Enemalta - Annual Report 2009 by 26th frame

ANNUAL REPORT 2009 and financial statements 2008

TABLE OF CONTENTS Company Profile

Board of Directors

Chairman’s Message

Chief Executive Officer’s Statement

Electricity Division

Petroleum Division

Gas Division

Information Communication Technology

Human Resources and Corporate Services

Finance Division

Financial Statements 2008

ANNUAL REPORT 2009 and financial statements 2008

COMPANY PROFILE Set up in 1977, Enemalta Corporation remains the main provider of energy generation and distribution in the Maltese Islands. Throughout the years, Enemalta has been instrumental in pioneering the usage of new technology to reach its corporate objectives together with offering better products and the best service to its customers. Enemalta continues to invest in all areas of its operations making best use of technological developments and is committed to continue to improve its service delivery through a pro-active approach, to meet an ever-growing and diversified demand for energy. Today, the Corporation is becoming more focused on environmental considerations to create a safer and more sustainable environment for the Maltese people.

BOARD OF DIRECTORS Mr. Edmund Gatt Baldacchino (Acting Chairman) Ing. Sarah PulĂŠ M. Phil., B.Eng (Hons)., P.G.CE. Mr. Joseph G. Cutajar FIRM ACII Mr. Frank Xerri de Caro ACIB Ms. Vivienne Galea Pace Mr. William Spiteri Bailey F.I.Q., C.P.A., M.I.M. Ms. Simone Vella B.Sc Mr. Paul Buttigieg Dr. Noel Buttigieg Scicluna LL.D.(Board Secretary) The term of office of Ing. Alexander Tranter ended on the 31st May 2010. Mr Edmund Gatt Baldacchino took up office on the 1st June 2010.

ANNUAL REPORT 2009 and financial statements 2008

CHAIRMANâ&#x20AC;&#x2122;S MESSAGE The supply of energy was one of the greatest challenges faced by Malta in 2009. The international price of oil, which in the past years reached levels never seen before in history, placed a heavy burden on our country which is totally dependant on the purchasing of oil from abroad to provide an energy supply to its residents. These volatile oil prices strengthened further the necessity for better management of the Maltese grid. It highlighted the importance of the interconnector between Malta and Sicily, a major project which will see the Maltese national electricity grid connected with a sub-sea interconnector, linking Malta to Sicily by the end of 2012. This project will provide Malta with the first opportunity to widen the countryâ&#x20AC;&#x2122;s energy mix, not only by providing a gateway into the European grid, but also by offering the option to consider purchasing electricity generated from renewable sources. It also highlighted the need to better

distribute our resources, something which Enemalta will achieve with the help of the SCADA system and the implementation of the Smart Meters. These two projects will also make Malta the first country to have a smart grid. The year 2009 also presented the pressing need for the Delimara 144MW extension. The new plant will improve overall efficiency, reduce the amount of fuel consumed and considerably decrease emissions. This project is moving the Corporation a step closer to the decommissioning of the Marsa Power Station which now has aged considerably. Another challenge we are currently faced with, is the environment. Being one of the greatest challenges facing society today, climate change is at the forefront of Enemaltaâ&#x20AC;&#x2122;s agenda. All the projects mentioned above will help the Corporation go beyond the 20% reduction of emissions by 2020 as stipulated by the EU, providing the Maltese population with cleaner energy and cleaner air.

Throughout the year, the Privatisation Unit has continued negotiations with the preferred bidder to commercialise the Petroleum Division. Once negotiations are finalised, Enemalta will be able to concentrate on its core activity - the production and distribution of electricity. Such major projects need great coordination within the Corporation, and I have no doubt that all Enemalta employees will do their bit to help Enemalta finalise successfully these targets whilst surpassing any other challenges along the way.

Edmund Gatt Baldacchino Acting Chairman Enemalta Corporation

CHIEF EXECUTIVE OFFICER’S STATEMENT The year 2009 was a very challenging year for Enemalta and for all operators. We were hit by a severe recession and with continuous volatile oil prices which were extremely hard to predict. Some very hard choices had to be made. Nonetheless, with technical expertise and a sound knowledge of the business we were able to make these choices sensibly, keeping in mind the Corporation’s impact on the Island’s economy and its objective to provide the best value for our customers. Suffering two national power cuts, 2009 highlighted the justification of a new long term strategy and further investment. The 144MW Delimara extension project will enable Enemalta to meet both the electricity demands of the local market and also EU targets with regards to CO2 emissions. The interconnector between the Maltese Islands and Sicily will connect us to the European grid ensuring a stable supply of electricity and will provide the nation with an opportunity to purchase greener, cleaner energy. The past year marked a significant milestone in the implementation of the IUBS contract signed in 2008. This project is moving at the expected pace and following the implementation of the Enterprise Resource Planning (ERP) system across the Corporation. In January 2010 the project moved on to the

next two phases, the implementation of the Business Intelligence system which allowed the Corporation to have an information system which supports decision making, and the Enterprise Asset Management (EAM) system through which all the assets of the Corporation will be properly tracked and will provide a quantum leap in tracking expenses linked to an asset plus a better asset maintenance planning programme. The next phase will deal with the national rollout of the Smart Meters which will make Malta the first country to be completely on a smart grid. This system will play a central role in the future of the island’s energy system. The Supervisory Control and Data Acquisition system, also known as SCADA, will enable the Corporation to control any Distribution Centre through continuous monitoring and will give a timely warning of any abnormalities before failure occurs, while the Smart Meter will help Enemalta to better manage the distribution of electricity and the customer to better monitor their consumption. Taken as a whole, our targets and major projects are indicative of our underlying approach and reflect one common goal: “To meet the energy needs and expectations of the customer in a safe, efficient and profitable manner whilst safeguarding the environment.” Ahead of us is a year brimming with challenges and critical targets but I believe there is tremendous commitment

from everyone within the Corporation. I am confident that ultimately success will be achieved; all we need is to be provided with a fair chance to prove ourselves to the Maltese public, something which we are relentlessly doing on a daily basis.

Ing. Karl V.A. Camilleri Chief Executive Officer Enemalta Corporation

ELECTRICITY DIVISION

ELECTRICITY GENERATION The Corporation continued to cater for the electricity needs in the Maltese islands, through its two power stations, the one at Marsa and the other at Delimara with an installed capacity of 267MW and 304MW respectively. In 2009 there had been a drop of 6.2% in the amount of units generated. This was also reflected in the maximum peak demands, where in certain months it was lower by up to 10%. The reason for this drop was mainly attributed to the rise in electricity tariffs. This rise in tariffs reduced a large amount of wastage that the Maltese families were accustomed to. The weather conditions though, still played a dominant factor in the use of electricity, and the demand for electricity fluctuated irregularly during the past months. The peak demand registered in August 2009, was 403MW as compared with the 424MW maximum demand in the previous year. All efforts were made to keep the plant at Marsa in optimum operating condition, by means of regular inspections, overhauls and maintenance. The statutory inspections of pressure vessels, boilers and safety equipment were carried out as in previous years. Similar procedures were adopted to the turbines and auxiliaries to prevent forced shut downs particularly during the peak summer months.

Other major works carried out at the Marsa Power Station included: ■ turbine No. 4 trust bearing inspections and repair; ■ turbine No. 4 replacement of most sea-water pipe work; ■ change-over of Turbine No.6 to new Siemens switchgear; ■ fuel Tank No. 2 inspection was completed; ■ re-circulation lines on feed-pumps Nos. 5 to 7 were completed; ■ turbine No. 8 inspection: replacement of H2 seal, HPH tube leak; rehabilitated seawater discharge line ‘B’ and repaired throttle valve.

The long-serving plant at the Marsa Power Station, continues to prove a great burden to the maintenance section, since the number of faults and breakdowns being registered are on the increase. The replacement of seawater lines, boiler tube leaks, feed pump failures, damaged bellows and burnt motors all reflect this situation. A new automatic emission monitoring system was commissioned and the QAL 2 were conducted. The system was thus calibrated in July and with the new system now in service, emissions from the station are being adequately monitored online and all readings duly recorded.

