‘Dependent’ corporation

The rating agency that downgraded Enemalta Corporation’s credit worthiness by one notch is adopting a cautious approach to the government’s decision to lighten the corporation’s financial burden and absorb €25 million in company costs.

Vittoria Ferraris, infrastructure ratings director at Standard and Poor’s, said the credit rating agency would “wait and see” how any measure impacted the economics of the power company.

“We tend not to give full credit to announcements,” she told The Times yesterday, when asked for a reaction to the decision.

Ms Ferraris, one of the analysts who worked on the Enemalta report, said the government’s decision to absorb part of the costs strengthened the belief that Enemalta’s credit quality was “increasingly dependent” on government support.

The state-owned energy company has debts of some €600 million and according to information submitted in Parliament two years ago, half of the money is owed to Bank of Valletta.

On Tuesday Standard and Poor’s downgraded Enemalta from BB to B+, a move which the Finance Ministry has admitted could see the company’s borrowing costs increase. Lower ratings carry higher risk and this incurs higher interest rates on loan facilities.

The government had to present a final refinancing plan by the end of last year to restructure Enemalta’s debt and failure to do so was one of the key reasons for the credit downgrade, according to Standard and Poor’s.

Bank of Valletta has an exposure of more than €275 million with Enemalta and the Irish-German Depfa Bank more than €146 million. Enemalta’s third largest loan, €105 million, is with the European Investment Bank. The company also has other minor loans with HSBC, APS and Volksbank.

When asked whether the downgrade had any impact on its relationship with Enemalta, Bank of Valletta said the arrangement was of a purely commercial nature and “not open to public discussion”.

A BOV spokesman said the bank protected its shareholders’ interests whenever it offered credit facilities and had done so and “will continue to do so in this case”.

A spokesman for the European Investment Bank was more emphatic, insisting the downgrade had “no impact” on the relationship with Enemalta.

“Enemalta is one of the most important corporations in the country and remains an important counterpart for the EU bank, also thanks to the state guarantee,” he said.

Depfa Bank said it was company policy “not to comment on individual client relationships”.

Meanwhile, government and Opposition yesterday traded barbs as they engaged in a tit for tat on the matter.

Labour leader Joseph Muscat said the downgrade could have been avoided had the government presented a debt restructuring plan by December and asked who would be taking responsibility for the missed target.

Referring to the government’s decision to absorb €25 million in costs, Dr Muscat said the country was owed an explanation about whether this would be financed through other budgetary cuts.

The Finance Ministry said Dr Muscat’s was a superficial analysis. It accused the Opposition leader of ignoring Standard and Poor’s recommendation that utility tariffs should increase, something which went counter to the Labour Party’s promise to reduce electricity bills.

Finance Minister Tonio Fenech has said tariffs will not change but when asked to justify what appeared to be a policy change – the government has consistently maintained that tariffs should be pegged to the price of oil, which is on the rise – the Finance Ministry had no reply yesterday.

No forced redundancies – Finance Ministry

There will be no forced redundancies at Enemalta despite a debt restructuring exercise that will see a reduction in the workforce, the Finance Ministry clarified yesterday.

The job cuts will come about by limiting recruitment and finding alternative employment for those whose services will no longer be required. The Finance Ministry said fewer workers would be needed to operate the Delimara power station extension but insisted that a number of vacancies had been identified in district distribution centres to allow for a relocation of workers.

The Ministry said the restructuring and reorganisation process would take place in full collaboration with the unions.

Earlier in the day, the General Workers’ Union had expressed concern about the restructuring exercise announced by the Finance Minister on Tuesday, since it had been in talks with Enemalta management for the past three years over a reorganisation of the various departments.


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