A drop in national electricity demand owing to the temporary closure of various businesses and entertainment venues due to the pandemic did not “materially impact” the cash flows of Electrogas last year, according to a report by the power station consortium’s directors.
As part of the controversial power station deal, the government locked Enemalta into a take-or-pay agreement with Electrogas, meaning the state-owned electricity distributor is obliged to pay for a pre-determined amount of LNG or electricity units from the consortium regardless of demand.
The report says that while the reduction in demand meant the complete energy requirements of the country were being satisfied by the Electrogas facilities alone, consumption was still lower than at the same time in prior years, causing concerns about the consortium’s ability to take LNG deliveries.
The risk was transferred in its entirety to Enemalta and government
However, the report says the consortium was still able to receive all the scheduled LNG deliveries in 2020.
“This was made possible through the take-or-pay commitment in place between the company and its client [Enemalta], which requires the client to consume a fixed annual volume of LNG.”
The report explained that while Enemalta’s consumption of the consortium’s LNG and electricity units was lower during the months most impacted by the pandemic, Enemalta was still able to consume the fixed annual allocation.
As a result, the pandemic did not impact materially the cashflows of the company, Electrogas said.
Although take-or-pay provisions are common in energy deals, the National Audit Office had criticised how these provisions, plus the late inclusion of a security of supply agreement, had shifted all the risk away from Electrogas.
“The risk was transferred in its entirety to Enemalta and government, now obligated to purchase 85 per cent of the annual contract quantity, be it power and gas, irrelevant of requirements,” the NAO said in a 2018 report.
Critics have long cried foul about the Electrogas deal. A request by the opposition last year for a public inquiry about the power station project was shot down by the government.
A source familiar with Enemalta’s operations said the dip in electricity demand was expected to impact the company’s bottom line.
An Enemalta spokesman told Times of Malta last October that the company was still evaluating the financial impact of the damage to the interconnector and eventually due to COVID-19.
The interconnector was taken out of action between December 2019 and March 2020 after being damaged by a ship’s anchor.