A credit rating agency, Moody’s, has reacted favourably to the Government’s plan to put the energy sector on a sound footing, but it also makes three very important observations.

The first is that it considers the energy reform agenda as ambitious, a description that cannot be taken lightly when made by a credit rating agency.

The second is that there are risks to its successful implementation, and the third  – perhaps the most important at this early stage of the reform programme – is that Enemalta’s financial health could be jeopardised by a premature cut in tariffs “should any roadblocks delay the anticipated savings”.

It is not surprising that such an extensive energy plan as that contemplated by the Government would carry risks in its implementation. The plan involves the setting up, by a private partner, of a gas-fired generation plant, the use of an interconnector to link Malta to the European power grid and, now, a multi-faceted deal with China that includes the taking up of a minority shareholding interest in Enemalta. As in all large projects, difficulties are bound to arise as the plan starts taking shape.

The Government is expecting that cost reductions stemming from the overhaul of the energy sector will allow Enemalta to reduce tariffs by 25 per cent for households next year, and for industry, the following year.

However, Moody’s does not appear to be too convinced that it is wise to reduce the tariffs so early in the reform programme, which is why it said that the corporation’s financial health could be jeopardised by a premature cut.

The problem for the Government is that it is totally politically committed to the reduction of the tariffs by next year. Since it had made the pledge one of its main election commitments, it can hardly renege on it now without losing face and credibility.

Very soon, the Government will have to come out with all the details justifying the appropriateness of its move to go ahead with the implementation of the energy tariff cuts.

This time the country would expect full transparency, as in fact it also does over the cost of the tax cuts that had been included by the Nationalist administration in its Budget for this year and which the new Government had accepted after its election in March without much ado.

Quite naturally, Moody’s also brings in the Government’s deal with the China Power Investments Corporation, which, it says, is one of the five largest state-owned electricity producers in China.

However, since few details have yet been thrashed out with China, the credit rating agency has held back from giving any overall assessment of the deal.

It does say, however, that the energy service centre contemplated in the deal is “likely to further boost economic activity”, which is a generic comment.

Less generic, of course, is its remark that “successful implementation would be credit positive, yet risks remain”.

There are various question marks over the deal with China; its implications, especially over the possible influencing force it might have in the island’s foreign affairs decisions in international forums insofar as these concern that country, have yet to be studied. And, as the Opposition has had reason to complain, the Government may not be handling the matter as it should either.

However, there is no denying that the Chinese investment can contribute to salvaging Enemalta.

The question is: at what cost?