Finance minister questions cost of Labour’s proposal

Finance minister Tonio Fenech has claimed the €370 million capital cost for Labour's energy plan for a conversion to gas fuel, was too costly to win any savings on efficiencies gained.

Fenech faced Labour candidate Konrad Mizzi on Bondiplus on TVM on Tuesday evening, in which he said Labour's timeframes to give 35% in reductions in electricity bills by 2014 were not realistic.

"How can utility bills be reduced by 2014 for households and by 2015 for industry, before all the infrastructure necessary for a gas storage terminal and gasification unit is completed? Issuing a tender and getting MEPA permits alone takes two years... the process altogether will take at least five years," Fenech said.

Mizzi, formerly chief information officer at Enemalta and Labour's key speaker on its utilities plan, said that Labour plans to build a new 200MW gas-fuel unit and gas supply infrastructure at Delimara, converting the BWSC turbine at Delimara to gas from heavy fuel oil, and build a liquefied natural gas terminal - all at a cost of €376 million.

Mizzi said that with the Malta-Sicily energy interconnector, energy will be generated at 9c6 per unit, and generate overall savings of €187 million a year which will be partly used for tariff reductions and for the repayment of Enemalta debt.

But Fenech claimed the entire project aims at improving efficiencies by running the Delimara plant at 95%, to produce 734 megawatts of energy when Malta currently consumes 434MW at peak periods.

Konrad Mizzi, who was quizzed on the details of the plan, said Malta's generation capacity is already at 691MW.

Mizzi also said he was not aware of whether Israeli firm Bateman - one of the unsuccessful bidders for the Delimara power turbine in 2010 - was interested in tendering for the gasification unit that Labour was proposing. Fenech claimed the project as proposed by Labour was based on Bateman's own combined-cycle technology that had been proposed for Delimara. Mizzi retorted, saying Bateman's combined-cycle technology was run-of-the-mill technology that was supplied by similar firms.

Fenech also said Labour's plan is likely to include some €40 million more in capital costs to strengthen the foundations of reclaimed land at Delimara, that would site the gasification unit.

The minister added that Labour's own plan shows that with a gas pipeline feeding the Delimara turbines in the future, energy can be produced at 8c4 per unit - far cheaper than the 9c6 per unit claimed by Labour, by using tankers to ship LNG into harbour.

However, the government itself plans to reduce the current generation cost of 15c per unit, to 11c in 2014 after the Malta-Sicily energy interconnector comes into operation.

On his part, Mizzi said Enemalta would still be losing money in 2015, citing management accounts that show €7 million losses in the year the interconnector is in full operation; and €51 million losses during 2014.

Fenech, who disagreed with the figures, said that Labour's plan would only utilise the interconnector at 20% of its capacity, and the new BWSC turbine at half of its capacity, while mainly employing the new gas plant. "It would be a waste of the capital investment we have placed in these projects... why should we invest in all this generation capacity seven years before we actually need this kind of energy?"

Mizzi also replied to claims that using tankers to transport LNG into harbour, was not secure due to supply concerns or adverse weather conditions.

"Apart from having an interconnector and a source of gas, we will retain Delimara Phase Two - whose turbines will be fired by gasoil and not HFO - which will guarantee us security of supply. If something happens, we can switch on the turbines; apart from having other renewable sources of energy."

On his part, the minister questioned the Labour claims that it could reach a 10-year price fixing agreement with the investors who had to invest in the new power station and gas facilities, due to wild fluctuations in international gas prices.

The same concern was raised by Alternattiva Demokratika spokesperson Arnold Cassola, who said tying an investor to a 10-year hedging agreement was questionable due to the fluctuation of prices on what was essentially a fossil fuel that risked rising in price due to lower supply.

Cassola however said AD had welcomed Labour's adoption of renewable energy as part of the generation mix for its energy plan.