A Government motion to restructure Enemalta’s debts was unanimously approved yesterday, with the Opposition declaring from the onset that it did not want to have anything to do with the corporation’s appalling financial situation.

€384 million in debts and interest will be repaid over 25 years

By setting up a special purpose vehicle (SVP), administered by a foundation, property belonging to the corporation would be transferred to the foundation and leased back to the corporation.

Finance Minister Tonio Fenech said Enemalta was facing financial difficulties and its debts had to be restructured.

Discussions on restructuring started in 2009 because the corporation had to double its borrowing requirements to embark on the Delimara power station extension and the Malta-Sicily interconnector project. Enemalta’s financial position had to be ensured so that it could acquire confidence from international financial agencies.

Mr Fenech said that when the Government introduced the capital employed concept, Enemalta had to incorporate part of the investment payment in its electricity tariffs.

For years the tariffs were kept low and did not cater for paying back debts made by the corporation. No sinking fund had been set up.

A reform in the energy sector was needed so that the corporation could be financially sustainable, making the necessary investment while paying back its debt over a period of years. Malta’s energy demand doubled over the last 20 years. Enemalta had to finance the extension of the Delimara power station and the interconnector project amounting to €175million and €200 million respectively.

In 2009, Enemalta’s accumulated debts amounted to €318 million, which was guaranteed by the Government. Its losses amounted to €142 million. The debt accumulating from the building of the first Delimara power station amounted to €340 million.

This necessitated the setting up of a mechanism for a repayment programme. A number of loans were at a mature stage with €99 million due to be paid in 2011, €110 million in 2015 and a further €100 million in 2018.

Among Enemalta’s debtors were the Deffa Bank in Germany, which went bankrupt and was taken over by the German government, and the Bank of Valletta, which was owed €200 million.

The Government had to find a solution which did not have an impact on tariffs. It was creating an instrument so that Enemalta could get new financing while paying back its debts over a 25-year period.

It also wanted to transfer recurrent debt payments to a sale and lease transaction so that this could be reflected in Enemalta’s accounts.

The debt would be converted to rent paid annually by the corporation to the foundation, to be called Vault Finance Ltd. This meant that €384 million in debts and interest would be repaid over 25 years.

The corporation sold the Marsa installation, the first Delimara power station and various distribution centres valued at €214.7 million to the foundation, which would lease them to Enemalta.

This provided an immediate injection of €208 million to Enemalta. The assets would be transferred to the Government when the debts were paid.

Minister Fenech said that the transaction meant Enemalta’s capital would increase from €132 million in 2010 to €340 million, while its debts would be reduced from €685 million in 2010 to €366 million.

The corporation would be able to strengthen its ratings with international credit agencies and would be able to borrow at low rates of interest.

Discussions were held with Eurostat so that the transaction acquired the approval of the European Commission. Property belonging to Enemalta had to be commercially valued before being transferred to the foundation.

Negotiations were also held with the Bank of Valletta and with the Deffa Bank . The Deffa loan amounting to €75 million would be repaid in 2015 and summed up by the Bank of Valletta as part of the transaction, which also needs authorisation from the Malta Resources Authority. Discussions were held also with the credit agency Standard and Poor’s.

Minister Fenech said that Enemalta’s debts for 2012 amounted to €165 million while the government contributed €25 million in subsidies.