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5 YANNICK PACE NATIONALIST MP and former finance minister Tonio Fenech has suggested that Enemalta will have likely paid Shanghai Elec- tric, the Chinese owners of the 'BWSC plant', €486 million over the next 18 years, in what seem to be fees for the lease back of the power station to the State-owned energy provider. Fenech, who as minister over- saw the establishment of a special purpose vehicle for the restruc- turing of Enemalta's debt in 2012, was asked for his analysis of D3 Power Generation's financials for 2015. In 2014, Chinese state-owned company Shanghai Electric paid €150 million for the 90% stake in the BWSC plant (Delimara Phase 3), while Enemalta retained a 10% stake. During 2015, D3 registered €27 million in revenue, which Fenech noted came with no production costs being deducted from this revenue. "This means that this is some sort of rent, that is after ac- quiring the plant from Enemalta for €132 million," said Fenech. He said that in his view, this implies that Enemalta is leas- ing back the BWSC plant from Shanghai Electric at a rate of €27 million annually. "Indeed, the government had announced in 2015 that before the plant is converted to gas, Enemalta will remain operating the BWSC plant while paying Shanghai Electric for its use," he explained. "In operating the plant, En- emalta is not only incurring the rental charge but also all the costs of operations directly, including fuel, labour costs and mainte- nance. This has been a very good deal for Shanghai Electric." Fenech argued that had En- emalta taken out a loan at an in- terest rate of 6% – a conservative estimate, he claimed – annual repayments would have been in the region of €27 million, and the government would have paid off the BWSC plant within six years. "This means that in those 18 years, for an original investment of €133 million, Shanghai Electric will have made €486 million, 2.65 times the original amount," Fene- ch said. "This is a very good deal for them and a very bad deal for the Maltese, as it means our util- ity bills will have to collect these monies." The original investment of €133 million is listed under 'tangible assets' in the financials. Fenech acknowledged caution in his analysis however, since not all details have been published. "It could be the case that rent will be paid only during the initial years until the plant is converted to gas, with Enemalta only paying for energy bought from D3 be- yond that point." "It is not very clear what has really been agreed with Shang- hai Electric. The government is claiming that they have no agree- ment on the BWSC that obliges them to buy all the energy pro- duced, contrary to the agreement with ElectroGas, which has this condition," he said. Fenech explained that from his experience, contracts such as the one in question generally have "two revenue streams": revenue generated from the sale of elec- tricity units, and a charge for the availability of an asset – in this case the power plant – when it is not in use. "From what I've seen from a power purchase agree- ment of this sort, the rental cost would be added to the electricity rate. If you do not acquire suffi- cient energy to recover the rental charge however, then a fee must be paid for the time the asset is being kept idle but available." According to Fenech, this would be a very costly charge that will effectively guarantee that the entire €27 million is paid through a combination of an amount that is recovered through the sale of electricity and the charge for the availability of the asset, since Shanghai Electric cannot sell their energy to anyone else. Financial estimates from Budg- et 2017 show €14 million being earmarked under 'Provision of Spare Capacity – Electricity.' "The government is planning to pay €14 million for this availabil- ity. The new power plant being built by ElectroGas is not yet in operation and therefore it is logi- cal to deduce that this money is intended for whoever is operat- ing the BWSC plant, i.e D3 Gen- eration Limited," said Fenech. Questions sent to minister without portfolio Konrad Mizzi, who retains responsibility for energy matters, remained unan- swered by the time of going to print. maltatoday, SUNDAY, 19 FEBRUARY 2017 News TAKE YOUR AMBITION FURTHER PART-TIME COURSES MARCH 2017 APPLICATIONS NOW OPEN for shortcourses.mcast.edu.mt BWSC plant's profits raise questions over Shanghai deal Former minister suggests Enemalta could pay Shanghai Electric €486 million over 18-year period Deal done: Deputy PM Louis Grech (left), the Prime Minister (centre) and Minister Konrad Mizzi shake hands with Shanghai Electric representatives