The temptation of further energy tariff cuts was the main risk Enemalta was exposed to, Standard & Poor’s said in a recent report.

The credit rating agency said the government could be tempted to make additional tariff reductions in future, given the significant impact previous cuts had had on the demand for power.

Prime Minister Joseph Muscat has so far dismissed calls by the Opposition and various business associations to further slash energy rates.

Family Minister Michael Farrugia told a press conference yesterday the government’s decision to reduce tariffs after the 2013 election had helped spur economic growth and reduce poverty.

The government estimates that the tariff reductions inject €80 million a year into the economy.

The company’s available cash resources will be sufficient to meet liquidity uses over the next 12 months

Dr Muscat said on Sunday the previous government had planned to further raise energy tariffs after the 2013 election.

Standard & Poor’s said that the 2018 election would test Enemalta’s resilience with regard to its exposure to potentially adverse energy policy decisions.

It said that the presence of a minority shareholder in Enemalta, Shanghai Electric, would reduce the risk of political interference on the tariff-setting mechanism in the future.

The government sold a 33.3 per cent stake to Shanghai Electric in 2014 for €250 million.

Opposition leader Simon Busuttil criticised the deal, saying it put part of a state-owned company into foreign hands.

Questions have arisen over the lack of transparency surrounding the deal. Heavily redacted versions of the Shanghai Electric contracts were only published two weeks ago.

S&P said that Enemalta’s management delivered consistency against the targeted business repositioning and debt reductions.

Enemalta’s liquidity is viewed as “adequate”, with S&P saying that the company’s available cash resources would be sufficient to meet liquidity uses over the next 12 months.

S&P said the government’s guarantee on Enemalta’s financial agreements would, in its view, continue to be instrumental in securing the company access to funding from local banks.

The rating agency is anticipating that, except for 2017, Enemalta could post positive cashflow after capital expenditure

It said that through Enemalta’s business repositioning, the predictability of the company’s performance had been greatly improved and the swing to profitability was now consolidated.

The government has long insisted that it saved Enemalta from the brink of bankruptcy in 2013, when it had debts of over €800 million.

jacob.borg@timesofmalta.com

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