Update 2 | Gas plant for June 2016, Chinese deal to be closed in coming weeks

Technical committee to decide energy supply mix on an annual basis • Video by Ray Attard

According to new timeframes announced by Energy Minister Konrad Mizzi, Malta will be making use of gas-generated electricity by June 2016. A 200MW interconnector connecting Malta to the European grid will be commissioned in early 2015 as works on the interconnector are in their final stages.

The June 2016 deadline also means that the BWSC plant would have been converted to gas while the ElectroGas plant is up and running.

Around 50% of Malta’s required electricity will be generated by the ElectroGas consortium, while the BWSC plant – to be converted to gas by Shanghai Electric Power – would cater for 30% while the interconnector would provide for the rest of the 20% of the energy mix.

The agreement signed with the Chinese state-owned company does not dictate the energy dispatch that Enemalta should buy from the converted BWSC plant, but it will be up to a technical committee to decide this.

Having landed in Malta from China yesterday afternoon, Mizzi told parliament that the “formal close of the Shanghai Electric Power investment was being finalised”.

No fresh details on the SEP agreement were given, other than that the BWSC will be converted to gas by SEP and that the €320 million cash injection in Enemalta meant that SEP would be acquiring a 33% stake in the company.

Addressing a press conference soon after briefing parliament on the new timeframes, Energy Minister Konrad Mizzi said a technical committee would, on an annual basis, decide how much electricity Enemalta would need to buy.

“These would be based on economic criteria, the unit cost of electricity and security of supply which can vary from year to year. Early on, we will be making more use of the ElectroGas plant which is envisaged to be running most of the time. The other two portions will be split 30% and 20% between the SEP plant and the interconnector respectively.

“This mix may change over time depending on the price of the interconnector.”

Mizzi confirmed that Malta was currently negotiating prices with an international company on the interconnection, which include congestion charges that must be paid and losses that have to be shouldered.

The agreement with Shanghai Electric Power, which will see the Chinese acquiring a 33% stake in Enemalta and an investment to convert the BWSC plant to run on gas, should be finalised in the coming weeks. Mizzi pledged that the agreement would be tabled in parliament for debate.

Mizzi said the ElectroGas contract would be disclosed during a separate debate during which the contractual provisions and all the pricing-related information would be published. He cautioned that the publication of such information would be subject to clearance from the consortium’s end and based on legal advice.

The timeline of the conversion of the BWSC plant and the construction of the ElectroGas plant will “be the same and both will work in synch”.

Mizzi said that the formula used to determine the price of energy to be purchased from SEP and ElectroGas was “very similar” with the price variation depending on the efficiency of the plants. Further details will be announced once government announces the final deal with SEP.

Although the new interconnector is built in a two-way system – meaning that Malta could both import and export energy – the government will initially be importing only.

“Once the commission takes place and we ensure that electricity is being delivered in a reliable manner, we can both import and export energy. Initially, however, we will be importing only,” Mizzi said.

The Opposition has repeatedly taken the government to task over its failure to deliver the power plant on time, questioning how the government was financing the €80 million reduction in energy bills for both households and businesses. Orginially, the €30 million tariff cut for households was to be financed by a €30 million cash consolidation by the ElectroGas consortium, while the €50 million for businesses should have been financed through the switch to a gas-fired power plant.

Today, Mizzi confirmed that the utility tariff reductions will be financed through a seven-year business plan in which Enemalta will have a price guarantee of five years.

“This has allowed Enemalta to make financial projections for this period and has also made plans for future investments,” he said, adding that the utility tariffs reduction for businesses was “accounted for” in the business plan agreed to with Chinese-state owned company Shanghai Electric Power.

Mizzi insisted that the delay in the energy plan would “not have any impact on government finances”.

Various works in connection with the construction of the new power plant are already underway, including the leveling of land. LNG pumps have been ordered while works are underway on the construction of the LNG conversion plant by the Siemens Industrial Turbo Machinery in Sweden.

The works carried out are on the basic components of the power stations.

Works will follow on the construction of the jetty and the power station.

The minister said that, for the first time, Enemalta this year paid government €130 million in excise duty.

He reiterated that Enemalta’s debt and losses had exerted pressure on the national credit ratings and public coffers.

“This turnaround was possible because we took responsible decisions and we partnered up with a company with a AAA rating and which, together, we will do investment in Europe,” he said, of Enemalta’s decision to partner up with SEP.

Mizzi reiterated that the government could not turn down an offer by the Chinese for a €320 million strategic investment: “We could either continue with the original gas project or take some time to be able to align the two projects involving ElectroGas and SEP. We went for the responsible choice to align the two strategic investments.”

“In case of emergency”, the ‘BWSC’ plant will also operate on gasoil. The minister insisted that the government was now ensuring a security of supply through the interface being created between Enemalta, ElectroGas and Shanghai Electric Power and the use of the interconnector.