Fenech’s KPMG report based on ‘wrong assumptions supplied by government’

Labour candidate Konrad Mizzi has attacked a report commissioned by Enemalta to analyse the PL's €360 million plan for a new natural gas terminal and 200MW power station, saying that the report by auditors KPMG is based solely on "wrong assumptions supplied by the Nationalist government."

Mizzi, the main sponsor of Labour's plan, said the KPMG report had double-counted the return-on-capital-employed (ROCE) factored in the price of energy per kilowatt-hour, by comparing the cost of energy generation with the cost of energy when finally delivered into households.

"We're standing by our figures, with estimates from DNV Kema, which have defended their estimates in our press conference. KPMG, which drew up a report in one day from the terms of reference supplied by Enemalta, were not present for Tonio Fenech's press conference," Mizzi said.

Labour wants to generate 40% of Malta's energy demand from a 200MW natural gas power station, another 40% from the BWSC power station that would be powered by natural gas, and 20% from the Malta-Sicily interconnector.

While the Nationalist government says it will steam ahead with a gas pipeline that could be eligible for EU funds, Mizzi today said a new Labour government would still apply for funds to go ahead with the pipeline.

"We assume the pipeline takes up to 10 years to complete. So while we will have a set price on gas through a 10-year agreement with the private sector, it will be up to the private company to choose whether it will get gas from the pipeline or importing it into harbour."
Labour's natural gas proposal depends singularly on the importation of LNG via ships - something which finance minster Tonio Fenech claims is not possible because they need to be specially built for the transportation of large quantities of natural gas.

"Malta is in a favourable position to generate alternative revenue for Enemalta by putting its gas tanks at the disposal for many private companies that seek bunkering services. This will give us security of supply if there is a problem with the pipeline."

Mizzi said DNV Kema's estimates also factor in shipping costs. "We spoke to various private companies who told us individually of the possibility of having small ships coming into harbour, medium-sized ships stopping outside Delimara bay, or larger ships that would berth at alternative sites. It will be the private operator that will choose the shipping line to import the gas," Mizzi said, saying the LNG infrastructure alone would cost €146 million.

Mizzi was also asked whether Labour were wasting an investment on the 200MW interconnector cable, if they were seeking to use just 20% of the cable just to have a new power station running on natural gas, instead of waiting for the gas pipeline to be constructed.

"The DNV Kema estimates show that the cheapest plant to use would be the one running on natural gas, followed by the Delimara extension running on gas, and finally the interconnector. The latter is because Kema worked out the cost of electricity from Italy - if in three to four years' time the price of energy from the cable goes down, we can reduce the load on the Delimara power station extension and then load more on the interconnector."

Mizzi set much store in a comment posted on The Times by retired physicist Edward Mallia, who said the KPMG report was based on a "fraudulent brief" from Enemalta which assumes that the Delimara power station would run for 24 hours a day for 240 days.

Mizzi said Labour's estimates for its €360 million gas power station and gas terminal were defendable, and that this would generate €187 million in savings every year that would pay off the returns for the private sector and Enemalta, as well as further reduce consumer bills.

Fenech claims that the overall cost of Labour's proposal runs up to €600 million, but Mizzi insists that steel pries have reduced and that maintenance costs have already been factored in the DNV Kema estimates.

"The KPMG report used figures Enemalta is forecasting for 2013, while we used real estimates from 2012.

"Enemalta's 18c per unit of energy only includes the cost of generating that energy, and not the distribution."

Labour's 9c6 cost of energy generated does not include distribution of energy.