There are parallels between John Dalli’s sale of Mid-Med Bank to the Hong Kong and Shanghai Bank and Konrad Mizzi’s sale of the BWSC plant to the Shanghai Electric Company. Both came out of the blue without prior public discussion. The HSBC deal came as a complete surprise to all from the Prime Minister down. I wonder if it is the same is the case in the present deal.
Like HSBC, Shanghai Electric is not a charity and will do its best to recoup its investment as fast as possible. Not from dividends from its stake at Enemalta, but from the sale of electricity from the ex BWSC plant to Enemalta.
Up to now Enemalta owned all electricity generated by the BWSC plant, which it sold to the public at standard tariffs. The plant was the most efficient and it was reported that it produced a saving of €60 million per year over other generating plants. Now that the electricity belongs to Shanghai, Enemalta will have to purchase it at commercial rates. I presume that the €60 million will now go to Shanghai Electric.
This is the first experience of Enemalta in purchasing electricity from other generating companies, but in the future the bulk of electricity will be outsourced.
There will be four sources, the new Electrogas power station, Enemalta’s own Delimara 2 (Delimara 1 is to be closed down), Shanghai Electric and the interconnector to Europe.
Electrogas will supply the base load at a price according to the power purchase agreement. The other three entities will compete to supply the rest of the electricity at a commercial price. The Shanghai plant here has a distinct advantage: it is more efficient and flexible that the other sources. At the present time, when the closing down of Marsa power station is top priority, Enemalta has no option but to buy all the electricity Shanghai can generate, and will have to pay whatever is demanded.
Konrad Mizzi, speaking on Dissett, said that he thought Shanghai electricity would probably be at the same price as the Electrogas electricity, as it would use the same fuel. But this equates cost price with selling price which does not apply in a liberalised electricity market.
Moreover Electrogas operates at base load, which is intrinsically cheaper.
In a future liberalised market, Shanghai may make deals with large electricity consumers to sell them electricity directly, undercutting Enemalta’s tariffs.
Enemalta will be in deep trouble and will have to sell a controlling share to Shanghai. Then Shanghai, free from electoral promises, will raise the tariffs in the same way bottled gas prices rose on liberalisation.
I hope this is a pessimistic view and look forward to a clarification.