Former fuel procurement chief says Alex Tranter owes the country ‘an apology’

Hedging could have avoided energy price hike in 2006, former chairman of Enemalta’s fuel procurement advisory committee says 

Alex Tranter
Alex Tranter

The former chairman of Enemalta’s fuel procurement advisory committee Joseph Falzon today said that former Enemlata chairman Alex Tranter had a lot to answer to and owed the country an apology for purchasing oil and hedging fuel and currency for billions of dollars without obtaining quotations and keeping minutes.

“As chairman, Tranter was purchasing $1.5 billion for five years and I cannot understand how they were purchasing and hedging fuel without quotes. You should ask Tranter about this. These persons owe an apology to the people. How do we know whether these were the cheapest bids without minutes and quotations? You should also ask him whether any commissions were paid on bank loans and other purchasing agreements," Falzon told MPs. 

Tranter, appointed chairman of the state utility corporation by Nationalist minister Austin Gatt in 2005, was last year the subject of  parallel investigations by the police and Enemalta’s internal audit office over an alleged misuse of funds.

Testifying in front of the Public Accounts Committee, Falzon also explained that had Enemalta decided to hedge fuel prices before 2006, the energy price hike introduced by the former PN administration could have possibly been avoided.

PAC chairman Jason Azzopardi challenged Falzon to take these If you have an axe to grind, this is not the place to do it. You have a right to criticise persons but you cannot say that one person was responsible for $1.5 billion in purchases.”

However, Falzon clarified that Tranter headed the procurement committees who purchased fuel and hedged deals while he served as chairman.   

He explained that despite carrying out thorough studies on the benefits of hedging fuel prices, for long years these reports were overlooked and ignored.  

A study he authored on simulation of prices between 1999 and 2000, which Falzon explained were based on real fuel prices, showed that Enemalta would have saved €111 million in a matter of months had it chosen to hedge fuel prices.

“I did not carry out this exercise to show how smart I am but I did it to show the market’s potential,” he said, adding that this report was completely dismissed by the then Enemalta board.

Falzon, a professor and dean of the Faculty of Economics, Management and Accountacy was the first Head of the Department of Banking and Finance at the University of Malta. In 1984 he obtained a Ph.D. in Economics from Northwestern University in Evanston, Illinois.

He was member of the Enemalta board between 1999 and 2003 and during those years he also served as member of the fuel procurement committee. Although he had always advocated the use of hedging in fuel procurement, his advice fell on deaf ears.

The first time hedging took place at Enemalta was in 2005 after Falzon found the support of then Chief Financial Officer Pippo Pandolfino. Falzon was removed in 2003 by former PN minister Austin Gatt only to be brought again a couple of years later, presumably by Pandolfino.

In 2005 he was appointed chairman of the fuel procurement advisory committee by Gatt only to have him removed a few months later. He was replaced by Roderick Chalmers who, according to Falzon, was also against hedging.

During his earlier years at Enemalta, Falzon unsuccessfully tried to convince Enemalta and the minister to go for hedging.

In reference to the documents the decision to go for a hedging agreement in 2005 he said that for a long time he had argued in favour of hedging, and after sending a letter to Gatt, the minister replied that it was not up to the minister to make such decisions.

However, when asked what he made out of this reply, Falzon said “He is very smart. I admire him, he is very smart man.” When pressed to elaborate further by justice minister Owen Bonnici, Falzon said that his team did not have the necessary tools at their disposal to “win the war.”

Asked whether hedging never ,materialized before because of a lack of political or administrative will, Falzon explained that the committee only had an advisory role adding that “it was the responsibility of the Chief Financial Officer, then Pippo Pandolfino to close such deals but he couldn’t act without the chairman’s go ahead.”

Noting that at the time the chairman post was occupied by Alex Tranter, Falzon said that the 2006 energy surcharge introduced by the PN administration could have been avoided had Enemalta opted for hedging.

“At the time I was arguing in favour of short-term hedging because we had no experience and we did not have long-term analytics, but we would still have controlled the corporation’s spiraling costs.

He added that it would have made no difference for commission agents such as George Farrugia and Frank Sammut, at the centre of the oil scandal, whether Enemalta hedged or not.

Quizzed by opposition MP Beppe Fenech Adami whether he was making reference to legal or illegal commissions, Falzon said he wasn’t “implying anything.” Comparing the whole saga to an Alfred Hitchcock movie, Falzon said that he had no suspicions on any illegal activity “because I was never involved.”

He insisted that he was the problem and not hedging itself, because after being removed from the fuel procurement advisory board, Enemalta started hedging.