As Malta braced itself for the highest utility tariffs ever in 2009, Enemalta’s team tasked to hedge oil prices did not meet for 10 months.

It was a couple of months after the 2008 election that the Government introduced new exorbitant tariffs to cover Enemalta’s rising fuel costs.

The situation caused widespread dissatisfaction but unknown at the time was the fact that Enemalta’s risk management committee had failed to meet for 10 months in 2009.

The committee was tasked to analyse the oil market and propose hedging agreements on oil quantities and foreign exchange rates. These agreements would have locked the price on future oil purchases – this could be beneficial if oil prices rose and detrimental if they dropped.

Noting the prolonged period of inactivity in 2009, the Auditor General said the implication was that various opportunities of “favourable market conditions were not capitalised upon, and other circumstances characterised by their negative implication on Enemalta not reacted to”.

More so, the Auditor General found no documentation, meeting minutes, e-mails or records justifying the 10-month lull in activity, during which Enemalta still undertook hedges on foreign exchange transactions to the tune of $70 million.

The Auditor General also noted that in late 2009 then minister Austin Gatt had instructed Enemalta to hedge if the price of oil was below the benchmark on which the tariffs were set – $81.80 per barrel of crude oil.

The minister insisted price stability for the whole of 2010 was a matter of Government policy.

The Auditor General noted that Enemalta’s hedging strategy to defend the set tariff was “a contentious position”.

But even though fuel procurement was characterised by questionable management practices, the Auditor General noted that Enemalta still managed to register positive results from its hedging agreements.