Energy Minister Konrad Mizzi insisted this morning that he had done nothing wrong when he gave ministerial direction to Enemalta which led to hedging with state-owned Azeri company Socar, and he would do the same again.
Reacting to criticial remarks made by the Auditor-General in a report yesterday, Dr Mizzi told a press conference that the audit report was about hedging, not oil procurement.
He welcomed the fact that the auditor had noted significant improvement in Enemalta procedures and governance.
The government had made it clear it wanted price stability, he said, and Enemalta and later Enemed hedged in terms of government policy.
Under the government in terms of its policy, fuel prices had fallen eight times.
NAO, however, had raised concerns about hedges with Socar Trading - two out of hundreds of hedges made by Enemalta in this legislature.
Dr Mizzi explained that in the second quarter of 2014, Enemalta had concluded its hedging on diesel and petrol. The chairman of Enemalta had told him that as a result, fuel prices would have to rise 2c.
Dr Mizzi said he replied that everything possible needed to be done to avert this increase in price. Enemalta was told to stay in the market longer and seek lower prices.
The Enemalta chairman later told him the market was not responding and it was hard to avoid an increase in price.
The minister said he called for more efforts, and said one option was to include Socar Trading in the trading pool as an option.
Socar Trading, Dr Mizzi recalled, was part of the winning bid by Electrogas for the building of the new power station, and talks were being held at the time with Socar and the Azari government on general cooperation. Therefore it was decided them to ask them if they could help out. The then chairman of Enemalta, Charles Mangion, had agreed.
A few weeks later the Enemalta chairman informed him that agreement had been reached with Socar. As a result the price of petrol went down by 2c instead of being raised, while the diesel price was unchanged.
“I did the right thing” Dr Mizzi said, saying his direction was only for Enemalta to stay in the market and for it to consider Socar as an option.
This was within the law.
He had not directed Enemalta to reach agreement with Socar whatever the situation, but to consider it if it was favourable. He had not set a price and the direction was well within the remit of the law.
He had done nothing wrong, and therefore he would repeat what he had done, Dr Mizzi said.
In fact in January he had also given direction to Enemalta to go to the market and to lock at lower prices. In that case the deal was reached with BP.
Dr Mizzi said he acknowledged the auditor’s concerns on a lack of documentation. This point would be addressed, although this transaction (with Socar) was somewhat rushed. Nonetheless, everything was above board and all those who were responsible were involved.
These, Dr Mizzi said, were the only hedges done with Socar trading. They and all other hedges were audited and nothing wrong was found.
HEDGING LOSSES
On hedging losses, Dr Mizzi said that after considering currency gains, net hedging losses last year were about €6 million (A loss of €14m on procurement offset by a gain of €8m on financial transactions), and these would be recouped this year.
This contrasted with a loss of €49.5 million made by Enemalta in 2009, he said.