Tall order for Enemalta

Tall order for Enemalta

Good news does not pour forth regu­larly from Ene­malta Corpora­tion. Rather the opposite. In re­cent months the emphasis seems to have been on corruption and bribery running amok in the entity. Without one investigation being concluded, room for a fresh one soon comes up. Where and when will it end?

Against that background nudging up the corporation’s credit rating was a welcome development. It showed, if little else, that Enemalta was on the right track, at last. That does not mean there is anything to justify euphoria.

The Prime Minister reminded the public over the weekend that the government inherited a corporation with an overhang of debt of €800 million. The question now is how that debt can be repaid. If things go according to announced plans, Chinese money to the tune of €200 million will be injected in the enterprise. It is not yet clear how that will be done. Possibly through an increase in paid-up capital so that the corporation will be able to use the new liquidity to pay off part of its debts.

That will still leave a massive €600 million to be tackled.

That burden will not come down very fast, certainly not in the short term. The government is hoping to make Enemalta more efficient and to switch its energy use to cheaper gas. The early part of that improvement, if and once it comes about, will have to go to finance cheaper bills to consumers.

The government has a commitment to reduce energy tariffs by a weighted average of some 25 per cent. Consumers with low bills will benefit, relatively, far more than those of us who are guzzlers of electricity. The reduction in consumer tariffs will be implented as from the end of the current month.

In this regard I have a feeling there is a widespread misconception which has not been adequately clarified by the Energy Minister. As I understand it, consumers will not receive reduced bills at the end of March. What will happen is that consumption from the beginning of April will be charged at the new tariffs.

Reduced bills will therefore be issued in June to cover the April-May period, since Arms Ltd has now moved to a sensible two-month billing cycle.

Consumers will not receive reduced bills at the end of March. What will happen is that consumption from the beginning of April will be charged at the new tariffs

This needs to be explained very clearly by the government if it is not to become a political issue leading up to the May European Parliament elections. Even if it is properly explained, the Opposition are likely to spin it for all they are worth. Such is the nature of the current game.

Spin aside, the first annual tranche of reduced energy tariffs will be made up for from €30 million the corporation expects to receive from the consortium that won the right to build a new gas-driven power station. To the extent that the proposed time frame is met, that would be one hurdle out of the way.

I am less clear about the second hurdle. The government is also committed to reduce commercial tariffs a year after it benefits domestic consumers, from 2015. That will possibly cost more than the reduction in tariffs this year. It will come on top of another one- year drop in revenue from domestic users. Where will the necessary funds come from?

And what about beyond 2016, when the two reductions will impact together and move forward in parallel?

I would think the government’s reply to those questions will be to point to the savings that will be made by Enemalta Corporation in the cost of its own energy consumption and in energy generation. That is how things should square out but I am not aware that a definite forecast has been published, though one must presume that the corporation is working on it.

The forecast will have to assume that other things will remain equal, that time frames are met, that Mepa conditions regarding the new power station are entertained and that new generation powered by gas stored on a tanker in Marsaxlokk will take place as planned.

Nothing in the above will be new to the planners at Enemalta Corporation, or to the Energy Minister. Nevertheless one would be foolish not to recognise that we are talking of a very tall order, and one with little – if any – wiggle room for errors or shortfalls.

Another source of saving for Enemalta could come from good governance. The corruption and bribery which seem to have been endemic in the past should be no more. In particular more regular payments should be received for energy distributed, which should itself be higher relative to production, flowing from increased efficiency.

This source could be substantial. Whether all sources taken together will be enough to meet the commitments made to consumers and to allow a margin of profit to finance new investment that may be required plus gradual repayment of the debt overhang remains to be seen.

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