1 million to subsidise the price of gas cylinders.

Despite the introduction of the surcharge, units sold increased by 59,000 or 3.2 per cent over the previous year, partly due to a reduction in electricity theft.

Enemalta absorbed Lm4 million in increases in excise duties on fuel.

Following the rise in LPG international prices by Lm1.6 million, the government increased its compensation to cover part of the difference and maintain prices.

Fuel costs for the generation of electricity increased by 45 per cent, from Lm54 million in 2005 to Lm78 million in 2006.

On an operational level, the profit registered by the corporation was Lm7.8 million compared to a loss of Lm1.3 million in 2005. A sum of Lm995,000 came from the electricity division, Lm7,875,000 from the petroleum division and a loss of Lm1,069,000 from the gas division.

The report states that if finance costs of Lm5.2 million, allocated at corporate level, were to be allocated at departmental level, the electricity division would have made an operational loss as well.

The corporation recorded a reduction in electricity losses from 15.8 per cent to 13 per cent compared to 2005. Technical losses at five per cent, losses for theft, meter malfunctions and misreporting stood at eight per cent of units generated, equivalent to about Lm8 million in lost revenues.

The report said this problem was being addressed through the Smart Meter project, Enemalta's contribution to which will be some Lm17 million and which will have a payback period of two years following full implementation.

Enemalta invested Lm5.2 million in transmission and distribution equipment.

Staff, finance and administrative costs basically remained at previous year levels except for an increase in the provision for bad debts. An increase in debtors from Lm51 million to Lm73 million and in borrowings from Lm120 million to Lm140 million was registered, the latter largely due to the increase in debtors and in stocks.

The report contains a detailed statement of the hedging reserve account which shows a gain of Lm127,000 on currency forwards, a loss of Lm434,000 on interest rate swaps and a loss of Lm1.1 million on fuel swaps.

The audited accounts also give the fair values, at the time of the audit, of forward derivative financial instruments then in place.

A statement by the Investments Ministry said Enemalta believed that a fair reading of the audited accounts showed that the corporation made substantial improvements to its operations in the financial year being reported on, resulting in greatly improved financial results.

"Nevertheless, were it not for the government's compensation of Lm21.3 million, Enemalta would have made a corporate loss of some Lm18.8 million. The government compensation was equivalent to Lm532 for every man, woman and child which everyone, deserving or otherwise, benefited from.