Enemalta Corporation is expecting a loss of €35 million on electricity sales in the next few months unless oil prices drop drastically, Finance Minister Tonio Fenech told parliament today.

However, Mr Fenech said, instead of projecting a raise of between 25 and 30 per cent in utility tariffs for 2012 the corporation's Risk Management Committee is being prudent and heeding the advice of international experts who during past weeks have been saying there are indications that oil prices may start to drop due to the prolonged crisis in Europe and the sluggish US economy, besides other international situations.

Answering a parliamentary question by Charles Mangion (PL), Mr Fenech said that forward buying of oil supplies could only be done if international prices stayed at the same levels on which current utility tariffs had been calculated, or went lower. Current tariffs are based on hedging agreements for 2010, when Enemalta had fixe 100 per cent of its costs on the purchase of oil at the average price of €81.80 per barrel at a dollar exchange rate of $1.49.

For 2011 Enemalta had taken forward-buying positions for 63 per cent of its needs, at an average price of $79 per barrel. As far as the dollar exchange rate was concerned, the corporation had managed to buy all its currency needs at an average rate of $1.3632.

This meant that 37 per cent of oil supplies for 2011 were being bought at spot prices.

Mr Fenech said that oil prices for 2011 had registered the highest level of $126.66 a barrel and the lowest level of $93.50. These levels had not permitted the corporation to take positions as it did not want to raise utility tariffs by 25 to 30 per cent, when international realities could yet offer the possibility of more reasonable prices.

When one considered that oil purchases accounted for about 70 per cent of the total outlay for the generation of electricity, which exceeded €350 million, one could appreciate how much tariffs depended on what was happening overseas.

If market prices persisted at such heights, the corporation would start to take positions close to the current ones. But nobody could guarantee that this would be possible, and the only alternative would continue to be to purchase at spot prices.

Concluding, Minister Fenech invited the opposition to make public its alternative plans and when it thought it would be opportune to purchase oil supplies for 2012.