Enemalta recently inaugurated the Electrogas plant (D4) at Delimara, giving the utility company three sources of electricity that include the interconnector and the BWSC plant (D3). Vanessa Macdonald challenges chairman Fredrick Azzopardi to reassure consumers that electricity will be bought in the most cost-efficient way.
Last February, the Marsa power station saved us when there was a power cut due to a breakdown with the interconnector. Now it has been completely decommissioned. What happens in the event of another power cut? Do we need it as back-up or not?
Since last February, the cables were re-routed from the Marsa power station to the new Marsa North distribution centre, and the switchgear is being dismantled to be moved to Delimara. In the case of a major power cut, the heavy fuel oil engines at Marsa can no longer be used.
Delimara 1 will be kept on standby for a few months. Can it be turned on as quickly as Marsa was in case of an emergency?
No, as the steam needs to be warmed first. It is doable, but it takes quite a few hours, possibly as long as a day. We have emergency back-up using gas oil which can be run for a few days but we would then need to change to something that we have sufficient fuel for, as the amount of gas oil stored is limited. But this will only happen in the case of complete emergency…
The Electrogas station was recently turned on. What about Delimara 3? Has it been switched to gas and is it operational?
When planning the switch to gas, we had to ensure that the supply could be maintained. So we switched four engines to gas – which have now been turned on – and kept Marsa as standby.
At the moment, the load is quite low and D3 [the BWSC plant] will be ready by mid-June in time for the summer demand.
In 2016, Enemalta was purchasing a considerable percentage of its electricity from the interconnector. What happens once the Electrogas station (D4) and D3 are both in operation?
The interconnector will still be used, contrary to rumours. Our plan is based on the interconnector, D3 and D4. There are no plans to ever stop using any of them.
In November last year, you told me Enemalta would end 2016 in the black – after a loss of €53.4 million in 2014, and one of €100.1 million in 2013. But you still have not even published your accounts for 2015. What’s going on?
In 2016, our unaudited accounts show a pre-tax profit of nearly €40 million. We managed to negotiate one of the loans we had which had very high contract breakage fees, and paid off €32 million last December. This also means that the government guarantees will be able to go down steadily. And the better credit ratings also help to reduce costs.
The PN has accused you of saving considerable amounts by buying cheap electricity but not passing those savings on to consumers. Your argument is that you need the money to invest in the future and to make Enemalta finances sustainable. Does it have to be one or the other?
The issue is not whether Enemalta is making a profit. You have to see it in the context of where we started and where we are trying to get. It was losing money and was drowning in debt as there were so many loans. The distribution system also needed a major investment.
In 40 years, we had 18 centres until 2014 and by this year we will have 24: six new ones in three years! The investment is considerable and it was all financed by Enemalta and not by the banks.
The profits are not being given to the shareholders as dividends but being invested in the distribution network. There is still more to do if we are to keep up with growing demand.
The interconnector will still be used, contrary to rumours
The PN worked out last February that oil prices were down by 66 per cent in four years and that you were saving €1 million a week through lower generation costs. How low must costs go before you would consider reviewing electricity tariffs?
In 2009, oil was cheaper in euro terms than in 2015 (as you have to consider the price of oil and the foreign exchange rate).
In March, the Times of Malta carried a story saying that you were paying Shanghai Electric a fixed fee irrespective of whether you buy electricity or not – or how much you buy. Is that correct?
I cannot divulge commercial details, but we have already denied information carried in the Times of Malta. The figures quoted for what we were paying were completely wrong.
The figure of 14c5 per kWh was based on D3 Generation’s own accounts…
They are way off the mark. The figures were derived from the NSO by dividing total revenue from the units generated, but the units generated were nowhere near the actuals.
Simon Busuttil asked why you were paying 9c6 per unit from Electrogas when the interconnector cost up to half as much (between 3c and 8c). How much will you be buying from each source – and on what basis? You had said an Enemalta team would go for the cheapest options. But your hands are tied and you need to buy – or pay – for D3 and D4.
There are contracts with D3 and D4 but there is enough demand. And the way we buy will give us enough flexibility to buy as we need to.
We need to understand that the price varies depending on the time of year and even the time of day. We will be able to choose at any time between the three sources.
Sorry, but people are not convinced. The little information we have been given indicates that you are bound to pay for D4 and D3 whether you need that electricity or not. The oft-repeated mantra of “security of supply” is not enough to justify such as ridiculous situation…
I disagree that it is ridiculous. Government policy is to have stable prices and Enemalta wanted to ensure – even when negotiations for D3 and D4 were under way – that there would be a stable and low price. Our prices are still very good when compared to other European countries.
I was recently in Brussels and there was a presentation on the cost of electricity on a small Greek island: it was almost three times as much and had to be subsidised by the mainland.
It is not about comparing; it is about whether you could reduce tariffs if your hands were not tied to the agreements with Electrogas and Shanghai Electric.
You could see it as our hands being tied or as having tied in the price irrespective of what happens with the cost of gas.
In February 2016, Konrad Mizzi said Enemalta had imposed a €10 million penalty for late delivery of the new power station. It took a further year to do so. What was the total penalty and how was it paid?
The penalty is much more than €10 million now.
But will it be paid or will it now be conveniently forgotten?
No, it will not be forgotten. It will be paid or set off.
In March 2015, the National Audit Office expressed reservations over how Enemalta hedged oil consignments worth millions of euros from the State-owned Socar following ‘ministerial direction’ from Konrad Mizzi. The Egrant allegations are linked to money from the Azerbaijan ruler’s family.
The main connections that Malta has with Azerbaijan are the fuel purchase agreement and the Socar investment in Electrogas. Is Enemalta investigating the purchase agreements to ensure that there is no corruption? If it finds evidence of corruption, would the agreements be terminated?
I can assure you that no politician has ever spoken to me to favour anyone, including Socar. If they did so, I would immediately resign. And I am not aware that any pressure was ever exerted on anyone else by anyone else.
Hedging is part of a policy to ensure price stability. When you talk about losing, you are losing against the market. If there is anyone capable of beating the market, I take my hat off to him.
And if you found out that there was corruption involved in the agreement…
We are hearing a lot about the investigations that are underway… I am not the person who should be investigating.
Malta’s power stations
Delimara 1: Built in 1992; uses heavy fuel oil; closed in 2017 but on standby for the next few months.
Delimara 2: Built in 1994 and 1999; uses gas oil; kept in reserve.
Delimara 3 (Former BWSC plant): Built in 2012; converted from heavy fuel oil use to gas; half of the plant is already operational and running on gas, the other half will be ready by mid-June.
Delimara 4 (Electrogas): Built in 2017; uses gas; fully operational.
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