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Fenech on PL power plans: 'You do not know what you are saying'

Minister insists gas pipeline better option than using ships

The new BWSC plant at Delimara will be converted to gas under Labour's plan.

The new BWSC plant at Delimara will be converted to gas under Labour's plan.

Updated with comments on Bondiplus - Finance Minister Tonio Fenech this evening poured cold water on Labour's power tariff reduction plans.

Speaking on TVHemm, he said that, firstly Labour was promising to reduce the tariffs from next year when a new power station would, according to its own plans, be completed in 2015. The only way tariffs could be reduced next year was after the interconnector cable from Sicily was commissioned, something which was a PN government project, he said. At that time the average unit cost of electricity would be 11c.

Furthermore, he said, the two-year timeline for the building of the new power station was too short.

It had taken two years to build the latest power station extension, which was smaller, he said. And one needed to allow sufficient time for the tendering process under EU rules, which took at least 18 months.

Mr Fenech questioned the Labour claims that it could reach a 10-year power purchase agreement with the investors who decided to invest in the new power station and gas facilities once gas prices were fluctuating. Furthermore, any investor willing to take that risk would demand payment for it.

The minister said the €367 million investment costs listed in Labour's plans did not include the cost of building three specialised tankers to ferry the required liquefied natural gas. Those ships alone would cost some €160 million. Indeed, relying on three ships was risky and it was better to seek a gas pipeline with Europe financed by the EU, as the government was trying to do.

Another cost which Labour was not speaking about was some €40m to lay the foundations on soft ground in Delimara for the new gas tanks which Labour's artist's impression of the site showed.

Mr Fenech also made arguments that the 9c per unit power production costs which Labour was speaking about did not cover return on capital investment.

He noted that the consultants engaged by Labour had not said that the cost of production from the new power station would be 9c6. It was Labour which said so. The consultants actually mentioned a unit cost of 14c.

The Labour plan, Mr Fenech said, would see substantial over-investment in an effort to achieve energy efficiency. Labour was proposing to build a 200MW power station while retaining the new BWSC plant, Delimara Phase II and the interconnector. That meant a total generating capacity of 800MW when the peak demand was of 400MG. All this would have an impact on tariffs and on return on capital employed.

The minister said the Labour proposal was the same proposed to the government by Bateman some years ago. He asked if Labour Party officials had had meetings with the company.

Labour candidate Kevin Mizzi said he had no knowledge of any such meetings.

Mr Fenech insisted that tariff reductions from 2015 could come about only with the commissioning of the interconnector prepared by the PN government, which would bring the unit cost of production down to 11c. At that time Enemalta would be turning a profit.

Mr Mizzi said Enemalta would still be making losses in 2015. He said the Labour proposal would bring about considerable fuel cost savings for Malta, thus ensuring a return on investment for the investors. Malta would also have security of supply since its energy would come from the new gas power station, the gas-converted BWSC plant and the interconnector, while Delimara Phase II would be retained in reserve and use diesel.

He defended the PL timeframes, saying Labour would hit the ground running with an international call for tenders in April this year followed by a month-long road show in Europe.

MEP Edward Scicluna defended Labour's plans, saying consultants had told the PL that there were many overseas companies which would be interested in the sort of investment which the party was proposing and a 10-year price agreement was feasible, given that the investors would have a guaranteed domestic market. As a result Malta would have a cleaner environment and cheaper power. Furthermore the new investment would not pose a burden on the people as this would be a public-private partnership.

GONZI SEES PARALLEL WITH 1996 VAT PROMISE

Meanwhile, Prime Minister Lawrence Gonzi said Labour's promise on reducing tariffs was similar to its promise in 1996 to remove VAT.

"We have been here before. We warned you then, as we do now, that Labour's plans will drive the country into a wall," Dr Gonzi told a PN rally in Sliema.

Dr Gonzi recalled that the removal of VAT in 1996 had put national finances into a mess and raised the tax burden for the people.

 

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