€250 million in government subsidies saving Enemalta from financial ruin

The latest published financial results of Malta’s energy supplier show that a massive €250 million of taxpayer funds were given to Enemalta in subsidies in 2022, saving it from registering a sustainable loss.

According to the results, while the company – a monopoly – made an operational profit of €31 million in 2022, this was only possible through the granting of massive subsidies, not only to compensate for the higher costs in the generation of energy but also for other services to the government.

The results show that the government paid Enemalta a new grant of €12.2 million to maintain the national grid, which is operated by the same company. This was over and above the €250 million to compensate for energy costs.

State compensation subsidising the price of energy is supposed to be outlawed in the EU. However, Brussels has been ignoring the massive problem the government has created during the past years by keeping consumer prices constant, creating an artificial economy.

The €250 million in subsidies in 2022 was a massive increase from the €63 million given to the same company just a year before.

The reason is a significant increase in energy costs due to changes in the price of commodities (gas, diesel) to fire the power plants and the rise in imported energy through the interconnector.

In 2022, due to the start of the war in Ukraine and high international inflation, the cost of energy imported to Malta through the interconnector increased by a massive 122%, from €148 per MWh in 2021 to €329 per MWh in 2022.

The island is bound to import from the interconnector as it does not have the necessary local generation capacity to cover all its needs at peak demand.

The government is now investing in a second interconnector to Sicily, increasing the island’s capacity to import another 200 MW of energy from the European grid. Yet the project is already years late, with Enemalta having to invest another €37 million in a temporary diesel-fired power plant to ensure it can keep up with the demand until the second interconnector is commissioned.

The ’emergency’ plant tender was another contract awarded to Bonnici Brothers, backed by a Saudi Arabian company based in Dubai when the country was experiencing regular power cuts. But the plant has not been used so far.

The EU and the IMF have insisted that the Maltese government stop the subsidies and implement an exit strategy to ensure that prices reflect the true cost.

Yet, in a political attempt to maintain popularity, the government continues to defy the EU’s guidance.

In 2014, after Labour returned to power, former disgraced prime minister Joseph Muscat sold a third of Enemalta and its then-newest power plant, the BWSC, to the Chinese government. He boasted that this would put Enemalta on a sound financial footing. Clearly, this has not happened.

A few years later, Enemalta is again in the red, with fewer assets on its books and a dependence on third parties, including the Chinese government, to buy the country’s power needs.