Former Enemalta Chairman Alex Tranter and the Risk Management Committee he chaired should apologise to the Maltese people for the way they had handled oil procurement, dealing in up to $1.5 billion per year in oil supplies, oil price hedging and currency exposure without any quotations whatsoever, the former head of the Fuel Procurement Advisory Committee, Joe Falzon told Parliament’s Public Accounts Committee this evening.
The PAC is considering the Auditor General’s report on Enemalta fuel procurement.
Prof Falzon said it was no wonder that the Accountant General, in his audit of the corporation’s fuel procurement policies between 2008 and 2011, had been moved to write that there had been no governance, accountability or transparency.
The PAC should quiz Mr Tranter closely on these practices, Prof. Falzon said rather heatedly.
When pressed by Beppe Fenech Adami (PN) if he was implying that commissions were going around underhand, he said he was not implicating anyone and did not want to go into that aspect.
“To me, this whole affair is an Alfred Hitchcock film,” he said. The oil procurement saga had started in 2005, not 2008, and the Auditor General should be asked to audit those three years too.
Dr Azzopardi pointed out the Auditor General had started his audit from 2008 after a specific request in the House by an MP.
At one point Prof. Falzon asked if Dr Azzopardicould veto the publication of his testimony in the media. Dr Azzopardi said the sitting was being streamed live and what he was asking for was inconceivable.
Pof Falzon said that when he learnt from Mr Tranter that he was being replaced as chairman of the Fuel Procurement Advisory Committee, he had written to Prime Minister Lawrence Gonzi asking him to stop this injustice, which would have reflected badly on him after five years. He had received no acknowledgement from the Prime Minister, let alone an answer.
The witness said that back in 1999, every rise of one dollar in the price of oil would have cost Enemalta $0.507 million. Nobody could have known that February that year would have seen the deepest trough in oil prices, but if Enemalta had hedged then it could have saved 10 per cent on fuel costs.
He reiterated his conviction, uttered last week, that Enemalta should take up to six qualified researchers on board for research work, or else turn the hedging job over to the Central Bank.
Replying to other questions, he said that in July 2005 then minister Austin Gatt had declined to meet the Fuel Procurement Advisory Committee to discuss hedging, writing back that the committee was made up of “extremely competent people” who should talk to the Enemalta board because the ministry had no role to play.
With this non-reply, Prof. Falzon said snidely, Dr Gatt had shown how smart he was, sending the committee to war without weapons.
Defending his views on hedging, he said hedging on oil procurement would have saved or met the 55 per cent surcharge imposed by the government on utility bills. The choice had been to raise prices for the consumer or keep them stable and let Enemalta borrow more and increase its debts – or buy part of the risk on the hedging markets for the short term.
Hedging would have meant that if the corporation had bought oil at $120 dollars per barrel it would have received a rebate of $20, but commission agents would still have been paid on the $120.
Prof Falzon recalled that when the FPAC was dissolved the government had issued a news release lauding the committee for its work and results “in spite of the unjust criticism from some quarters”.
PAC member Owen Bonnici (PL) asked Prof. Falzon if that news release had been misleading, giving one to understand that hedging had been made, when actually it had not. Prof. Falzon countered by asking why he had been replaced if the committee had been doing so well.
He said Roderick Chalmers, who had succeeded Alex Tranter as corporation chairman, was “a very honest and competent man” but who did not believe in hedging.
Prof. Falzon said the FPAC had always recommended a portfolio of hedging instruments, including a self-insurance fund which, with the consumer paying average prices, would have filled up the coffers when fuel prices were low to spend when they went higher.