Enemalta reports a loss of Lm7 million for 2006/7

Enemalta made a corporate loss of Lm7 million in fiscal year 2006/7 despite a government subsidy of Lm18 million. The loss an impairment charge of Lm6 million on a property transfer from the government. The loss is in sharp contrast to Enemalta's profit of Lm2.5 million in the previous year.

The corporation's audited accounts, laid on the table of the House by Investments Minister Austin Gatt yesterday, show that during this accounting period, the surcharge on electricity bills fluctuated between 50 and 63.5 per cent. The subsidy was necessary to avoid passing to consumers the full impact of increased fuel prices.

A sum of Lm15.9 million of the Lm18 million subsidy were used for fuel used in electricity generation while the other Lm2.1 million were directed to subsidise the price of gas cylinders.

Fuel costs for electricity amounted to Lm71 million compared with Lm78 million in 2005.

The report shows that on an operational level (before finance costs), the profit registered was of Lm5.1 million (down from a profit of Lm7.8 million in 2005). This was derived as follows: Lm3.2 million for the electricity division; Lm 2.4 million for the petroleum division; and a loss of Lm516,000 for the gas division.

Finance costs of Lm6.1 million were allocated at corporate level but if this had to be allocated at departmental level, the electricity division would have made an operational loss as well.

According to the report, electricity losses remained stable at 13 per cent which, when considering justified technical losses at five per cent losses for theft, meter malfunctions and misreporting, stood at eight per cent of units generated equivalent to some Lm7 million lost revenues. A Ministry for Infrastructure statement said this problem was being addressed through the Smart Meter project, Enemalta's contribution to which will be about Lm17 million and has a payback period of 2 years following full implementation.;

Despite the continued use of the surcharge during 2006/7, units sold remained on the same level as in the previous year. Enemalta absorbed Lm8 million in increases in excise duties on fuel such as diesel and petrol, that were introduced and were not passed on to the consumer.

The corporation invested Lm5.4 million in transmission and distribution equipment.

Staff costs remained on the same levels while finance costs increased by Lm0.9 million while administrative costs were back to 2005 levels in view of lower provisions for bad debts. A significant decrease from Lm73 million to Lm53 million was registered in trade debtors while borrowing decreased by Lm4 million. The report gives a detailed statement of the hedging reserve account . This shows a loss of Lm951,000 on currency forwards; a loss of Lm225,000 on interest rate swaps; and a loss of Lm117,000 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.

The ministry statement says that Enemalta has, year on year, made substantial improvements to its operations and in the 2006/7 fiscal resulted in "fair results in a very difficult year when the price of oil and currencies fluctuated widely".

It adds that "were it not for government's subsidy of Lm18 million, Enemalta would have had made a corporate loss of Lm25 million which, when considering the same numbers for the previous years, would have meant accumulated losses of a massive Lm43 million in just two years."

It concludes that in these two years, notwithstanding a subsidy of Lm35 million and surcharge income of Lm53 million (a total of Lm88 million beyond the normal tariffs), the tariffs were still not high enough to finance operations.