ANNUAL REPORT 2009 and financial statements 2008

SYSTEM GENERATION FIGURES Actual

Actual

2008

2009

1,058,949

966,151

5,739

5,900

859,904

836,970

TOTAL GENERATING CAPACITY MWh Generated Marsa B Stn (Steam) MWh Generated Marsa B Stn (Gas) MWh Generated Delimara Stn (Steam) MWh Generated Delimara Stn (Gas)

4,975

15,756

382,504

342,863

2,312,071

2,167,400

127,142

121,705

2,184,929

2,045,935

System maximum demand (MW)

424

403

System maximum demand (MVar)

210

165

329,102

303,029

2,339

2,338

228,169

220,457

Gas Oil (Delimara)

2,020

5,541

Gas Oil (Delimara CCGT)

77,803

69,609

Steam Units Marsa

0.311

0.314

Steam Units Delimara

0.265

0.263

Gas Turbine Unit Marsa

0.408

0.396

Gas Turbine Unit Delimara

0.406

0.352

CCGT

0.203

Steam Units Marsa

82.23

78.49

Steam Units Delimara

95.10

92.40

Gas Turbine Unit Marsa

38.76

39.65

Gas Turbine Units Delimara

42.10

46.90

CCGT

70.40

70.00

Steam Units Marsa*

26.67

26.27

Steam Units Delimara*

31.78

31.86

Gas Turbine Unit Marsa

20.43

21.09

Gas Turbine Units Delimara

22.09

23.77

CCGT

39.48

39.28

MWh Generated Delimara Stn (CCGT) Total MWh Generated Units consumed in Stations (MWh) Units sent out from Station busbars (MWh)

FUEL CONSUMPTION (MTONS) Heavy Fuel Oil (Marsa) Gas Oil (Marsa) Heavy Fuel Oil (Delimara)

FUEL RATES (KG/KWH)

PLANT CAPACITY FACTOR %

STATION THERMAL EFFICIENCY %

* Efficiency calculated on Net CV

GENERATING PLANT DATA 2009 Plant

Commissioned

Capacity MW

Running Hours

MWH Gen

% of System’s Requirements

966,151

44.57%

5,900

0.27%

836,970

38.61%

15,756

0.73%

342,863

15.82%

2,167,640

100.00%

MARSA STATION (STEAM) 1 - F Tosi

1966

2 - F Tosi

1966

2,629

3 - F Tosi

1970

6,903

4 - F Tosi

1970

3,402

5 - GE (1956)

1982*

3,478

6 - GE (1956)

1983*

6,476

7 - Ansaldo (1956)

1984*

7,600

8 - CA Parsons (1959)

1987*

6,490

MARSA STATION (GAS) 9 - GEC Alsthom

1990

1 - BHEL

1991

2 - BHEL

1992

419

DELIMARA STATION (STEAM)

DELIMARA STATION (GAS) 1 - John Brown

1995

2 - John Brown

1995

DELIMARA STATION (CCGT) 1 - GT Nuovo Pignone

1999

2 - GT Nuovo Pignone

1999

3 - ST Nuovo Pignone

1999

* Refurbished Plant

ANNUAL REPORT 2009 and financial statements 2008

GENERATION PROJECTS â&#x20AC;&#x201C; DELIMARA POWER STATION NEW ELECTRICITY GENERATION PLANT FOR DELIMARA POWER STATION Following approval given by the Department of Contracts to the technical adjudication report in December 2008, the final commercial bids for the new generation plant were submitted in February 2009. These bids were evaluated and adjudicated and referred to the Department of Contracts for approval. Following the above, final negotiations were concluded with BWSC of Denmark and the contract for the new plant was signed on the 27th May 2009. The new plant is a combined cycle diesel engine type. It consists of 8 Wartsila 18V46 engines and has a total generating output of 148MW. Civil works on this project started in October 2009 and excavations are now in progress. APPLICATION FOR THE REGULARITY APPROVALS FOR THE NEW GENERATION PLANT The Environmental Impact Statement for the construction of the new plant was submitted by AIS Limited (The EIA consultants) to MEPA, in August 2009. The public consultation process was carried out during September. As part of the environmental planning process, Enemalta gave a series of presentations to NGOs and Government entities including Local Councilsâ&#x20AC;&#x2122; representatives, on the operation of the new plant. An application for the extension of the

Delimara Power Station was also submitted to the Malta Resources Authority in August 2009.

PLANNING AND DEVELOPMENT The Development Section is responsible for the short and long-term planning and the implementation of reinforcement schemes for the high voltage network, aimed to meet demand growth and provide adequate electricity supply to the Maltese islands. The Section is also responsible for the operation and maintenance of the high voltage network. 132KV NETWORK DEVELOPMENT During the past months the Planning Section has revised its long-term plan for the 132 kV network and primary substations, to take into consideration the increased generation facilities at Delimara Power Station, the eventual shutting down of the Marsa Power Station, the commissioning of an interconnection with the European grid and the possibility of a large offshore wind farm. These developments required several significant changes to the network, to cater for relocation of the power sources connected to the grid. Following the revision of the network long-term plan, the Development Section has issued a tender for a new 132kV Distribution Centre at Kappara. The building of the primary substation is completed and underground tunnels for the 132kV supply cables are now under construction. The 132kV Distribution Centre at Kappara is expected to be completed in 2011.

THE EUROPEAN INTERCONNECTOR Enemalta has commissioned the Transmission System Operator, TERNA, to jointly study in detail, the viability of an electrical interconnection between Malta and Sicily. The study has assessed various technical options, the impact on the Maltese and Sicilian High Voltage networks, took into account environmental considerations, carried out cost-benefit analysis and provided guidance on commercial and regulatory issues regarding electricity interconnections. The feasibility study has been concluded and Enemalta has issued a call for expression of interest for the supply and installation of a submarine cable link between the European grid and the Enemalta High Voltage network. This is the first step in the issue of a tender for the European Interconnector. Offers are being evaluated. Enemalta has also successfully applied for EU funding for this project under the European Energy Programme for Recovery. NATIONAL SCADA PROJECT As part of the IUBS project, Enemalta has awarded a contract for the provision of a SCADA system and control centre for the high Voltage transmission and distribution networks. This is a three year contract, during which, the contractor will provide the equipment and expertise for the installation of a new control centre at Marsa, from where Enemalta would be able to control and supervise all its primary substations. This will increase the reliability of supply and would ensure a more rapid remedial action in case of supply failure.

33KV NETWORK DEVELOPMENT During the year 2009 the Development Section commissioned one new 33kV circuit. Three others are in the course of completion. The first circuit is a 10km cable from Mosta Distribution Centre to Bugibba Distribution Centre and this will increase the reliability of supply to the localities of St. Paulâ&#x20AC;&#x2122;s Bay, Bugibba and Qawra. The other three 19km circuits have replaced two overhead line circuits and have substantially increased the network capacity to the northern part of Malta and to Gozo. Underground cables have been utilised for these circuits to reduce the negative impact on the environment and decrease the adverse effect of inclement weather on the reliability of supply. A tender for the provision of four new 33/11 kV Distribution Centres was also issued. These Centres will increase the High Voltage network capacity to several localities including Sliema, Paceville, Swieqi, Gozo and Zabbar. These projects are expected to be completed by 2012. 11KV NETWORK AND SUBSTATION REINFORCEMENT During 2009 the Development Section has continued to reinforce the 11kV network by

commissioning 30 new Distribution Substations. Various 11kV reinforcement projects were also implemented. HIGH VOLTAGE NETWORK MAINTENANCE The Maintenance Section has carried out routine maintenance in 189 Distribution Substations together with the 10 year maintenance exercise on the 132kV switchgear at the Marsa South Distribution Centre. The 33/11kV switchgear and transformer equipment in the various Distribution Centres were also maintained. During the year, a contract was awarded for the replacement of the old 11kV switchgear at the Tarxien Distribution Centre and for the installation of a new control system at this Centre. These works form part of a long-term plan for the replacement of equipment that is approaching the end of its economic life and for the installation of control systems in the various Distribution Centres. As part of the IUBS contract, the Maintenance Section is also involved in the provision of an Asset Management System, which is considered a useful tool for scheduling maintenance works, asset refurbishment and replacement.

