In energy, sovereignty is an issue

The interest shown by 19 companies, including some international big names in the new government's energy proposal shows that it was far from a pie in the sky. 

The strong interest in the proposal is an indication that the bait offered by the Maltese government is considered lucrative by a large number of prospective bidders.

But it is noteworthy that Labour's original proposal has already been tweaked to accommodate bidders: the 10-year fixed price agreement has been significantly changed to a five-year agreement and additional "floating" infrastructure is also being foreseen, rather than just land-based terminals.

The issue at stake is not whether the proposal is possible but whether it is desirable to hive off the supply of 40% of our energy supply to one single private operator which will also own significant parts of our energy infrastructure - like the gas storage facilities and terminal - for a 25-year period.

Surely the government will still retain its ability to determine the energy mix of the remaining 60%, but it would also rely on the new company for the provision of gas for its own power station plant, which means that Malta will be dependent on the new company for the energy supply of both power stations.

The energy mix promised by Labour envisaged that the state-owned power station will continue to account for around 40% of our energy supply (depending on the share of energy from the interconnector). Potentially the new company will be the sole provider of energy of 80% of Malta's energy needs.

In a normal country the political left-wing would look at such a prospect with trepidation.

The major issue is what will happen after the expiry of the five-year fixed price agreement and what power the Maltese state will have on energy prices and the determination of Malta's energy mix, throughout the 25-year period. 

Surely nobody in his right senses would object to private investment in the energy sector, but it is arguable whether it is in the interest of a small nation to be lumped with one dominant company, which would be in a position to determine the energy mix of the country's next five legislatures.

Surely the status quo, namely the heavily-indebted Enemalta which is in itself a threat to the viability of public finances and indirectly to the country's economic sovereignty, and the desirability of a shift to from HFO to gas, does militate in favour of Labour's neoliberal solution to Malta's energy quandary. 

By thinking out of its ideological box, Labour is making an offer which is hard to resist: offering cheaper and cleaner energy to the masses by shedding state control on the energy sector.

But it is imperative that the long-term issue of dependence on a single private company is at least studied by an independent national commission, which assesses Malta's long-term energy interests beyond the electoral cycles of this particular government.

Surely it is in the national interest to assess the consequences of the deal in 5, 10 and 15 years' time.

One major variable in the equation are the fluctuations in gas prices, which may well be decreasing (especially in the next five years) due to the viability of shale gas in the USA, but could well increase as China starts shifting from coal to gas. Too many things can happen in a 25-year timeframe.

My major concern is that the present government clearly sees decreasing energy prices in the short term as a key to kick-starting economic growth. Due to the decrease in tax revenue, which is the inevitable consequence of the budget tax cuts inherited from the previous government, the government is desperate for an injection for growth.