Standard and Poor’s reaffirms Enemalta’s sustainability

Standard and Poor’s sixth consecutive positive review of Enemalta plc reaffirms the efforts of the company and its employees in restoring power affordability and security of supply, while ensuring the environmental and financial sustainability of electricity services in Malta.

On Monday, the international agency confirmed Enemalta’s BBcredit rating and B- stand-alone credit profile, with a stable outlook for the next few years. Standard and Poor’s has supported Enemalta’s long-term transformational plan for cleaner energy and financial sustainability since 2014, when it started upgrading its credit rating and stand-alone credit profile.

While confirming that the end of Enemalta’s reliance on heavy fuel oil led to “positive changes in working capital of €15m to €20m,” Standard and Poor’s also explained that the company’s new energy generation mix, including the new Delimara 3 and Delimara 4 gas-fired plants and the MaltaItaly Interconnector are adequately ensuring Malta’s security of supply as well as a sufficient level of future capacity. In this regard, the agency is forecasting a 4% to 5% annual increase in power consumption for the next two years.

Monday’s report also notes that Enemalta is gradually reducing its long-standing government-guaranteed debts. “We think government in the future could gradually reduce guarantees extended to Enemalta on most of its debt,” the credit rating agency said.

This debt reduction is taking place without resorting to new refinancing mechanisms and without compromising on capital expenditure. In fact, the rating agency indicates that Enemalta will be allocating up to €30m of its annual income for the expansion and the reinforcement of the electricity infrastructure that supplies electricity services to its customers.

Five years ago, the same credit rating agency warned that Enemalta’s rising government-supported debts and ongoing loss-making operations were putting the country’s economy at risk. After “successfully repositioning itself” through the 20132017 transformational plan, Enemalta’s prospects are now considered more positively, with adequate liquidity, stable profitability and the necessary resources to invest in capital projects and repay its loans without increasing liabilities.

In its annual assessment of Enemalta, Standard and Poor’s also maintained its 2017 “satisfactory” assessment of the company’s management and governance, explaining that the “management has consistently delivered against the targeted business repositioning and positive free-operating cash flow”.

Ing. Fredrick Azzopardi and Ing. Jason Vella, the company’s chairman and chief executive officer, welcomed Standard and Poor’s review as an encouragement to maintain Enemalta’s drive towards increased efficiency and an improved customer experience.

“Five years ago we invited our employees, our customers and all our stakeholders to support a transformational plan that sought to bring Enemalta back on its feet,” Ing. Azzopardi said. “We have since embraced this vision as a continuous commitment. The ongoing effort to streamline and augment the quality of our operations is helping us provide better services to all our customers. Standard and Poor’s assessment definitely supports us in this direction.”