ANNUAL REPORT 2009 and financial statements 2008

NEW INDOOR SUBSTATIONS & OUTDOOR TRANSFORMER CENTRES COMMISSIONED – MALTA Substations with 500kVA Transformer Naxxar Wied Filep Luqa n/s in Valletta Rd (PJ.Sutters) Xemxija Katerina Vitale Fgura Kunsill Ta' L-Ewropa (HSBC) Valletta St. Christopher Xg˙ajra Fortizza Tal-Grazzja (Eastend) Pembroke Kurunell Lorenzo Manché (Primary School)

Substations with 800kVA Transformer Mellieha Marlozz (Michele Ville) Zebbug Achille Ferris

Substations with 1000kVA Transformer Fgura Louis Schickluna (Alpha Court) Ûejtun Pres.A.Buttigieg (Lasco) Naxxar Andrea Debono (Etoile) Óamrun Dun Frans Camilleri St.Paul's Bay Stella Maris Qawra Nawciera Bahrija Qastan Swieqi Kaffis Mosta Triq Il-Kbira (Eureka Court) Attard Triq Il-Mit˙na (Tar-Razzett)

Substations with 1600kVA Transformer Mrie˙el L-Arkata L-Baxxa San Ìwann UB16 Tx.1 San Ìwann UB16 Tx.2 St.Julian's Pendergardens (SS4) Sliema Tigné T2 Tx.1 Sliema Tigné T2 Tx.2 Sliema Tigné T14 Tx.1 Sliema Tigné T14 Tx.2 GΩira William Reid (Savoy Gardens) Qormi Nylon Knitting No.3 Tx.1 Qormi Nylon Knitting No.3 Tx.2 Óal Far HF26 (Aurobindo) Ta’ Qali Idwart Net Increase TOTAL NO. OF TRANSFORMERS TOTAL NO. OF SUBSTATIONS

35,900 32 28

NEW INDOOR SUBSTATIONS COMMISSIONED - GOZO Substations with 500kVA Transformer Qala Villa©© San ÌuΩepp Substations with 1600kVA Transformer Victoria Duke Net Increase

2,100

TOTAL NO. OF TRANSFORMERS

TOTAL NO. OF SUBSTATIONS

TOTAL INCREASE OF TRANSFORMER CAPACITY IN MALTA AND GOZO : 35,900 + 2,100 = 38,000kVA

132KV & 33KV DISTRIBUTION CENTRES IN OPERATION IN THE MALTESE ISLANDS MALTA Bu©ibba D.C.

2x30 MVA

(33 kV/11 kV)

60 MVA

Freeport D.C.

2x30 MVA

(33 kV/11 kV)

60 MVA

Óal-Far D.C.

2x22.5 MVA

(33 kV/11 kV)

45 MVA

Marsa South D.C.

2x50 MVA

(132 kV/11 kV)

100 MVA

Marsa South D.C.

1x90 MVA

(132 kV/33 kV)

90 MVA

Mellie˙a D.C.

2x10 MVA

(33 kV/11 kV)

20 MVA

Mosta D.C. (132kV)

2x90 MVA

(132 kV/33 kV)

180 MVA

Mosta D.C. (132kV)

2x50 MVA

(33 kV/11 kV)

100 MVA

Msiera˙ D.C.

2x22.5 MVA

(33 kV/11 kV)

45 MVA

Paceville D.C.

2x30 MVA

(33 kV/11 kV)

60 MVA

Pembroke D.C.

2x12.5 MVA

(33 kV/6.3 kV)

25 MVA

St. Venera D.C.

2x30 MVA

(33 kV/11 kV)

60 MVA

Tarxien D.C.

3x22.5 MVA

(33 kV/11 kV)

67.5 MVA

Vendome D.C.

2x6 MVA

(33 kV/11 kV)

12 MVA

New Hospital D.C.

2x15 MVA

(33 kV/11 kV)

30 MVA

New Hospital D.C.

1x22.5 MVA

(33 kV/11 kV)

22.5 MVA

Valletta D.C.

3x22.5 MVA

(33 kV/11 kV)

67.5 MVA

Kirkop D.C.

2x22.5 MVA

(33 kV/11 kV)

45 MVA

Marsascala D.C.

1x22.5 MVA

(33 kV/11 kV)

22.5 MVA

Qala D.C.

2x30 MVA

(33 kV/11kV)

60 MVA

Comino D.C.

2x6.3 MVA

(33 kV/11kV)

12.6 MVA

GOZO

ANNUAL REPORT 2009 and financial statements 2008

11KV DISTRIBUTION TRANSFORMERS IN SERVICE IN MALTA END DEC 2009

END SEPT 2008

INCREASE

DECREASE

TRANSFORMER RATING KVA

NO.

TOTAL CAPACITY KVA

NO.

TOTAL CAPACITY KVA

NO.

KVA

NO.

KVA

900

850

100

2,600

2,800

200

237

711

250

20,250

20,500

250

300

900

315

945

500

236

118,000

222

111,000

7,000

750

33,750

34,500

750

800

198

158,400

199

159,200

800

1,000

323

323,000

309

309,000

14,000

1,500

90,000

1,600

259

414,400

252

403,200

11,200

2,000

14,000

16,000

2000

3,000

5,000

10,000

7,500

15,000

TOTAL

1268

1,206,056

1238

1,174,831

35,250

4,025

NET INCREASE OF TRANSFORMERS - 30 NET INCREASE OF - 31,225 kVA

11KV DISTRIBUTION TRANSFORMERS IN SERVICE IN GOZO END DEC 2009

END SEPT 2008

INCREASE

DECREASE

TRANSFORMER RATING KVA

NO.

TOTAL CAPACITY KVA

NO.

TOTAL CAPACITY KVA

NO.

KVA

NO.

KVA

100

700

250

6,750

500

25,000

24,000

1,000

750

3,750

800

11,200

1,000

13,000

14,000

1,000

1,500

4,500

1,600

14,400

12,800

1600

TOTAL

129

79,350

127

77,750

2,600

1,000

NET INCREASE OF TRANSFORMERS - 2 NET INCREASE OF - 1,600 kVA TOTAL INSTALLED TRANSFORMER CAPACITY IN MALTA & GOZO Total installed transformer capacity at end of September 2007 in Malta and Gozo Net increase during year up to end of December 2008 in Malta and Gozo Total installed transformers capacity at end of December 2008 in Malta and Gozo

1,174,831 + 77,750 = 1,252,581 kVA 31,225 + 1,600 = 32,825 kVA 1,206,056 + 79,350 = 1,285,406 kVA

NET INCREASE IN DISTRIBUTION TRANSFORMER CAPACITY FROM 1985/1986 TO 2009

YEAR

NET INCREASE OF TRANSFORMERS

NET INCREASE KVA

1985-1986

23,778

1986-1987

27,175

1987-1988

41,979

1988-1989

22,467

1989-1990

32,487

1990-1991

44,851

1991-1992

52,000

1992-1993

47,690

1993-1994

33,525

1994-1995

52,838

1995-1996

33,775

1996-1997

34,025

1997-1998

53,565

1998-1999

25,190

1999-2000

48,500

2000-2001

36,300

2001-2002

41,465

2002-2003

37,765

2003-2004

38,815

2004-2005

45,800

2005-2006

49,237

2006-2007

19,800

2007-2008

45,700

2009

32,825

ANNUAL REPORT 2009 and financial statements 2008

CHANGE OF TRANSFORMER CAPACITY OF EXISTING SUBSTATIONS & TC’S - ( MALTA ) LOCALITY/NAME

FROM

QTY

kVA INCREASE

kVA DECREASE

G˙ajn Tuffie˙a tat-Tafal

M©arr il-Ballut Ûebbu© Gianpula

100

250

300

M©arr Barbara

500

1,000

500

Luqa Warehouse

500

1,600

1,100

Mosta tad-DiB

750

1,000

250

Marsa Cold Stores

800

1,000

200

Corradino Grain Silo

3,000

Xwieki Quarry No. 10 Mosta Kultellazz Gudja Housing Estate

800

500

900

Burmarrad Price Club Ûebbu© New Óal Mula St. Paul’s Bay Housing Estate (Qarbuni) Xemxija BP Rabat Buskett Road Ûebbu© Miekelan© Sapiano

