Local energy tariffs "would have shot through the roof" had the government not piloted the building of the new gas-fired power station, former energy minister Konrad Mizzi said in parliament on Tuesday.

He said that without the new power station, Malta would have had to rely on oil and on the interconnector, and the prices of energy from both sources had gone up substantially compared to gas.

Dr Mizzi was speaking when he and Energy Minister Joe Mizzi gave a statement on the conclusion of the Electrogas power station project with the signing of the security of suply agreement.

In his statement, minister Joe Mizzi said the completion of the project had cleared the way for the government to focus on its next big energy project, which would be the €320 million gas pipeline from Sicily.

The government was proud of what had been achieved, not least because clients in Malta were now charged some of the lowest energy tariffs in Europe.

Others, he said, had said the new power station was not needed. Yet, in terms of international rules, a country had to have enough capacity to ensure supply even if the biggest generating capacity failed. Therefore, had the new power station not been built, the Marsa power station and the Delimara One power station would have had to be retained.

The building of the new power station also meant Malta was no longer using the polluting heavy fuel oil in its power stations.

The conclusion of the project meant that the government could focus on the gas pipeline, a project which the EU had recognised as one of common interest. The new pipeline will follow a route from Gela in Sicily to Marsaskala and on to Delimara.

The158km pipeline would also involve the installation of a storage facility and a proposed regassification unit 12km off Delimara, about which more studies were needed.

The pipeline would eventually replace the floating storage unit.

Konrad Mizzi, formerly minister for energy, said the project, he said, was innovative, ambitious and complicated and faced many challenges.

It faced all maner of obstructions from some elements in Malta, including incitement in the media and in the European Commission. But the bottom line was that while in 2012 Malta had some of the highest energy tariffs in Europe, now it had some of the lowest, as well as cleaner air.

Dr Mizzi defended the temporary bank guarantee, initially of €80m and then €360m, given to the investors, insisting that this was strictly within EU rules, including state aid rules. The European Commission was kept in the picture throughout the project.

A bridge loan was paid by the developers and the government’s guarantee was withdraw in December, meaning that Malta was now benefiting from a totally private project – and tariffs were not rising because of the power purchase agreements reached by Enemalta with Electrogas.

It was worth pointing out, Dr Mizzi said, that the government had given a guarantee on investment. The former government had issued guarantees just to ensure that Enemalta would not go under.  

Nationalist MP Claudio Grech said that the government initially kept the government’s unprecedented loan guarantee secret and it was only revealed by the media. The power station project would not have happened without this loan. Was the guarantee offer included in the calls for expressions of interest and request for proposals so that all 18 bidders could have opted for it?

At what rate had Enemalta agreed to buy electricity from Electrogas? If this project was being made out to be so good, what was stopping the minister from disclosing the figure? Were the government/Enemalta obliged to buy all the power generated by this project? What would become of excess capacity? Was the power purchase agreement for 18 years or 25? How did the agreed price compare to interconnector prices?

Marlene Farrugia (PN) said Dr Mizzi had privatised the provision of electricity despite promising the contrary. The people had lost control over the generation of electricity. The Electrogas deal was still shrouded in mystery, she said. Electrogas initially could not find financing until the government stepped in. But what had changed?

Tariffs, she insisted, had dropped because oil prices were down, the dollar was weak, supply from the interconnector was cheaper and generating equipment was more efficient.

Mario de Marco observed that it was Finance Minister Edward Scicluna who had described the government’s guarantee to Electrogas as ‘unique’ as the government never issued a bank guarantee to a private company.

Why was the guarantee not announced when it was issued and extended? Would tariffs be reduced now that the Electrogas power stations had come on stream?

Finally, had Enemalta signed a security of supply agreement or security of purchase agreement? Was Enemalta bound to buy all Electrogas output even if other sources were cheaper?

Replying, minister Joe Mizzi said the power purchase agreement was for 18 years. He said the attacks and suspicions raised by the Opposition were uncalled for, especially when the Electrogas project was praised widely in Europe. The Opposition had lost an opportunity to explain its vision on energy, if it had one.

Mr Mizzi said he was confident that later this month, the EU would approve funds for studies into the gas pipeline project.

Konrad Mizzi said the project had needed the security of supply agreement, something which was mentioned at the outset. Once this was achieved, the guarantee by the government was lifted.

Dr Mizzi said Enemalta had dispatch rights and could choose the source of energy it bought. He pointed out that prices on the interconnector had risen, and had Malta been dependant on that only, tariffs would have had to rise. The gas prices negotiated by Enemalta were very advantageous, he said. He refused to disclose them.  

The government, he said, had turned around Enemalta and it was now making healthy profits. Without the new power station, tariffs would have 'exploded' he said because of high oil prices and  30 per cent increase in interconnector prices.

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