Disadvantages intrinsic to Malta’s size make it “difficult” to imagine energy corporation Enemalta ever being profit-making, Finance Minister Tonio Fenech has admitted.

What is the solution? What are Labour proposing we do?

“It should be a target but I think it is the nation’s greatest challenge. We should at least all agree that, in principle, Enemalta should cover its costs and a fair share of its investments every year,” Mr Fenech told The Times.

But despite the scale of the challenge, the government had no intention of sacking any existing workers or of raising electricity tariffs – already among the EU’s highest – any further, the minister said.

Malta’s national energy provider is some €600 million in the red, with year-on-year operating losses, rising oil prices and an added €200 million interconnector bill compounding its financial woes.

A refinancing plan spreading the company’s debts over a 25-year period is due to be presented to Parliament soon and should go some way towards assuaging concerns about the corporation’s credit worthiness.

According to Mr Fenech, the refinancing plan will cover €400 million of the company’s debt. That still leaves one-third of its debt – €200 million – as well as the interconnector’s cost, outstanding.

“The interconnector will be paid through the return on capital employed formula included in the tariff structure,” the minister explained. The formula has been criticised by the Opposition, to Mr Fenech’s annoyance.

“They criticise us for having accumulated the debt in the first place, but then also criticise the solution. So what is the solution? What are they proposing we do?”

He was slightly cagier about the manner in which the other €200 million will be paid back. “Part of it will come from the proceeds related to the privatisation of the petroleum division’s infrastructure, and some of it will need to be refinanced,” he said.

The corporation could try replenishing its coffers by raising tariffs even further but the Minister was adamant that doing so was not feasible and likely to backfire.

“Economic growth can only be sustained if energy prices are at the very least reasonable. Even though oil prices are surging, I cannot in any responsible manner hit the economy with higher tariffs. It would drain the economy by hurting productivity.”

Raising tariffs would also be political suicide. “Every decision we take could be political suicide. Not meeting deficit targets would mean the EU imposing things on us, which is political suicide. Leaving Enemalta unsustainable would be more than political suicide, because not funding its investments would leave the country energy-less.”

The government had taken a clear decision, the minister explained. “We’d rather cut expenditure than raise tariffs. If I need to make further expenditure cuts to support Enemalta at this point, the priority is that.”

He took the opportunity to take a swipe at the Opposition, which has criticised government expenditure cuts. “If the Opposition is saying I should instead be increasing tariffs, then they should say so outright. They need to be a bit consistent in this situation.”

Approximately 70 per cent of Enemalta’s costs are fuel-related and are therefore intrinsically linked to the price of oil, which, at €125 a barrel and rising, is creeping towards the $145 peak it reached in July of 2008.

That still leaves 30 per cent of its costs to be controlled, with the minister saying that electricity tariffs “cannot be burdened with the cost of operating inefficiencies”.

Any such inefficiencies are set to be identified and ironed out as part of an “ongoing” company restructuring process which will adapt company structures to its operational changes.

The Delimara power station extension, currently in its test phase, will be switched on this coming June and will allow the corporation to shut down half of its Marsa plant.

Work on the undersea interconnector cable linking Malta to the continental electricity grid is also underway. The remaining sections of the Marsa power station will be phased out once that becomes operational in October 2013. The minister however revealed that not all the plant might be dismantled.

Economic growth can only be sustained if energy prices are at the very least reasonable.

“We are exploring the idea of keeping parts of the plant there, in case of national emergencies. We know what happened to Cyprus [where a navy base explosion left an entire country without electricity]. What if something similar happened here?” This gradual shift in Enemalta’s operations is likely to leave some workers surplus to requirements. But there’s no reason for concern, the minister insisted.

“There’s no talk of redundancies in any way. Most extra workers will be redeployed to other departments – we’re holding back in staff recruitment for distribution centres, for example – and if there are extra workers the government has a number of other options to ensure they’re taken care of.”

He refused to discuss specific restructuring details, saying it was too early to do so. “It’s useless me throwing a figure about the number of workers involved. We haven’t yet nailed down the figures.”

With Enemalta, the economy and finance all forming part of his ministerial portfolio, Mr Fenech is responsible for coordinating a delicate balancing act. The difficulty is not lost on him.

“As minister for Enemalta, I have to ensure it is on a sound, sustainable footing; as minister for the economy I must ensure growth and jobs; as minister for finance, I have to balance the books.”

The three cannot be in contradiction, he said. “Look at Hungary, which has just been slapped with a €500 million fine by the Commission for not meeting its deficit targets.”

Domestically, problems have been magnified by rating agency downgrades and warnings by international institutions that growth forecasts may be overly optimistic.

But the minister argued that not all was doom and gloom. “Irrespective of growth forecasts by the IMF and the EU – which I’m not criticising by the way – the Maltese economy isn’t reflecting that decline,” he said, adding that government revenue had so far exceeded 2012 forecasts.

“Rating agencies only look at the bottom line, and it would be easy for Enemalta to just increase its tariffs. But government is not going to hurt families, industry and possibly induce a recession ourselves. We’re not going to increase tariffs.”