1,000

500

3,000

Naxxar San Pawl Tat-Tar©a

1,000

800

3,000

Mosta Housing Estate Qormi Ta’ FarΩina H.E. G˙axaq Borehole

1,600

1,000

4,200

Qormi Chatillon Tx.1

2,000

1,000

M’Scala Latmija T/C M’Scala Bidni T/C Stella Maris T/C

250

750

1,000

1,600

5,375

10.050

Qawra Gallina Ba˙˙ara St. Paul’s Bay Dawret il-GΩejjer Ûebbu© Mill Luqa Wil©a

TOTAL

NET DECREASE OF 2 TRANSFORMERS NET DECREASE OF 4,675 kVA CHANGE OF TRANSFORMER CAPACITY OF EXISTING SUBSTATIONS & TC’S - (GOZO) LOCALITY/NAME M©arr Marina TOTAL

FROM

QTY

kVA INCREASE

kVA DECREASE

1,000

500

NET DECREASE OF 0 TRANSFORMERS NET DECREASE OF 500 kVA TOTAL NET INCREASE MALTA AND GOZO : 38,000 - 4,675 - 500 = 32,825kVA

CIVIL ENGINEERING SECTION The Civil Engineering Section has embarked on various projects to assist in the planning and design of buildings required at the various Divisions of the Corporation. This Section is entrusted with the location of suitable sites for electricity substations and providing designs according to planning criteria when submitting applications for development permits. Projects are then duly supervised, to ensure that all works are carried out according to the approved plans. This is a lengthy process which many times involves lengthy negotiations with other government departments, to ensure the best possible use of government land. When substation buildings are completed, these are passed over to the Development Section to be duly equipped and energised. Several maintenance works were carried out on existing structures. Around 30 substations were maintained by the Corporation period contractors. Most of them required pointing, rendering and painting, while several others had to have their roof replaced and a new damp proof membrane installed. Some structural elements had to be repaired or completely replaced and an ad hoc contractor had to be hired for this work. Every year the Section utilizes the services of several contractors for various civil engineering projects, particularly on trenching works. In such cases, Section personnel are only involved in the application

process for the acquisition of the required permits from the Malta Environment and Planning Authority and the Malta Transport Authority and for the supervision of the top tarmac surface layer only. The trenching permits system was also updated to facilitate procedures for the other Corporation engineers. A new three year contract was signed with interested contractors on revised bill of quantities for Corporation projects. New items were introduced and prices were amended to reflect the current trend in the building industry. The new contract includes maintenance as well as new construction and is not limited to substations only but may be also utilized for others works required across the Corporation. These period contractors will assist in reducing the times for the approval of minor works, some of which may be routine but others may be of very urgent nature. The normal tendering procedures will invariably be followed. 132 KV AND 33KV TUNNELS The main tunnel from Delimara Power Station to Marsa South Distribution Centre was completed and it is expected to be handed over shortly. Plans for the new tunnel from Marsascala to Smart City Malta were also prepared and the necessary design drawings completed. Construction and excavation works from the Marsascala side were also taken in hand. The geology tests carried out confirmed that very hard coralline limestone rock is to be excavated and thus progress on these works will not be as fast as originally expected.

GAS AND PETROLEUM DIVISIONS The Civil Engineering Section actively assisted in the Gas and Petroleum Divisions privatization process by preparing an extensive number of drawings required in processes. Several maintenance and other minor construction works were also completed on various sites and premises managed by these Divions to keep them in an optimum operational condition. OTHER PROJECTS Once construction works on the Kappara Distribution Centre were completed, attention was focused on the Xewkija Gozo District Office and Distribution Centre. The archaeological remains which were found on site were cleaned with the assistance of a professional archaeologist and adequately preserved. Plans for the District Office were altered and structural elements were introduced to allow these finds not to be destroyed in the course of construction. The Distribution Centre is practically complete and only some minor finishing works remain outstanding. Other tenders were also awarded. These include alterations and refurbishment works for the Tarxien Distribution Centre and the excavation of the escape shafts of the main tunnel. The tender for the Marsa Power Station roof replacement has also been adjudicated.

ANNUAL REPORT 2009 and financial statements 2008

ELECTRICITY DISTRIBUTION The Distribution Section, fully aware of the Corporation’s mission, to provide the best possible service to its many consumers, fully commits its resources to ensure an adequate and reliable supply of electricity to the community. The need for the extension and reinforcement of the transmission and distribution networks, brought about by the widespread property development in various localities in Malta and Gozo, continues to tax in no small way, the Section’s resources. 11KV DISTRIBUTION SYSTEM During the past year, several high voltage deviations and reinforcement works were carried out, in line with the Section’s on-going programme for the reinforcement of the transmission and distribution networks, which are the arterial feeds by which electrical energy is conveyed to the end user. A number of substations and transformers were also commissioned to meet the evolving load demands. LOW VOLTAGE SYSTEM Services The Section continued to provide new services to general consumers and other entities applying for electricity supply. A total of 5,585 new consumers were connected to the system during the past twelve months. The Corporation makes every effort to accommodate requests for electricity service in the shortest time possible and the new policy

introduced some years ago, to extend service and provide metering equipment concurrently, is still rendering very good results. Metering As in previous years, the Section focused its activities on revenue protection, meter replacements and inspections. More than 19,300 meters of various types were installed in Malta and Gozo during the past twelve months. The Corporation continued with its efforts to detect illicit connections and curb abuses. A total of 13,544 surprise inspections were carried out and in 222 cases meters were found to have been tempered with or not functioning correctly. These were referred for further investigation. The planning and implementation of the first phase of the Automatic Meter Reading project was taken in hand and the pilot exercise involving the replacement of 5,000 electricity meters is well in hand. Reinforcement Low voltage reinforcements were carried out in various localities in Malta and Gozo to rectify low voltage problems and enhance the quality of supply. A total of 66 new feeders were commissioned. Maintenance The Corporation continued with its on-going maintenance programme to ensure that the electricity network is kept at an optimum level. Some 7,638 breakdown calls were attended. More than 3,200 service cable/ boxes were replaced. High voltage overhead line maintenance works were carried out on a span of about 66 kilometres of cable.

STREET LIGHTING SYSTEM More than 40,000 street lamps are currently connected to the system. Maintenance on street lighting in areas not yet devolved to Local Councils continued as scheduled. Every effort is made to repair street lamps within the shortest time possible to avoid undue nuisance to the residents in the localities concerned. TRANSPORT Several new vehicles were added to the Transport fleet managed by this Section replacing both hired cars and old Enemalta vehicles. The delivery of fifteen tower ladders is also expected shortly. DISTRICT OFFICES The new Gozo District Office is in an advanced stage of construction and is expected to be completed shortly. Refurbishment works on the former Mosta Distribution Centre are currently in hand. The new building is intended to house the Mosta District Offices, where currently the space available is not adequate to handle operations in this locality. The extension to the Bugibba District Office to house employee gang rooms is also nearing completion. MEETINGS WITH THE ICT SECTION Several meetings were held with the Information Technology Section on the setting up of the Geographical Information System. Structural works are progressing satisfactorily while the requisite database is already in hand.

