Without hedging deal, consumers would have faced ‘€3 million increase’ in fuel prices

Had he not personally intervened to tell Enemalta to add Azeri company SOCAR Trading to the traders’ list, consumers would have faced a €3 million increase in fuel prices, Energy Minister Konrad Mizzi insisted.

Along with shadow energy minister Marthese Portelli, Mizzi was a guest of Saviour Balzan on Reporter.

But Portelli appeared to find it hard to believe Mizzi’s justification, insisting that it did not explain why the government had “specifically” pushed for SOCAR rather than opting for other companies.

“The issue here is transparency, lack of documentation and accountability. It is the NAO itself that pointed out these things. How can you expect us not to question anything?” Portelli said.

She however could not substantiate statements made by PN leader Simon Busuttil during Dissett, who described the hedging deal as “the biggest scandal we have before us”.

“Do you have any guarantee that no underhand payments were made, when this minister intervened personally, when the government went to Azerbaijan without any accompanying press?” Busuttil had asked.

Asked whether the PN could confirm that kickbacks were paid, Portelli insisted that the PN leader had been referring to the report of the Auditor General. The NAO described a direct order on six months’ hedging on unleaded and diesel as “detracting from the process’s accountability and a shortcoming in terms of governance.”

Persisting, Portelli insisted that a minister was bound by the Enemalta Act to give policy direction: “But you went beyond,” she told Mizzi. “There’s a difference between policy direction and trader selection. Why was SOCAR involved? Weren’t there other companies who could have offered different prices?”

“I didn’t give Enemalta any targets … I gave them a clear direction to reduce persons and because I am a responsible person, I told them to consider SOCAR,” Mizzi replied.

When it was pointed out that it was the PN deputy leader himself who had spoken about “a fictitious distinction” between strategy and policy – while the energy minister insisted that he wanted to keep fuel prices stable and cheaper – Portelli insisted that the Azeri deal was shrouded in secrecy.

“They asked journalists to accompany them when they met the German Chancellor; but kept the media away during their trip to Azerbaijan. It was just the minister, the prime minister, his chief of staff and the communications coordinator,” Portelli said.

She avoided commenting on a $3.2 billion figure paid to oil companies Trafigura and TOTSA over a period of 13 years, representing 70% of all the oil sold to Enemalta in this period. Instead, the shadow energy minister said Enemalta had lost €5.5 million following the SOCAR deal.

The AG’s report said that, during 2014, Enemalta registered a €8.6 million loss with respect to crude oil hedging and a €5.5 million loss with respect to unleaded petrol and diesel hedging- a total of €14.1 million.
It also pointed out that the drastic crash in crude oil prices at the end of 2014 was central to Enemalta’s hedging losses and that “such significant market movements were not and could not have been anticipated when the hedging agreements were entered into”.
On the other hand, Enemalta registered a gain of €5.5 million in terms of foreign exchange hedge undertaken for fuel oil and gasoil and an additional €2.5 million gain from exchange hedges entered into with respect to unleaded petrol and diesel requirements.

“The SOCAR transaction wasn’t to buy fuel but for hedging,” Mizzi told Balzan, explaining that the Azeri company did not receive €67 million. He said, that petrol and diesel were procured from BB Energy and Kolmar respectively following a request for tender.

"The hedging was carried out with Socar Trading," he said, adding that a particular price is fixed with hedging and gains or losses would be registered with the hedging operator.

Enemalta has entered into some 200 different hedging agreements over the past 24 months.
Mizzi admitted that the Auditor General was right in pointing out a lack of documentation vis-à-vis correspondence with SOCAR. “We have taken onboard the NAO’s proposals … but I will keep giving direction for cheaper prices,” he said, adding that it was only in the last two months of 2014 that Enemalta made losses following the collapse of the oil market.

The energy minister said that Enemalta’s hedging during the first three quarter of 2014 resulted in gains. He reiterated that consumers would have faced a €3 million increase had he not intervened. According to Mizzi, consumers were “robbed €6.1 million” in three months.

Mizzi said no one could deny that the Labour government had lowered fuel prices for seven times while the Maltese, for 13 months, paid below than average prices.

A visibly incredulous Mizzi took umbrage at Portelli’s comments who called the closure of the Marsa power station “a gimmick to cover the delayed opening of the new gas plant”.

“Closing down a 62-year-old power station is not a gimmick. Providing cleaner air is not a gimmick,” the minister said.

The Marsa power station is currently on standby while the Delimara gas plant should be completed by June 2016.

“Government has a commitment, and already missed one deadline. If you don’t deliver on this one, the government will have both credibility and energy problems. Are you going to deliver?” Balzan asked Mizzi.

The energy minister insisted that the energy plan was on track and it had been a conscientious decision to delay the construction of the plant in order to include the SEP investment.

“Let’s put things into perspective: before 2013 consumers paid the highest utility tariffs in Europe and business’s competitiveness was hindered. In just two years we have cheaper bills and a power station on cold standby.”