S&P keeps Enemalta rating at BB- with negative outlook

Credit rating agency S&P has reaffirmed a BB- rating for Enemalta, the same rating it has held since 2019. It retained its forecast to negative, which was changed last year in the 2020 rating.

According to Enemalta, the agency had recognised the utility company’s decrease in energy production due to the COVID-19 economic slowdown, especially in tourism. Demand for energy in 2020 fell by 4.5%.

Back in December 2019, the underwater interconnected linking Sicily and Malta, was severely damaged by a boat anchor. Enemalta had to use its diesel-powered pants up until around March 2020, adding more expenses to energy production.

S&P had already stated that Enemalta’s operating performance in 2019 was poor and its free operating cash flows (FOCF) was negative, leading it to revised its outlook to negative from stable. “The negative outlook indicates that if Enemalta is unable to restore its cash flow to previous levels by 2021, its liquidity could deteriorate further,” S&P said in 2020.

Enemalta said on Thursday that it had recovered over €10 million in expenses from its insurance cover for the interconnector repairs, but that it remains in a legal tussle to recover the additional expenses incurred on the damage.

“Analysts are forecasting that in the next two years, demand for energy will increase, and Enemalta will be back on track… with an annual increase in demand for energy of 3.5% to 4% until 2023.”

Enemalta said S&P had recognised the benefit of government grants to businesses and families, which ensured a constant level of liquidity for Enemalta, coming from bills being duly paid by its consumers.

Outlook could be changed to ‘stable’ from ‘negative’ if the macro-economic situation improves.