Enemalta made hefty losses last year, the first time since its return to profitability in 2015.
Analysis of an unpublished credit ratings report by S&P Global indicates the loss for 2020 will be in the region of €30 million.
A spokesman for Enemalta did not comment on the extent of the losses when contacted, instead telling Times of Malta the company faced “extraordinary costs” due to damage to the interconnector and a dip in demand caused by the pandemic.
Enemalta had posted a brief synopsis of the S&P report on its website in March, putting a positive spin on the fact that the credit rating given to the company remained “stable”, despite the pandemic.
S&P gave Enemalta a rating of BB with a negative outlook, the same as in the previous year.
After years of racking up massive losses, Enemalta made a pre-tax profit of €19 million in 2015, €46 million in 2016, €44 million in 2017 and €7 million the following year.
Enemalta 2019 accounts yet to be published
Enemalta’s accounts for 2019 have yet to be published, with the company’s spokesman saying they were in the process of being filed with the Malta Business Registry.
Times of Malta understands that Enemalta’s profitability dipped further in 2019 but no major losses were registered.
The government had put Enemalta’s return to profitability in 2015 down to cost-cutting measures as well as an ambitious energy plan.
The plan involved the part-sale of Enemalta to Chinese-owned Shanghai Electric Power and the building of a new power station by the Electrogas consortium.
The government, in 2015, bound Enemalta to buy a fixed amount of gas or electricity from Electrogas, regardless of energy demand.
Electrogas started supplying energy to Enemalta in 2017.
While Electrogas noted in its latest financial filings that a drop in electricity demand due to COVID-19 did not materially impact cash flows, the same could not be said for Enemalta.
The S&P report says that the reduction in power demand and one-off costs hindered cash flow generation, though the situation is expected to improve this year.
Enemalta’s spokesman did not say if the Electrogas contracts hampered its ability to buy energy from the cheapest source in the face of a drop in demand caused by the pandemic.
The spokesman merely said that the unavailability of the interconnector in the first quarter of 2020 had led to a “naturally higher dependence on plants operated by natural gas”.
Enemalta’s Earnings crash
Enemalta’s earnings before interest, taxes, depreciation and amortisation crashed from €64.2 million in 2019 to €16.8 million last year.
Following years of rising demand fuelled by a booming economy and population growth, power demand dipped by 4.5 per cent in 2020.
S&P put this dip down to COVID-related lockdowns and reduced business activity and tourism.
Power demand is expected to reach pre-pandemic levels by 2022, assuming a 50 per cent recovery in 2021 and the remainder in 2022.
S&P expects a clear trajectory of deleveraging in the next two years, driven by higher sales and a return to a normal cost profile, with 2021 likely to be an interim year.
Enemalta’s cost of sales went up by €10.9 million in 2020, an increase the S&P report put down to the use of backup oil-based plants to make up for the loss of the interconnector.
In addition, remote working redirected some power consumption from businesses to residential, changing consumption patterns.
As a result, revenues fell seven per cent from 2019. Enemalta also registered €7 million of exceptional costs due to the provision for bad debts.
The company has recovered from insurers €11 million of the €15 million spent on repairing the interconnector, which was taken out of action in December 2019 due to damage by a ship’s anchor.