Five-year gas deal intended to give government more leeway – energy minister

Energy Minister Konrad Mizzi said the government has scaled down the prospective gas purchase agreement from 10 years to five years, in a bid to allow his ministry more leeway in the search for a gas supplier.

In an interview with weekly newspaper Illum last Sunday, Mizzi revealed that the reason behind government's decision to scale down the power purchase agreement, which binds the developer of the new gas power plant and accompanying natural gas terminal, to supply the gas itself, was to give it more space in negotiations.

Mizzi had claimed throughout the campaign that the power purchase agreement would fix the price of gas for 10 years, but the Nationalist Party always claimed that having the price of gas fixed for such a long time did not reflect the volatility of the market.

"We left a number of parameters open so we would have the freedom to evaluate different paths, and to have different options that we would be able to present and to discuss with the entities in the Maltese sector and see what they prefer," Mizzi said in the interview.

He stressed that this decision was made so that the government would be able to better administer the risks, and decide according to which option achieves the broadest basis of national consent.

Mizzi also confirmed that despite the five-year-long minimum power purchasing agreement, government is however envisaging an agreement that will run longer than 10 years.

"At this stage we gave guidelines in the expression of interest document. Now we are waiting to see what proposals the bidders will come forward with, but the timeframe is going to be significantly longer than the one mentioned before," confirmed Mizzi.

Mizzi however said that government is also considering the option whereby the fixed-price component of the power purchase agreement is approached with greater flexibility.

One such option, Mizzi said, would be to establish a fixed-price timeframe of only five years, and after those five years the price would not remain fixed but would be determined upon the prices of energy and energy generation at the time. "This depends on international gas prices, and whether we would be informed that gas prices would be dropping in the coming years," Mizzi said.