Audited Enemalta Corporation accounts, issued today on the Table of the House of Representatives, for the financial year October 2005 to September 2006, show a corporate profit of Lm2.5 million but only after Government payment to Enemalta of Lm21.3 million equal to a 195% increase over the compensation paid in 2005 (8.3 million). In that period the surcharge on electricity bills fluctuated between 17% and 67.5% and Government payments were used not to pass to consumers the full impact of increased fuel prices. In fact, the payment was used as to:

Lm19.2 million for fuel used in electricity generation; and

Lm2.1 to subsidise the price of gas cylinders.

Fuel costs for the generation of electricity rose to Lm78 million compared with Lm54 million in 2005, an increase of 45%.

On an operational level (i.e. before considering finance costs), the profit registered by the Corporation was Lm7.8 million (compared to a loss of Lm1.3 million in 2005) derived as follows:

Lm995,000 from the Electricity Division;

Lm7,875,000 from the Petroleum Division; and

a loss of Lm1,069,000 from the Gas Division.

Finance costs of Lm5.2 million are allocated at corporate level but if this had to be allocated at departmental level, the electricity division would have made an operational loss as well.

Other highlights from the audited accounts are:

a reduction in electricity losses from 15.8% to 13% compared to 2005. Considering justified technical losses at 5%, losses for theft, meter malfunctions and mis-reporting stood at 8% of units’ generated equivalent to circa Lm 8 million in lost revenues. This problem is being addressed through the Smart Meter project, Enemalta’s contribution to which will be circa Lm17 million and has a payback period of 2 years following full implementation;

despite the introduction of the surcharge, units sold increased by 59,000 or 3.2% over the previous year. This is partly due to a reduction in electricity theft;

Enemalta absorbed Lm4 million in increases in excise duties on diesel, petrol etc. that were introduced in 2006. These increases were NOT passed on to the consumer;

since LPG international prices rose by Lm1.6 million, Government increased its compensation to cover part of the difference and maintain prices;

Enemalta invested Lm5.2 million in transmission and distribution equipment;

staff, finance and administrative costs basically remained at previous year levels except for an increase in the provision for bad debts. An increase in debtors from Lm51 million to Lm73 million and in borrowings from Lm120 million to Lm140 million was registered, the latter largely due to the increase in debtors and in stocks;

a detailed statement is given of the hedging reserve account which shows:

a) a gain of Lm127,000 on currency forwards;

b) a loss of Lm434,000 on interest rate swaps;

c) a loss of Lm1.1 million on fuel swaps.

The audited accounts also give the fair values, at the time of the audit, of forward derivative financial instruments then in place.

Enemalta believes that a fair reading of the audited accounts show that Enemalta made substantial improvements to its operations in this financial year resulting in much improved financial results.

Neverthless were it not for Government’s compensation of Lm21.3 million, Enemalta would have had made a corporate loss of some Lm18.8 million. The Government compensation is equivalent to Lm532 for every man, woman and child which everyone, deserving or otherwise, gained from.

It should also be noted that the Corporation was forced to increase debt levels notwithstanding both the high Government payment and the introduction of the surcharge, the latter giving the Corporation an added income of Lm27.7 million. The inevitable conclusion is that even though the Corporation enjoyed an injection of Lm49 million from compensation and surcharge, the electricity tariffs (including the surcharge) and retail price of gas were still not high enough to finance operations.

Permalink: Enemalta Financial Statements for 2005 to 2006