Gas pipeline link to Sicily under consideration - Fenech

Finance Minister Tonio Fenech said this morning that the government is actively considering a gas pipeline link with Sicily.

Costs were still high, he said, but a major opportunity may have been created with the EU saying funding assistance being possible. If EU funding was sufficient, this could be a possibility and that was why the new Delimara power station could also be operated on gas. The important thing was that costs for consumers were kept under control, Mr Fenech said.

In his speech Mr Fenech repeatedly laid importance on Eemalta being able to fund capital expenditure to guarantee the power supply.

In 20 years, he said, energy demand had doubled and now peaked at 400 megawatts in the summer. Demand was expected to continue to increase and Malta needed to ensure it kept up with the demand because this was key to economic development.

Demand could be met by new generating plant, the cable to the European grid or alternative sources. However, it needed to be ensured that Enemalta could recover the cost of its investment.

The Opposition could promise heaven on earth, but no one could make promises without knowing what oil prices would be, Mr Fenech said. Joseph Muscat had said he would adjust the formula of the return on capital employed and would thus save €15 million. This was a drop in the ocean, with capital costs being €350 million.

If this investment was not made, how could investors be guaranteed a stable power supply? The bottom line would be, perhaps, slightly cheaper power bills, but also fewer jobs, Mr Fenech said. Clearly, jobs came first.

Mr Fenech said that while the government wanted to make as much use of alternative sources of energy or gas, but both possibilities were still expensive. The best option was to establish a gas pipeline to Sicily and this was under active consideration. Costs were still high but a major opportunity had been created with the EU saying funding assistance could be possible. If EU funding was sufficient, this could be a possibility and that was why the new Delimara power station could also be operated on gas. The important thing was that costs for consumers were kept under control.

Mr Fenech said Enemalta was continuing to improve its efficiencies. Outstanding revenue from bills was down to €127 million from €145m at the end of last year.

On oil hedging, Mr Fenech said purchases for last year had been hedged at $81 dollars per barrel. For this year, 63% of oil purchases were hedged at $79 million although dollar costs were slightly higher.For next year, Enemalta was treading water but the markets were not helping. There were times this April when the oil price was $126 but the average was $111 a b arrel, a situation which did not allow forward buying as it would mean raising tariffs as high as 40%, something which the governemnt did not want.

The corporation was being prudent but taking a risk, however, in the hope that prices would improve.

For this year alone, if it managed to buy remaining requirements at $104, Enemalta would make a loss of €35 million. However it was felt that because of global economic gloom, prices might go down. Indeed, current prices were around €103 per barrel.

Mr Fenech said that excluding some planned capital projects, Enemalta has a debt of €450m. Talks are being held with the local banks to restructure this debt so that it could be paid back over 25 years, he said.