AMR (AUTOMATED METER READING) The communication problems encountered with the remote reading of CT (Current Transformer) operated three-phase meters have been solved. The trials of fifty such meters were successfully completed during the year. ENERGY SAVING INITIATIVES The tender for street lighting dimming has been published and it is being currently adjudicated. Trials with LED street lighting lamps have been carried out. However results obtained so far, have proved inconclusive.

ANNUAL REPORT 2009 and financial statements 2008

PETROLEUM DIVISION

ANNUAL REPORT 2009 and financial statements 2008

RESPONSIBILITIES The Petroleum Division is responsible for the planning of all petroleum products imports, including Liquid Petroleum Gas and fuel Oils for the power stations and for their internal marketing. The Division also caters for the storage and distribution of these products in the Maltese islands and also offers excellent storage facilities to international oil companies, at Óas-Saptan and Ras ÓanΩir complexes. The Division regularly maintains its various depots and installations in order to keep these in optimum condition. These include the installations at Birzebbugia, Óas-Saptan and Ras ÓanΩir, and the Depots at Wied Dalam and Luqa airport. This was the first year in which the Corporation was exposed to competition in the distribution of fuels on the inland market. Other oil companies in Malta, that previously enjoyed a free hand in the bunkering business, have now been given a licence by the Malta Resources Authority, to import and distribute fuels locally, thus entering into direct competition with Enemalta. So far, this concession was only limited to diesel and heating oils. The commercialisation process of the Petroleum Division is almost complete and only a few details need to be ironed out to finalise this exercise. FUEL IMPORTS During the past financial year 831,612 metric tonnes of petroleum products were imported for local consumption. The total fuel oil imported for use at the two power stations amounted to 61% of all fuel purchased.

IMPORTS IN METRIC TONNES PRODUCTS

2008

AVERAGE/ MNTH

2009

AVERAGE/ MNTH

MONTHLY % CHANGE

Gas Oil

109,433.879

7,296

84,014

7,001

-4.0

Diesel (EN590)

123,461.438

8,231

81,352

6,779

-17.6

Unleaded Petrol

86,678.941

5,779

71,326

5,944

+2.9

Jet A1

148,368.838

9,891

61,030

5,086

-48.6

Fuel Oil

722,136.282

48,142

506,102

42,175

-12.4

LHO/HGO

7262

484

6,295

525

+8.5

Avgas

110.201

7.35

108

+22.4

LPG

26,813.871

1,788

21,005

1,750

-2.1

Propane

383.487

25.6

379

31.5

+23

TOTAL

1,224,649

81,643

831,612

69,301

-15.1

Although there appears to be a 12.4% drop in the total amount of fuel imports, one is to take into account the fact that last year’s financial year covered a period of fifteen months. In fact, this year there has been a 4.4% increase in the amount of fuel imported when compared to a similar twelve month period over the previous year. This is in line with the

trends shown in recent years. All petroleum products purchased were in line with European specifications. Calculated on a month by month basis, the imports of petroleum products suffered a substantial drop of 15.1% when compared to the previous financial year. The biggest

SALES IN METRIC TONNES

decrease registered was in the importation of JET A1, amounting to around 49%. The drop in demand for this product was due to the financial crises that hit the world markets and left a negative impact on the tourism sector. Moreover, Enemalta opted to maintain a smaller backup stock (due to reduced demands) and utilize its reserves of the product rather than importing more fuel, to meet demands. Another substantial drop of around 18% was registered in the importation of EN590 diesel for the service stations. Apart from the general downward trend in the consumption of fuel products, this decrease can mostly be attributed to the liberalisation of the inland petroleum market, where Enemalta had to surrender part of its market to local competition. Another trend shown in the importation table, is the increase in the purchase of Light Heating Oil when compared to the drop in sales of this product for the same period last year. This can be explained by the fact that last year product purchases were made during a 13 month period and not over a 15 month period as happened with other products. This pushes the import average to 559 metric tonnes per month. Thus the importation of Light Heating Oil / Heavy Gasoil, has in 2009, actually dropped by 6 per cent (and not increased by 8.5% as one may erroneously conclude). This is more in line with the actual sales of this product. SALES The sales of petroleum products during the financial year under review, amounted to 854,262 metric tonnes. On a monthly basis, this figure is more than 10% lower than that

PRODUCTS

2008

AVERAGE/ MNTH

2009

AVERAGE/ MNTH

% CHANGE

Gas Oil (total)

95,639.921

6375.995

76,139

6,345

-0.5

Gas Oil (MPS)

2,067.130

137.809

2,171

181

+31.2

Gas Oil (DPS)

93,572.791

6238.186

73,968

6,164

-1.2

Diesel (EN590)

123,706.365

8,247.091

79,254

6,605

-19.9

Unleaded Petrol

73,953.519

4,930.235

63,284

5,274

+7.0

LRP

14,016.953

934.464

9,477

790

-15.4

Jet A1

114,565.047

7,637.670

88,805

7,400

-3.1

Kerosene

1,639.283

109.286

1,081

-17.4

Fuel Oil (total)

716,011.809

47,734.121

502,204

41,850

-12.3

Fuel Oil (MPS)

418,285.180

27,885.568

294,688

24,557

-11.9

Fuel Oil (DPS)

297,726.629

19,848.442

207,516

17,293

-12.9

Thin Fuel Oil

8,162.000

544.133

4,929

411

-24.4

LHO / HGO

14,786.029

985.735

7,609

634

-35.7

Avgas

79.038

5.269

+50.9

LPG

26,813.871

1,787.591

21,006

1,751

-2.1

Propane

383.487

25.566

379

31.5

+23

TOTAL

1,189,757.321

79,317.155

854,262

71,189

-10.2

ANNUAL REPORT 2009 and financial statements 2008

of the previous financial year. This drop in sales continued the negative trend exhibited last year. The consumption of fuel oil by the power stations decreased substantially by more than 12 per cent. This is partly a reflection on the total energy demands of the country, which dropped considerably following the revision of utility tariffs, and also the result of the shift in burning gas oil, instead of heavy fuel oil. In fact the consumption of gas oil at the power stations remained at par with the previous year with only a slight drop of 0.5%. The sales figure for diesel fuel shows a drop of almost 20 per cent. This is mostly attributed to the competition being offered by other local fuel importers who have been recently licensed by the Malta Resources Authority to trade on the inland market. Till now, however, this liberalisation did not have any effect on the selling price of automotive fuels. The unleaded petrol and LRP have both shown an overall increase of more than 3% over the previous years. Individually, unleaded sales, have shown an increase of 7% while sales of LRP have dropped by more than 15%. This confirms that cars running on LRP are being replaced by vehicles running on unleaded petrol rather than diesel. In spite of the improvement in the quality of Light Heating Oil, now branded as Heating

Gas Oil, to better reflect the quality of the fuel, the sales of this product have dropped drastically by more than 35%. This is attributed directly to the stiff competition offered by other suppliers on the local market. The sales of JET A1 showed a drop of around 3.1%. This decrease is in line with a worldwide slump in the tourism industry.

Wied Dalam The works on the filtering/water separation station at Wied Dalam have been completed and the plant is now being tested. On commissioning, this station would enable JET A1 fuel to be pumped directly from Óas Saptan to Wied Dalam, thus by-passing BirΩebbu©ia. This offers the advantage of shortening the supply chain to the airport and reduce certification costs.

INSTALLATIONS 31st March 1979 Installation Development works at this Installation were kept to a minimum in view of its future relocation. In fact the resiting project is well under way. During the last months all efforts were focused on the housekeeping of the Installation. Óas-Saptan Installation Programmed maintenance works at this Installation proceeded as planned. The storage area, tunnel shafts, plant and equipment were all regularly maintained.

Another project commissioned at this Installation, is the refurbishment of the storage tanks and ancillary pipelines. This project, which includes the blasting of the external surface of the storage tanks, and the application of a protective coat, is now complete. LUQA AVIATION SECTION The Aviation Section continued to provide a highly efficient service to aircraft calling at Luqa airport. This has been confirmed by qualified international personnel who carried out regular inspections and audits on all aspects of refuelling operations at the airport.

