The new water and electricity bills could jeopardise the future of giant microchip maker ST Microelectronics in Malta, the government was told during high level talks.
Discussions on the future of the Franco-Italian microchip maker have been ongoing for the past two years. However, in the past weeks they have been concentrated on the new water and electricity bills, which, one industry source said could go up by as much as 65 per cent for the Kirkop-based factory.
The plant is eligible for the new reduced night tariff, introduced with the new bills approved by the energy regulator just under three weeks ago. However, the full hike was extended on commercial accounts unlike the changes in October 2008, when the bills were raised to more or less current levels.
The company's management has produced an index table for the government which shows that the energy costs in Malta under the new tariffs will be among the highest in all of its plants across the world.
An industry source said: "The government has been told that the current bills could jeopardise the company's future here... the management said their presentation was being evaluated."
Finance Minister Tonio Fenech confirmed the meeting had taken place, but pointed out that it did not just deal with the energy bills. He said the government was considering the presentation made.
Mr Fenech said the government had announced a fund as part of the Budget for this year to assist companies that struggle with the new energy bills but which were prepared to invest.
"This is the context of the discussions we are having with ST Microelectronics... any help has to be within reason and the parameters of what the EU allows," he said.
In fact, the talks formed part of a series of meetings between Finance Ministry officials and the Chamber of Commerce, which represents ST Microelectronics and other large consumers such as the Farsons Group.
ST Microelectronics is, however, optimistic about the first quarter of 2010. Some 50 workers whose contract was not renewed last year were called back in - though the situation could change in the months ahead.
Local operations have been plagued by soaring labour costs and exchange rate pressures. The latter, in particular, have been exacerbated by the gap between the dollar, the currency in which the company trades its semiconductors, and the euro, the currency in which the company pays its bills, including salaries.
Earlier last year, the financial crisis had precipitated the situation and it looked like plans to downsize the local workforce would be speeded up. Some 400 jobs were shed over the past year but 1,550 people are still employed in Kirkop - more than double the 700-strong workforce which the ST Microelectronics management once suggested as its ideal complement in talks with government.
However, beyond the jobs, the sources said it is clear the company was not investing in new technology. Over the past months, production equipment shipped out of the Kirkop plant was not regularly replaced.
It is normal practice for the plant to change its equipment on a regular basis; however, "if in the past, 10 machines would be replaced by another 10, in recent months they would be replaced with five," a workers' representative said.
The Finance Ministry, which is leading negotiations with the company, has been trying to get the management to commit to an investment programme in new technologies, away from labour-intensive production processes which currently place the Kirkop plant in competition with China and north Africa. However, there has been no breakthrough so far.