Credit rating agency Standard & Poor’s has maintained Enemalta’s B credit rating in its latest review, but warns that a downgrade could take place tariffs are reduced “to support the local economy.”
Perhaps unsurprisingly, both the Nationalist and Labour parties have reacted by stating that the report vindicates their own energy policy and proves that the opposing party’s policy is unworkable.
S&P had downgraded Enemalta from BB to B in February 2012, and the company maintains its ‘negative’ outlook on the company. It expects the state corporation to register losses in 2013 and 2014 and only return to positive territory in 2015 – should the benefits of the electricity interconnector to Sicily materialise, allowing Malta to obtain electricity at a much lower cost.
But the credit rating agency warned that it could downgrade the company should it expect it to struggle to generate a positive cash flow in 2015, and notes that the government’s decision to stop funding part of Enemalta’s costs through the national budget could contribute to this. Another reason could be the reduction of tariffs to support the economy, reflecting an apparent belief that energy rates should rise to reflect the true cost of electricity generation.
The PN was first to react to the report, seizing on its emphasis on the importance of an interconnector to state that a reduction in energy bills was only possible through its own election proposal. The party wants to introduce lower night rates, but has yet to categorically dispute Labour’s claims that daytime rates would be hiked up.
It insisted that the report also showed the folly of Labour’s proposal to build a new power station and a gas terminal at Delimara, which it insists, over Labour’s objections, will cost €600 million. It quoted the report it had commissioned KPMG to draw up – the audit firm issued a disclaimer stating that its workings were based on figures provided to it – which estimated that energy bills would increase by 5% through Labour’s proposals.
The PN also pointed out that Labour has yet to come up with an example of a 10-year contract which provides a fixed price for gas – which is key to the party’s proposal – and insisted that the timeframes proposed were not doable.
Labour’s interpretation of the S&P report, however, was greatly different, with the party stating that it proved that energy bills could not be lowered if things remained as is.
It stood by its energy policy as announced in the beginning of the campaign, stating that this would reduce costs by €187 million, of which €77 million would be used to lower bills while the remaining €110 million would go toward keeping Enemalta afloat.
The present situation, Labour insisted, endangered the jobs of Enemalta workers.