Enemalta reports Lm7m loss after Lm18m subsidy in 2007

Enemalta made a loss of Lm7 million after a government subsidy of Lm18 million in the financial year 2006-2007, the Infrastructure Ministry said in a statement this afternoon.

It said, quoting audited accounts, that the loss of Lm7 million incuded an impairment charge of Lm6 million on a property transfer from the government.

The corporation made a profit of Lm2.5 million in the previous year (after government subsidy) according to accounts published on Monday.

The ministry said that in the 2006-07 accounting period, the surcharge on electricity bills fluctuated between 50% and 63.5% and the subsidy was used to avoid passing to consumers the full impact of increased fuel prices.

The ministry said the subsidy was used as follows:

Lm15.9 million for fuel used in electricity generation;

Lm2.1 million to subsidise the price of gas cylinders.

Fuel costs for electricity amounted to Lm71 million compared with Lm78 million in 2005,

On an operational level (before finance costs), the profit registered was of Lm5.1 million (down from a profit of Lm7.8 million in 2005) derived as follows:

Lm3.2 million for the electricity division;

Lm 2.4 million for the petroleum division;

A loss of Lm516,000 for the gas division.

Finance costs of Lm6.1 million are allocated at corporate level but if this had to be allocated at departmental level, the electricity division would have made an operational loss as well.

Other highlights from the audited accounts are:

· electricity losses remained stable at 13% which when considering justified technical losses at 5% losses for theft, meter malfunctions and mis-reporting, stood at 8% of units generated equivalent to circa Lm7 million lost revenues. This problem is being addressed through the Smart Meter project, Enemalta’s contribution to which will be circa Lm17 million and has a payback period of 2 years following full implementation;

· despite the continued use of the surcharge, units sold remained on the same level as in the previous year;

· Enemalta absorbed Lm8 million in increases in excise duties on diesel, petrol etc., that were introduced and were NOT passed on to the consumer;

· Enemalta invested Lm5.4 million in transmission and distribution equipment;

· staff costs remained on the same levels whilst finance costs increased by Lm900,000 whilst administrative costs were back to 2005 levels in view of lower provisions for bad debts. A significant decrease from Lm73 million to Lm53 million was registered in trade debtors whilst borrowing decreased by Lm4 million;

The ministry said a detailed statement of the hedging reserve account showed:

a) a loss of Lm951,000 on currency forwards;

b) a loss of Lm225,000 on interest rate swaps;

c) a loss of Lm117,000 on fuel swaps.

"Enemalta believes that a fair reading of the audited accounts shows that Enemalta has year on year made substantial improvements to its operations in this financial year resulting in fair results in a very difficult year when the price of oil and currencies fluctuated widely," the ministry said.

"Were it not for the government’s subsidy of Lm18 million, Enemalta would have had made a corporate loss of Lm25 million which when considering the same numbers for the previous years would have meant accumulated losses of a massive Lm43 million in just two years."

The ministry pointed out that in these two years notwithstanding a subsidy of Lm35 million and surcharge income of Lm53 million (a massive total of Lm88 million beyond the normal tariffs) the tariffs were still not high enough to finance operations.