Questions are being raised over a preliminary deal between China and Malta over Enemalta Corporation but observers are awaiting details before passing judgement.

Economists, business people and energy experts yesterday described the deal to Times of Malta as “interesting” and “innovative” but refrained from going on the record with their opinions.

“The devil might be in the detail,” said a former Enemalta CEO, who preferred to remain unnamed.

Many said that, while the Enemalta “problem” had to be tackled, particularly due to the high debt accumulated over the years, they had various reservations on the deal put on the table.

Most questions concerned the sale of a substantial stake of Malta’s only energy company directly to a Chinese state entity without a tender or competition.

They also questioned the possibility of the island losing its energy sovereignty, with 1,500 employees still on Enemalta’s books.

The move to get into a partnership with the Chinese was first announced by Prime Minister Joseph Muscat last September on the margins of a conference of the World Economic Forum in China.

It seems Malta will become totally dependent on foreign owned companies

Dr Muscat had said that the Chinese government would be buying a stake in Enemalta through one of its companies, the Shanghai Power Electric.

At the time, the information was that the Chinese were going to invest some €200 million directly into Enemalta in exchange for a minority shareholding. Dr Muscat had also said the deal had to be wrapped up by this month.

However, according to last Monday’s announcement, the final deal is now expected to be signed in six months’ time, probably in September.

Moreover, according to the first details given by Energy Minister Konrad Mizzi in Parliament, instead of €200 million, the Chinese will now invest a total of €320 million.

Of this, €100 million will be invested in Enemalta Plc, a new company, in return for a 33 per cent stake. This company will take over some of the existing functions of the energy corporation without the petroleum division and the main power station at Delimara.

Another €150 million will buy Shanghai Power an undisclosed majority stake in the new Delimara power station, known as the BWSC plant, which is the most efficient asset currently owned by the corporation. The remaining €70 million will be used to convert the current plant from one fired by fuel oil to LNG.

On top of this, two new joint ventures will be set up between Enemalta and Shanghai Power to start new projects connected with renewable energy and the servicing of other power stations in the region.

The Chinese will have a majority shareholding (70 per cent) in each of the companies.

No details have been given on whether the Chinese will be selling the energy from their plant to Enemalta and at what price.

“The deal is quite creative but it seems that the government will be selling the power station and Malta will become totally dependent on foreign-owned companies to acquire its energy,” an energy engineer told this newspaper.

“If Enemalta is selling its prime asset, the BWSC power station, closing down the Marsa power plant and buying its energy from the new private LNG power plant, what are the 1,500 Enemalta employees going to do?” another observer, who has served on the board of Enemalta, asked.

When announcing the deal, Dr Mizzi said all jobs would be safeguarded but no details were given on how the corporation’s considerable workforce would be deployed. Currently, all Malta’s electricity is produced and distributed by Enemalta through the two power stations in Marsa and Delimara. However, this is all set to change in a few years’ time.

Electrogas, a foreign-owned consortium with a minority shareholding of two local private companies, will be building a new LNG-fired power station next year and will be selling its energy to Enemalta through a long-term power purchase agreement.

This will enable Enemalta to close down the Marsa plant (a long overdue prospect due to its age) and eventually decommission the first phase of the Delimara power station, which in a few years will also become obsolete.

Selling the BWSC plant will leave Enemalta without a generation plant and the company will only be responsible for distribution.

Malta-China deal on Enemalta