A few years ago, Enemalta was at a crossroads. Consecutive increases in electricity tariffs were having no comforting effect on the entity’s spiralling debts. Rising theft losses, uncollected revenues, unpaid taxes, a reliance on old, inefficient power plants and hefty environmental fines were fast pushing Enemalta to bankruptcy.
Loans covering power plants built decades ago and nearing their end of life remained unpaid, while major investments to bolster the national grid were abandoned or postponed.
Accountants and economic observers were aligning Enemalta with other ailing government enterprises forced down the road of insolvency. Some of them warned of the repercussions Enemalta’s failure could have on the Maltese banks supporting it. Others advised that more tariff hikes were inevitable.
Rating agencies warned that this situation was threatening the nation’s economy.
Three years and a major transformation later, and Enemalta plc is on the road to financial recovery, self-sufficiency and long-term sustainability. The same rating agencies that lambasted Enemalta’s failures in the past are now crediting this recovery as one of the main factors behind Malta’s growing economy.
This recovery is taking place at the same time that Enemalta’s customers are paying some of the lowest utility tariffs in Europe and while the company is investing millions in much-needed electricity generation and network reinforcement projects without incurring additional debts.
Standard and Poor’s decision to upgrade Enemalta’s credit rating for the fourth time in a row is a welcome encouragement to all of us involved in this transformation. I am referring to our employees, our shareholders, our strategic partners and suppliers and surely, our customers. Through our commitment and support, all of us, in one way or another, are contributing to this change.
Reversing a long-standing downward trend and putting Enemalta back in the black is no easy feat. We are engaging private investment to establish an electricity generation mix based on cleaner and cost-effective sources, including natural gas. We will soon be dismantling our older, oil-fired plants at Marsa, which have already been shut down, and at Delimara.
These efforts boil down to better quality electricity services at reasonable rates for all our customers
The result is lower operational costs for Enemalta and better air quality in the Maltese Islands. At Marsa, a year after the power station was shut down, we already have indications of remarkable air quality improvements.
In 2014, additional resources were also allocated to accelerate the implementation of the Malta-Italy interconnector, which was facing technical obstacles and had fallen well behind schedule. Enemalta worked tirelessly to cut this delay and complete the project by April 2015. At the same time, we also held an international competitive process to secure the services of a trading partner and start using the interconnector as soon as it was commissioned.
The introduction of Shanghai Electric Power as a strategic partner to our company was another big step forward in our quest for financial recovery. It represents the biggest ever foreign direct investment in the Maltese Islands and a substantial debt reduction for Enemalta.
We made headlines when we launched a campaign to cut down electricity theft and other irregularities. Today, with non-technical losses at their lowest levels ever, we estimate that we are saving as much as €30 million. Over 1,200 individuals agreed to pay for stolen electricity in the last two years.
Our customers’ help to curb this abuse is crucial. We receive and investigate many reports of irregularities as customers are now aware that others stealing electricity are depriving them from the resources required for a better quality service.
By doing more with less and by securing our revenues, we are not only reducing our long-standing debts but also providing the necessary funds to improve the quality of our services. In 2014, we started the Network Reinforcement Project to upgrade several strategic nodes of the complex distribution system that delivers electricity from power stations to our customers.
We started off with a three-year €60 million project including the development of four new distribution centres and the expansion of two existing ones. We have now extended this project with an additional investment of €20 million for the expansion of our 132 kV network, for another two new distribution centres and other network upgrades in different localities.
Each of these reinforcements will increase network redundancy and reduce the frequency and duration of electricity supply interruptions.
Ultimately, these efforts boil down to better quality electricity services at reasonable rates for all our customers, providing adequate capacity to meet current and future demands with minimal environmental impact and with lower risk of dreaded power cuts.
We believe this is the recovery that our country and all our customers deserve.
Fredrick Azzopardi is the executive chairman of Enemalta plc.