Electricity generated at the Chinese-owned BWSC plant will cost more than that of the Electrogas plant, which is expected to be ready by June 2016

Energy Minister Konrad Mizzi told The Malta Independent on Sunday that Shanghai Electric Power (SEP) charges per kilowatt will be "a few mils" more expensive than the price agreed with the Electrogas consortium.

The agreement between Shanghai Electric Power and the government, which was signed this week, will see a €320 million cash injection for debt-ridden Enemalta.

The government has already committed itself to buy electricity at 9.599 cents per kilowatt for five years from Electrogas.

Dr Mizzi said a similar five-year agreement has been signed with SEP, but the government is not obliged to buy electricity from the Chinese company.

The Energy Minister put the discrepancy in the two rates down to efficiency differences in the BWSC and Electrogas plants. The latter plant will be more efficient, thus resulting in lower electricity generation costs.

Both these rates are in turn far higher than the European average price for electricity which could potentially be purchased through the Malta-Sicily interconnector.

According to prices quoted on the European Power Exchange spot market, peak prices stood at 4.395 cents per kilowatt at peak rate and 3.763 cents per kilowatt at base rate on 13 December.

The government will be setting up a technical committee that will be deciding annually on how much electricity Enemalta needs to buy and from where to buy it.

Half of Malta's required electricity is expected to be generated by the Electrogas plant, 30 per cent by the Chinese plant and 20 per cent from the interconnector.

This energy mix will be assessed and tweaked by the technical committee according to economic and security of supply factors.

The interconnector will allow Malta to both import and export electricity, although the higher tariffs in Malta make exports unlikely for the time being.

The agreement signed between SEP and the government also forbids the Chinese plant from selling electrical output "to any person other than Enemalta or its successors (if any)."

The agreement published by the government does not go into the specifics of the commercial deal reached between the two parties.

"Enemalta and D3 [the BWSC plant] hereby declare that the commercial transactions between Delimara 3 and Enemalta are regulated by a Power Purchase Agreement which contains the commercial terms and conditions governing power purchase," one clause of the agreement states.

Dr Mizzi said that the power purchase agreement will only be published if all the parties involved consent.

Geopolitical investment for the Chinese

On the face of it, the deal does not seem to benefit the Chinese much financially, although it ties in with the superpower's aim to expand its geopolitical influence in Europe.

Shanghai Electric Power chairman Yundan Wang hinted as much in his speech after signing the agreement.

He said the project in Malta is not only the first step into Europe for the state-owned company, but part of long-term investment strategy.

Malta and China will be embarking on a number of ventures in Europe through two companies set up as a result of the agreement.

According to the agreement, "International Renewable Energy Development Ltd, under the support of the Maltese government, will be responsible for identifying projects of renewable energy in the European region that would amount to at least 100 megawatts of solar photovoltaic power and 200 megawatts of wind power, and be responsible for procuring these projects feed-in tariff applicable in the EU."

The government will hold a 30 per cent stake in this company and the Chinese a 70 per cent stake.

The other company, International Developments Ltd., will service Shanghai Electric Power's plants in the surrounding regions. Seventy per cent of this company will be owned by Enemalta and 30 per cent by the Chinese.