The storage tanks available for lease to third parties have all been rented through the year, save for a short period in the beginning of the year. Enemalta has also managed to lease all its JET A1 storage facilities. All tanks in use have now been converted to gas oil storage. Despite its age, this Installation is still serving its purpose adequately.

GAS DIVISION

ANNUAL REPORT 2009 and financial statements 2008

MAIN OBJECTIVES The main objectives of the Gas Division is to import, store and bottle Liquid Petroleum Gas, to service both the domestic and industrial needs of the entire local market. All operations are currently being conducted through the Qajjenza Depot which is located on the south coast of the island. This Depot was built in 1959 and a year later the first locally bottled gas cylinders were offered to the general public. In view of building development in close proximity of the Depot and the stringent regulations coming into force during these last years, the Corporation had to seek an alternative site to relocate its installation. In fact a new Depot is being built at BengË&#x2122;isa. The new plant to be installed here will conform to the Seveso directives and will have increased storage facilities, more modern plant for accelerated productive rates and a palletising unit which will greatly reduce the manual handling of gas cylinders. In February 2009, the distribution of Liquid Petroleum Gas and Propane both in cylinders and in bulk was taken over by Liquigas Malta Limited. Emergency services have also been taken over by the new company. All operations will be transferred to Liquigas once the new plant at BengË&#x2122;aisa is commissioned.

MAINTENANCE Even though the Qajjenza Depot is now in its final stages of operation, the ageing plant and equipment housed there, continues to be maintained to ensure that operational disruptions are kept to a minimum. Maintenance works were carried out on all storage spheres and repair works on Number 11 Tank were completed in August 2009. In view that the Depot is located very close to the sea, the condition of the storage tanks easily deteriorates especially as a result of the adverse weather conditions prevailing during the winter months. Regular maintenance is considered crucial for the smooth running of the plant. PRODUCTION Following the installation of a new carousel in October 2007, there had been a significant increase in the bottling rate of gas cylinders. In fact the bottling rate for the 12kg cylinders is about 1200 cylinders per hour. The long term plan to shift from the screwtype valves to the safer clip-on type has left its positive effect on productivity since the machinery downtime to replace the filling heads has now decreased considerably. With the introduction of the new carousel and the new production management software, production gains/losses are now completely under control giving the accuracy of filling and real time monitoring.

Other relatively minor investments, such as a production management software and a speed controller for the carousel, have had a net positive effect on the bottling capacity over the previous years. SALES OF LPG MIXTURE AND PROPANE (IN MTS) YEAR

LPG

PROPANE

TOTAL

1999-2000

17,256

240

17,496

2000-01

16,239

228

16,467

2001-02

16,945

223

17,168

2002-03

17,709

253

17,962

2003-04

17,916

273

18,189

2004-05

19,265

248

19,513

2005-06

20,087

316

20,403

2006-07

19,416

439

19,855

2007-08

21,659

342

22,001

2009

22,832

294

23,126

SALES The sales of Liquid Petroleum Gas in 2009, increased by more than 3% over the corresponding period last year and reached a total of 22,832 metric tonnes. The number of cylinders sold has reached the 1.3 million mark. DISTRIBUTION Following agreement between Enemalta Corporation and Liquigas Malta Limited, the distribution and emergency services were, as from 2nd February 2009, transferred to the new company. An office has also been set

up by Liquigas Limited at Enemalta premises at Qajjenza to handle the distribution and sales of loose LPG cylinders. The new company is currently catering for all the Liquid Petroleum Gas Distribution in Malta and Gozo, including bulk supplies to commercial and industrial entities. IMPORTS A total of 22,404 metric tonnes of Liquid Petroleum Gas mixture and 400 metric tons of commercial propane were imported during the year. In all, there had been 13 shipments and all efforts were made to put discharge operations under control to avoid unnecessary demurrage charges. One shipment was brought over with reduced quantity of product due to the extraordinary maintenance on one of the storage spheres. The Corporationâ&#x20AC;&#x2122;s Gas Depot at Qajjenza has a storage capacity of 2300 metric tonnes of Liquid Petroleum Gas mixture and 200 metric tons of propane. NEW SERVICES As from 1st February 2009, Liquigas Malta Limited has taken over the ownership of all gas cylinders. The issuing of new services and the purchasing of the gas cylinders are now being handled by the new company, even though the collection of relative data is still being catered for by Enemalta personnel. The quantity of cylinders being purchased is now the prerogative of the new company. The process of removing worn out cylinders from circulation was however maintained, and Enemalta employees carry

out inspections of cylinders, and those not deemed fit for refilling are put aside for eventual withdrawal. CONSUMER SERVICES This Section has now ceased its operations and Liquigas Malta Limited has entered into a private agreement with a third party sub-contractor for the provision of these services. A number of employees previously deployed with this Section were absorbed by the Gas Division.

INFORMATION COMMUNICATION TECHNOLOGY

INTEGRATED UTILITIES BUSINESS SYSTEMS (IUBS) Having recognised that its management information and ICT infrastructure required a total overhaul, Enemalta, in conjunction with the Water Services Corporation, has embarked on an Integrated Utilities Business Systems (IUBS) programme – a holistic transformation process for the two businesses, underpinned by the following ICT projects: ■ The replacement of the billing system with a new billing engine that integrates Customer Relationship Management (CRM): The new billing engine will enable new operational possibilities and new business products and services. The new system will in the coming years, become an essential platform for Enemalta to interact with its customers and efficiently manage all services being offered. ■ The replacement of existing meters with an Automated Meter Management (AMM) system, resulting in a Smart Metering grid: This will enable the Utilities to configure, operate and read meters in real time, and will eventually lead to the elimination of estimate billing, and provide the possibility of introducing new service package based on differential tariffs. ■ Smart Metering Grid will also mean that the Utilities will have access to accurate and timely consumption and trend patterns allowing them to manage operations more efficiently. ■ The replacement of the accounting and inventory system with an Enterprise Resource Planning [ERP] solution: this solution is essential to enable the Utilities to restructure themselves around

customer oriented business processes, rather than legacy organisational functions. In conjunction with the other elements of IUBS, it will significantly enhance the availability and timeliness of financial information to management and will provide the tools to improve management and control of the Utilities’ material resources. ■ The introduction of Data Warehousing and Business Intelligence (BI): These tools will enable the gathering, storing, analysing and access to data that will help the management to make better business decisions. ■ The introduction of a Supervisory Control and Data Acquisition (SCADA) system and infrastructure to manage Enemalta’s electricity plant. The new system will allow the Network Operations Centre to continuously monitor and collect information from Enemalta’s Distribution centres. This information forms the basis for network planning and for the operations’ engineers to plan short and long-term works, including maintenance works and network reinforcement projects. The SCADA system will also provide immediate indication of alarms and events that could result in the interruption of supply or damage to the equipment, unless timely remedial action is taken. It will also permit remote operation of the switchgear in the Distribution centres. These capabilities should result in a marked improvement in restoring supply, especially where interruptions are due to load shedding.

In January 2009 Enemalta and the Water Services Corporation set up the Automated Revenue Management System Ltd (ARMS Ltd) as a result of their strategic partnership to implement the IUBS programme. This newly formed company is responsible for the following operations at both Corporations: ■ Customer Care and the Call Centre. ■ Applications for electricity service. ■ Device Management. ■ Billing and Invoicing. ■ Cash Collection. ■ Debt Management. ■ Revenue Management. IBM, together with Enemalta, the Water Services Corporation and ARMS Ltd personnel have completed an ‘as is’ analysis of the high level business processes that are relevant to IUBS, and are now developing the ‘to be’ scenarios. Work on the configuration and build of the billing CRM and ERP applications is also well in hand, with initial phases expected to commence in January 2010. The ICT Division is actively participating in the transformation and data migration processes. Enemalta has in the meantime launched a pilot project to install 5,000 Smart Meters during 2009. This was intended to allow the Corporation to gather information and obtain feedback in order to optimize its operations during the full scale implementation of the Smart Grid.

