Enemalta: The sick man of Malta

The government publicly ridiculed Labour's promises to reduce water and energy tariffs.

When Lawrence Gonzi's Administration claimed Enemalta's problems were on the way towards a satisfactory resolution, the government defended the hefty increases in water and energy tariffs by arguing that the tariff structure should ensure that charges for consumption reflected costs while increasing state subsidies to the energy corporation, meaning that taxpayers would have to foot the bill for energy consumed by others.
The government publicly ridiculed Labour's promises to reduce water and energy tariffs and insisted that it would be unjust and incorrect for all taxpayers to subsidise the use of water and energy: this would reward squanderers and punish those who were more diligent in the way they used electricity.
Labour, it must be said, has never unveiled any concrete plans on how their promised reductions will come about and has now put itself in a situation where it can hardly face the next general election without giving the electorate any inkling about their plans.
Many consumers could not afford the new tariffs and government introduced a system of vouchers to pay for part of the energy consumption bills, albeit those who qualify for these subsidies are only very low-income families who need to be propped up by the state.
Now that Enemalta needs more income than it is managing to collect from the new tariffs - that actually led to a decrease of electricity consumption in most families - the government cannot continue to use this argument to defend further increases in tariffs. So it has switched over to its 'caring mode' and announced that it will be subsidising Enemalta after all: €25 million of Enemalta's annual non-core expenditure is to be absorbed by the government, we were told. Where this money is coming from in the present circumstances must be just another sleight of hand trick similar to so many others that have reduced the government's own three-month old budget proposals to a heap of rubbish.
Two years ago, we were told that Enemalta owes almost €600 million in debts. I understand that today this figure is nearer to €1 billion. Add this to another loan of €200 million for the interconnector between Malta and Sicily and one can easily realise why Enemalta is the sick man of Malta.
A refinancing plan that had to be completed by the end of last year is nowhere on the horizon; and it will probably not cover all Enemalta's debts, anyway. As things stand, the more time passes, the more difficult it will be for Enemalta to start seriously reducing its debts. For too many years, it has been 'surviving' by paying just its operating costs and interests on loans since repayment of the original moneys loaned for capital projects has proved consistently impossible.
With its operating costs depending mainly on the price of oil - a commodity with a  variable price that is not under Enemalta's or the government's control - Enemalta cannot even ensure that income from tariffs covers its production and debt servicing costs. Its attempts at using hedging to buy oil at a fixed price for a period of time have proved to be disastrous: the profit was made by the institutions who offered the hedging mechanism while Enemalta suffered heavy losses. Now even cash-strapped Mepa is fining Enemalta for its environmental breaches!
On the capital investment front, Enemalta has moved from one disaster to another. The attempts to sell off and privatise MOBC, its subsidiary, proved a veritable fiasco. The latest Delimara extension to be operating in a few months time will soon expose the folly of opting for a system that burns high fuel oil.
One should not forget that this contract led to the temporary suspension of government's official (and Cabinet-approved) policy to opt for gas for energy generation and that this 'suspension' was applicable just for the period of the award of the contract! The sudden revelation that an investment of €100,000 will be enough to reach the same objectives of a previously announced capital project estimated at some €18 million - planned to be provided from EU funds - tells it all. There is an obvious unbridgeable chasm between financial planning and technical planning in Enemalta. And, that, I dare say, is the most obvious symptom of the malaise that has overwhelmed this corporation.
When the Delimara Power Station was planned and its first phase was built, there were two honest technical people running the show. They knew what the country could afford and the government of the day could rest its mind that in its capital investments, the Corporation was getting value for money.
Unfortunately, things did not remain the same. After the 1992 election a new Board was appointed, headed by a prominent accountant who soon found running Enemalta was not his piece of cake.
The man's honesty was never in doubt but he had to rely on the Corporation's people for technical advice. His appointment was followed by those of a number other chairmen who failed to give the stability and direction that the Corporation needed. Political interference and over-manning in certain areas made things worse. Slowly but surely the technical boys in Enemalta took over until no one knew whether the Corporation was coming or going.
The notion that the Enemalta chairman was to be a non-executive one with a Chief Executive Officer running the show, never took off. There even was a succession of CEOs, one replacing another...  with no one quite figuring out why the turnover rate of Enemalta CEOs was so fast - let alone doing something about it!
It has now come to the point where the government of the day and the responsible minister cannot rely on insider sound technical advice given with economic viability in mind. The Corporation has evolved into a den of serpents with the minister responsible unable to discern the harmless ones from the simply poisonous or the fatally venomous! As more time passed, the serpents' stranglehold on the country's lifeline became more and more serious: without an adequate supply of electrical energy, the country cannot survive.
The government continued to prop up the Corporation by replacing the 'de jure' monopoly in the importation of fuels by a 'de facto' one so that it would not lose the money it earned from petrol and diesel. The aviation fuel 'de facto' monopoly at our airport is a shameful story that shows the party in government doing everything it should not believe in while openly breaching EU rules and obligations.
The Administration also concocted rules to limit the possibility of the private sector providing alternative energy on an industrial scale - all to save Enemalta's skin.
This was all to no avail. In classic socialist mode, the more protection that Enemalta got, the more severe its sickness has become.
The task to remedy the situation is not an easy one but there is no alternative: someone must provide the remedy for this sickness. Before that, however, we need to have a thorough and correct independent diagnosis of the ailment.
Unless the country exorcises the devil that has possessed Enemalta, the corporation will keep on, for many years to come, assiduously devouring money collected from our country's harassed taxpayers.

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