[WATCH] Standard & Poor's upgrades Enemalta's standalone credit, stable outlook

Standard & Poor's upgrades Enemalta's standalone credit, stable outlook • Video by Ray Attard)

Credit rating agency Standard & Poor's has retained Enemalta's B+ stable outlook but has increased the standalone credit from CCC to CCC+.

Addressing a press conference at Castille, Energy Minister Konrad Mizzi said the government was currently working on a plan with Shanghai Electric on debt rescheduling.

Mizzi said the transformation of the energy sector was possible thanks to the government plan and a comprehensive energy reform.
S&P said that Enemalta's risk default had decreased and the stable outlook reflected Enemalta's debt reduction.

"S&P have noted the closure of the Marsa power station and the fact that, thanks to the government's push, the interconnector is moving at an accelerated rate," Mizzi said.

The energy Mizzi reiterated that Enemalta had started off with over €840 million, €130 million alone in excise duty paid this year. He said that Enemalta's credit improvement was registered even though it did not include the petroleum division, Enemalta's only profit making division.

In reply to questions by MaltaToday, Mizzi confirmed that the memorandum of understanding signed with Azerbaijan will be tabled in parliament next week.

"It is a very generic MoU which focuses on cooperation in the oil and gas sector, petroleum products, a trading platform in the Mediterranean and exploring a potential LNG bunkering."

The energy minister also explained that a €67 million hedging deal with Azeri trading company SOCAR trading, did not mean that the Azeri company got €67 million for fuel procured: SOCAR Trading acted as the insurer. Two contracts were signed, one with BB Energy for petrol and Kolmar for diesel. The contracts were awarded following tenders issued.

"The hedging was carried out with Socar Trading," he said, adding that a particular price is fixed with hedging and gains or losses would be registered with the hedging operator.

Mizzi said that SOCAR never won bids for the purchase of fuel and, so far, there was only a hedging agreement with SOCAR Trading.
According to the energy minister, some 200 different hedging agreements, mostly on currency, were agreed to in the past two years.

‘Enemalta profit depends on new power station, BWSC conversion’

In their report, Standard and Poor predicted that Enemalta will start making profit from 2017.

However, they warned that such a prediction hinges on the successful commissioning of a new 200-megawatt gas-fired power station by the Electrogas consortium, as well as on the conversion of the BWSC power plant in Delimara from oil to gas.

S&P said that they could upgrade Enemalta further in the future if they thought that its ongoing restructuring would enable it to achieve long-term financial stability.

They added that they could downgrade Enemalta if they perceived a delay in the full conversion of Malta’s power generation system to gas, if the government further cut power tariffs to a level “that would make it challenging for the utility to recover its costs”, or if Enemalta’s shareholders adopted an aggressive policy that would undermine Enemalta’s potential of gradually deleverging.