ANNUAL REPORT 2009 and financial statements 2008

ORGANISATIONAL CHANGE – GOVERNANCE AND STRATEGY Following the appointment of a new Chief Information Officer in May 2009, the ICT Division is currently in the process of restructuring itself in order to better support business critical operations and drive business change. Recruitment and training campaigns are being launched in order to strengthen the ICT management and ensure that the Division is adequately staffed with personnel having the right skills, training and experience to meet the upcoming challenges. A comprehensive new Information Security Policy has been drawn up and this will be launched and disseminated throughout the Corporation later this year. Meanwhile, a new ICT strategy for the years 2010 – 2012 is being prepared. The new strategy will continue to enforce the vision of the ICT as a driver for business transformation at Enemalta and includes objectives to: ■ fully support the business in its drive to ensure high levels of customer centricity, operational and cost efficiency, as well as social and environmental responsibility; ■ align Enemalta with the Government’s national ICT Strategy Plan; ■ restructure and strengthen ICT governance at Enemalta to best practice levels;

INFRASTRUCTURE, SYSTEMS AND OPERATIONS Throughout the year, the ICT Division continued with its programme for modernisation and preparation for business transformation. These initiatives include: ■ the continued enhancement of the Wide Area Network (WAN), the Local Area Network (LAN) and the PABX Infrastructure, including connectivity to an additional 15 Distribution Centres, installation of structured cabling, and upgrading the Network Access Layer for improved resilience and manageability; ■ complete re-design of Intranet and Internet portals in order to enhance functionality and ease of use; ■ ICT Infrastructure and support to enable the relocation of the Credit Control Department to the Water Services Corporation premises in Luqa; ■ the implementation of an ICT Asset Management System, including tagging of all ICT assets; ■ the development of a new mobile portal, allowing subscribers to receive notifications of planned and unplanned power suspensions. The system is envisaged to be implemented by the end of the year.

■ continue to develop and strengthen Enemalta’s data centre and network infrastructure; ■ ensure high levels of ICT support to the business. .

HUMAN RESOURCES DIVISION

ANNUAL REPORT 2009 and financial statements 2008

OUR AIMS The primary aim of the Human Resources Department is to provide a high quality service which will promote an efficient, effective and supportive environment, in order to deliver the best possible results to Corporation employees. This Division is responsible for various important functions that are all vital to the Corporation. HR management has to ensure that adequately fletched staff is available in order to cope with the pressing needs of the Corporation. In this regard the recruitment and selection of employees is a vital function. The Division calls for both internal and external recruitment and its primary aim is to enroll the best people available on the market. Manpower planning involving employee development and staff movements are all catered for by this department. The HR role in manpower planning is to ensure that all employees recruited by the Corporation are capable to fit in the organisationâ&#x20AC;&#x2122;s structure to be of more effective assistance in the various functions. One of the more important functions of the Division is to gauge employee motivation and carry out evaluation exercises that include progression, increments and performance appraisals. While progression and increments have been thoroughly used in the past by the Corporation as motivational tools, performance appraisals is a new concept intended to step up employeesâ&#x20AC;&#x2122; efficiency and effort in their work.

MARSAXLOKK TRAINING CENTRE The end of the year 2009 marked the finalisation of a training plan based on the findings of the Training Needs Analysis (TNA) exercise, launched in 2006. This plan is intended to guide Corporation employees through a Learning process, to attain the required knowledge in the respective fields thus having a more employable and efficient work force. In order to attain this level of competency within the workforce, the training programmes are being channelled along three directions namely: strengthening the core business of the Corporation, upgrading management knowledge and boosting Health and Safety culture infusion. The strengthening of the core business was attained once consensus was reached on the method of implementation. This was achieved through collective bargaining where the need of Human Resource development was emphasized and the multi-skills concept was accepted. As a result, the Training Centre has endeavoured to train employees in disciplines which are not traditionally practised as part of their routine work. Trainees are being encouraged to attend courses intended to broaden their skills and apply them to improve efficiency in their work output. Another agreement which has been implemented during 2009, was the Aviation Restructuring Agreement which broadened the skills and sphere of duties of the Aviation crewmen. The Training Centre played a major role in the implementation of this Agreement

as it prepared the relative course content and the logistics for the training of staff, in order to be submitted for assessment and eventual certification. The delivered training ranged from new skills in the dispatch of fuel for aircrafts to computer training and communication skills. The training given, allowed the newly appointed Senior Aviation Crewmen to offer a service not offered previously to Enemalta customers. Other support activities within the Aviation Section created other opportunities for staff to advance in their careers while upgrading the service offered. The Centre was also given the opportunity to actively participate in the introduction of the Integrated Business Systems (IUBS) venture between Enemalta and the Water Services Corporation by providing adequate training on the Automated Meter Management Enterprise resources planning and Customer Relationship Management. One of the critical success factors of this project was the relative transfer of knowledge of the key process owners and end users. With a view to attain the desired results, the process was meticulously planned, executed and monitored. The Training Centre has also offered opportunities to employees to broaden their knowledge in subjects not necessarily linked with their sphere of duties within the Corporation. Enemalta employees were given training free of charge after their normal work schedules. This initiative helped these employees to learn about subjects which may open new career paths within the Corporation or otherwise improve their skills

in the respective fields. The interest shown, has encouraged management at the Training Centre, to offer this opportunity again next year. As an on-going exercise, the Centre continued to provide training in the Health and Safety field, with particular emphasis to emergency response. As one of the major heavy industries in Malta, Enemalta has undertaken the task of training its staff at the Power Stations to respond to incidents emanating from generation plant. Regular drills were carried out, to retain the trained staff in readiness to respond to emergency calls. At professional level, the core business has been strengthened by offering opportunities to the staff to undertake undergraduate and post-graduate studies, through distance learning, in the engineering and administration fields. In-house training was also given as part of the continuous professional development in engineering and management, by inviting experts in the field to seminars, which included practical sessions, to enhance understanding of the subject. While the Centre continues to provide training at all levels of the organisation, its main aim remains that of exploring new methods of learning, to add value to the service being given. In fact, a new training programme is being scheduled to commence next year.

WELFARE SECTION This Section continually offers support to employees and their families in helping them cope with problems they may encounter from time to time.

With the help of CARITAS representatives, an Employee Assistance Programme (EAP) has been introduced to provide professional counselling to employees with work related problems. Managers and supervisory staff were given talks on how to identify persons who are going through some difficulty and see how these employees can be approached. The Welfare Section regularly organises talks to Corporation employees encouraging them to lifelong learning. Several social functions are organised to improve the social element among the Enemalta staff. This Section also handles the Private Health Scheme, which is widely utilized by Corporation employees and their families.

CUSTOMER CARE SECTION Since its inception, the Customer Care Section has offered valuable assistance to the many Enemalta customers in an efficient and satisfactory manner. The Section has now established itself as a fully functional Centre, adequately geared to handle enquires and offer quality service to the public. During the past months, the Customer Care Section was fully focused on providing assistance and giving information to the newly formed Automated Revenue Management Systems Ltd (ARMS). Regular workshops and meetings were held on this major exercise. The Section handles more than 3,000 queries each month. It also keeps liaison with all Corporation Departments to ensure that claims received are attended to in the shortest time possible. The Customer Care Section will undoubtedly feature prominently

in the Corporation’s vision to develop the one-stop-shop service being planned by ARMS Ltd in the coming months.

