News | Sunday, 05 July 2009

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In dire straits – Enemalta owes over €480m to banks

Enemalta’s financial estimates for 2009 have revealed that the national energy corporation is working “on an ambitious restructuring of [its] debt portfolio” after amassing €140 million in losses over the past three years.
Industry observers who spoke to MaltaToday have described the corporation being “in dire straits”, as it is being propped up by over €480 million in loans and overdrafts from banks.
The financial state of Enemalta has generated much concern after its long overdue audited accounts for the 2005/6 and 2006/7 financial years, were only finalised last February.
According to its 2009 projections, Enemalta is expected to end this year with €46 million in losses, over and above estimated losses of €77 million last year, and €16.5 million losses during 2007.
Additionally, the projections show Enemalta might have to go back to the banks to finance a shortfall of €106 million in cash by the end of the year, as government reduces its stake in the energy corporation.
Government’s assistance to Enemalta has been decreasing since 2007, when it poured €173 million into the corporation, down to just €43 million by the end of this year.
The difference has been made up by the increase in energy tariffs, the subject of great disgruntlement which cost Lawrence Gonzi the European Parliament elections in June.
Consumers have now been paying higher tariffs for electricity since October 2008, partly due to a €60 million expense incurred in Enemalta’s hedging agreements for oil puchases and the rise in the price of oil.
In just Enemalta’s electricity division, government will pour just €8 million this year – a fraction of the €83 million it spent last year. Enemalta is now asking for an additional €43 million from the government to balance out the books in 2009.

Banking on generosity
Enemalta is clearly wracked with debt but needs to constantly upgrade its power plant to keep up with consumer demand.
The corporation needs to invest €626 million over the coming years, €500 million to keep up Delimara’s power output through a 100MW extension.
Only €12 million has been spent so far on its programme and another €107 million will be spent this year.
It will need more funding to get through its capital investment programme in the years to come.
But with a government reluctant to prop the ailing corporation any longer, how long before privatisation of Enemalta’s electricity division becomes a reality?
Enemalta is already firmly in the hands of banks which virtually ‘own’ 69% of the corporation by sheer funding through loans and overdraft, which total €484 million.
Government’s share, which has been decreasing over the past years, is down to €43 million and a €13 million loan. Enemalta then owes another €134 million to its creditors, who are suppliers of goods and services to the corporation.
The banks are still lending money to Enemalta. Last year it got a €100 million loan from Bank of Valletta and €150 million from the European Investment Bank, all guaranteed by the government itself.
Whether the corporation is at any risk of defaulting with the banks is an unknown quantity. Would banks actually call up the loans from a government corporation, or take over any of Enemalta’s assets as collateral, just to make sure their funds are safe?
Or could they impose a refinancing programme for Enemalta to start paying back its dues – maybe suggesting ways of becoming commercially viable again?
In another scenario, the government could set off Enemalta’s assets against its bank debts – essentially handing it over to the bank under a lease agreement for the corporation’s assets. That might offload the burden of another state company, while the banks proceed to earn an income from Enemalta.
But with the millions needed to invest to generate more power, it is clear Enemalta needs a turnaround to get back on its feet.

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