Financial estimates tabled in parliament this week by Austin Gatt reveal that the national energy provider will have lost €133 million in 27 months by the end of this year. This raises disconcerting questions regarding the corporation’s viability as a national asset, and even its ownership. Is Enemalta owned by the State? Or by the banks which finance 70% of its operations?
The Enemalta Corporation’s financial estimates, recently tabled in parliament, have revealed a shocking picture of an unsustainable company in serious debt with the banks.
The Corporation registered a €16.5 million loss in 2007, and at end-2008 is estimated to have lost another €77 million.
According to estimates and financial statements tabled in parliament by Minister Austin Gatt, this year Enemalta is expected to register yet another loss, this time of €45 million.
To both MPs and industry sources who have pored over the financials, the picture is clearly not one of a sustainable organisation.
It is clear that the energy monopoly’s continued existence is being heavily financed by banks, and that the corporation would require urgent re-financing if it is even to remain in the hands of the government.
Serial losses in Malta’s energy monopoly have dropped the value of government’s holding from €173 million in 2007, to a projected €43 million by the end of 2009.
That means Enemalta’s main shareholder has lost 75% of the value of its ‘investment’ over 27 months.
And that may not be all: Enemalta is mainly funded – 70% of its assets – by banks in loans and overdrafts, while another 19% through creditors for supplies.
With Enemalta’s overall dependence on banking clemency, there is no sure answer as to whether banks and financiers will foreclose on the Corporation.
If government’s hold on the company is indeed tenuous, then Enemalta’s financials open up a debate on who actually owns the company: the State, or the banks? And is government about to sacrifice ‘ownership’ of this asset?
A privatised future? If the government finds itself forced to transfer Enemalta’s ownership – privatisating it to the banks – it will not just be making good for any shortfall the company has incurred. It will also have to pay any loans and interest, should Enemalta be declared bankrupt.
That means an increase in national debt. To the banks, it would be the realisation of their loans to Enemalta in the first place: banks don’t run companies, but when they loan them money, they know that when there is a remote chance of losing their cash, they can step in to run the show.
In another scenario, the government could instead set off Enemalta’s assets against its bank loans and overdrafts – essentially handing it over to the bank under a lease agreement for the corporation’s assets.
For government, it’s a win-win situation: the government offloads the burden of another state company, and the banks can earn a steady income from Enemalta. To consumers it could mean a steady, fixed cost on energy production.
But banks will find a problem with Enemalta. In its statements the corporation has a €627 million project, of which only €12 million has been spent so far, with €107 million to be spent this year. That is less than 20% mark in value: so who finances the rest?
A final option for Enemalta is for a third party to buy it up, debts and all, with a turnaround programme to get the corporation back on its feet. But in this world of global recession, such knights in shining armour are few and far in between.
Sustainability After the nationwide blackout of two weeks ago, it is clear that Enemalta’s future is based on its credibility. Government must be able to ascertain consumers and businesses that they have a steady electricity supply – sustainable, dependable and within their lifetime.
Even with projects for a gas pipeline and an electricity cable connecting us to the European grid via Sicily – as well as the 100MW extension, and the chance to tap alternative energy sources – the government still needs to remove any doubt of whether energy generation in Malta is sustainable.
Even businesses, who bore the brunt of the €8 million shock in losses during the blackout, themselves must look into their own future investments into power supply if they want to have guaranteed energy security.
Any comments?
If you wish your comments to be published in our Letters pages please click button below. Please write a contact number and a postal address where you may be contacted.
Download front page in pdf file format
All the interviews from Reporter on MaltaToday's YouTube channel.
