A former chairman of Enemalta’s fuel procurement advisory committee has angrily called on MPs to question ex-corporation chairman Alex Tranter over oil procurement practices after 2005.
Joe Falzon, a professor of financial economics, agreed with the assessment of the Auditor General that there had been no governance, accountability or transparency in fuel procurement policies between 2008 and 2011, the period the AG had been asked to probe.
Mr Tranter was chairman between 2005 and 2010. Prof. Falzon said on Monday that Mr Tranter and the risk management committee he chaired at Enemalta should apologise to the Maltese people for the way they handled oil procurement: they had dealt in up to $1.5 billion a year in oil supplies, oil price hedging and currency exposure without any quotations whatsoever.
The Public Accounts Committee, which is considering the Auditor General’s report on fuel procurement, should question Mr Tranter closely on these practices, Prof. Falzon said heatedly.
In reply to questions, he said he was not implicating anyone in underhanded commissions.
“To me, this whole affair is an Alfred Hitchcock film,” he said. The oil procurement saga had started in 2005, not 2008, and the Auditor General should be asked to audit those three years too.
To me, this whole affair is an Alfred Hitchcock film
On the subject of hedging, on which his board had made a number of recommendations, Prof. Falzon said that back in 1999, every rise of one dollar in the price of oil would have cost Enemalta $507,000.
Nobody could have known then that in February of that year there would be the deepest trough in oil prices. If Enemalta had hedged then it could have saved 10 per cent on fuel costs.
In July 2005, former minister Austin Gatt, then responsible for Enemalta, had declined to meet the FPAC to discuss hedging.
Hedging, said Prof. Falzon, would have saved or met the 55 per cent surcharge imposed by the government on utility bills. The choice had been to raise prices for the consumer or keep them stable and let Enemalta borrow more and increase its debts – or buy part of the risk on the hedging markets for the short term.
Hedging would have meant that if the corporation had bought oil at $120 dollars a barrel it would have received a rebate of $20, but commission agents would still have been paid on the $120.
Prof. Falzon said his committee had always recommended a portfolio of hedging instruments, which would have filled up the coffers when fuel prices were low to spend when they went higher.