HEALTH AND SAFETY The past months were characterised with intensive activities aimed at upgrading the health and safety standards across the Corporation. The Health and Safety Section is in constant liaison with the Occupational, Health and Safety Authority to ensure that all safeguards contained in local and European legislation are adhered to by Enemalta employees. Regular consultations are held at all management levels, to have wide consensus on all programmed health and safety objectives. The Enforcement Unit within this Section, ensures that employees at work are not at risk and they do not pose any danger to others. Officers from this Unit also provide consultations on the proper use of the Personal Protective Equipment (PPE). Other initiatives undertaken include: ■ provision of a detailed inventory of all Corporation sanitary facilities across the Corporation premises to provide the required refurbishments; ■ a strategy outlining the required occupational safety signs within all Corporation sites; ■ one-to-one meetings with Corporation employees to ensure understanding and adherence to Health and Safety initiatives.

ANNUAL REPORT 2009 and financial statements 2008

As in previous years, health and safety programmes were conducted and aimed at reducing injuries at the place of work. This was reflected in a lesser number of injuries being reported. Medical services continued to be provided to ensure that both clinics at Marsa and Delimara Power Stations were kept at the required standards. Other services coordinated by this Section included health surveillance and screening of Corporation employees, vaccinations and blood tests. The Health and Safety Section formed part of the emergency pandemic contingency plan set-up, and held periodic meetings with Government entities to ensure that WHO recommendations are being followed.

ESTATE MANAGEMENT DIVISION

ANNUAL REPORT 2009 and financial statements 2008

RESTRUCTURING The Estate Management Division has been restructured and it is now a separate department, no longer amalgamated with the Human Resources Section. A Chief Officer has been recruited to manage this Department which has now taken over other Sections within its ranks. During the outgoing year, the Estate Management Division managed to take a detailed stock of all major Corporation properties and with the assistance of the Land Department managed to compile a detailed register of these properties. The complete Property Register, including more than one thousand substations and other minor properties currently managed by the Corporation, is expected to be completed shortly. The Division finalised several acquisition procedures required for the construction of substations and continued to offer assistance to other Corporation officials involved in the privatization process.

FIRE AND SAFETY SECTION This Section provides emergency response and stand-by services to all the Divisions of the Corporation. During the past months this Unit attended to several incidents, at times in extraordinary circumstances, assisted by the Civil Protection Department. The core activity at this Section is the routine checking and maintenance of all equipment

installed across the Corporation, including hydrant systems, automatic extinguishing systems, fire alarms and other portable equipment. Fire cover was also provided at various sites for potentially dangerous welding works particularly at the Gas Division. Emergency signage continued to be updated to meet current standards and all efforts are being made to abide to existing legislation in this regard. A wider on-going process is currently in hand to update fire safety at the various sites. Besides the updating of safety signs (means of escape), advice is also being given on the implementation of the required safety measures. The Fire Section is also involved in the carrying out of risk assessments with regards to gas hazards and rescue plans for confined spaces. Statutory inspections were conducted by the competent authorities in compliance with the SEVESO II directive and recommendations were followed up as required. Major exercises are being organised in-house, in conjunction with other agencies. These include major oil spill exercises at Delimara and Fire drills at Marsa and Delimara Power Stations and at the Gas Division. The Fire and Safety Section is a small but efficient unit which offers a wide range of services to all Corporation sites, primarily to ensure maximum safety to employees at their place of work.

LIBRARY AND ARCHIVES SECTION The Enemalta Library and Archives Section was set up primarily to collect, index and catalogue the entire reference material under one roof. Apart from Corporation employees, this Section also offers research facilities to various local institutions, including the University. The last months saw a considerable increase in the number of students visiting the library particularly from the Technical Institute. Many students find the material available particularly useful when preparing their assignments and thesis, in part fulfilment of their studies. The Library and Archives Section today houses more than 25,000 books, standards, reports, contracts and journals. There are also a number of documents in CD format, DVDs and videos. A collection of thesis by various students and Enemalta employees is also available at these premises. A large collection of documents which was left at the Corradino Naval Power Station way back in the seventies was restored and added to the Melitensia Section. The library also holds a large collection of photographs, some of which date back to the late 19th century. Other photographs highlight important events in the history of energy in the Maltese Islands during the last sixty years. So far, more than 4,000 photographs were indexed and catalogued.

TRANSPORT SECTION During the year, Enemalta updated its transport fleet by purchasing sixty-five new vehicles. These vehicles are all equipped with modern engine technology and Enemalta mechanics were given specialised courses to improve their skills in the required maintenance and repairs. The Transport Section services all vehicles under its charge every three months, thus ensuring maximum safety. Preventive inspections are also carried out on all Tower Ladders which are mainly used by the Distribution Section. A new power-washer was installed, and its primary aim is to have cleaner vehicles on the road, thus boosting the Corporation’s image with the general public.

LEGAL OFFICE The Legal Office has, during 2009, hired another Professional Executive to reinforce its staff and assist in the many judicial proceedings in which the Corporation is currently involved. This Office also continued to provide Legal advice on all aspects of the Corporation’s activities ranging from issues of commercial, industrial, civil, and penal nature, as well as reviewing Directives issued by the European Union. The particularly significant tasks undertaken by this Office during 2009 included the drafting of Legal Notices amending the Electricity Supply Regulations, assistance on Legal issues arising during the adjudication process of various significant tenders, as well as the commercialisation process of the Corporation’s Petroleum and Gas Divisions.

ANNUAL REPORT 2009 and financial statements 2008

COMMERCIAL DIVISION

NEW DIVISION This is one of the newly established Divisions during 2009, in line with the new management structure of the Corporation. It has taken over the work previously carried out by three Departments, namely Procurement, Stores and Sales Sections. The Division is headed by a Chief Commercial Officer, also a newly created post.

PROCUREMENT The Procurement Section experienced a lot of changes during the past months. At the beginning of the year, the Open Plan Phase II project was inaugurated and the Section moved to the new premises. The Section processed several large tenders and various awards were made. These included the new generation plant at Delimara power station, the switchgear for the Tarxien Distribution Centre and the 132kV cable between Marsa Distribution Centre and Delimara Power Station. Other tenders were taken in hand and these included the Marine Survey between Malta and Sicily and the cable interconnection between Malta and the European grid. Two engineers joined the Department during 2009, bringing the number of engineers to four, all with their own specialisation. These engineers are involved in the preparation of tender specifications, adjudication of tenders, and in the certification of goods received. A centralised procurement procedure was implemented during the third quarter

of 2009. This was possible following the amalgamation of this Section with the Stores Section into one unit. The reorganisation of the Procurement Section was implemented towards the end of the year. The previous organisational structure was changed and this brought changes in the job descriptions of some employees as well as changes in the reporting lines. These changes are envisaged to be reflected in increased efficiency to render the Department better equipped to cope with the ever increasing work load, especially in the amount of EU tenders being published and processed.

managed. The stock lists for all stores have now been amalgamated in order to control better the movement of stocks and save from economies of scale. This intensive exercise served to ensure that stock data migrated to the new SAP Integrated Business System was clean data. Another priority was the reduction in the amount of the stock value, by identifying non-moving stock items and take appropriate action to scrap same. Particular attention was given to the A11 Stores which needed a major overhaul both in terms of the organisation of its various stock locations but also in the fine-tuning of its operations.

STORES SECTION

SALES

The new Stores Section was set up in June 2009. This took over the operations of the four major stores locations of the Corporation namely, the Generation Store at Marsa known as the A11 store, the Generation Store at Delimara, the General Stores at Marsa and the Corradino Stores. These Stores were previously managed as four different entities operating independently from each other. A new management structure within the Commercial Division was set up to manage these stores. A Stores co-ordinator was appointed following an internal call for applications. An external call for the post of Stores Manager was issued since the post could not be filled internally. The recruitment process was expected to be completed by the end of the year. One priority for this Department during the past months was to align the operations of the four store locations, so that these can be centrally

The Sales Section coordinates with the Distribution and Development Sections for the issue of quotations to clients for projects that include Distributions Centres, electricity substations and new services that due to their nature are not covered by the Corporation standard rates. This Section ensures that all clients are billed within the parameters of the Electricity Supply Regulations. During the past year, a total of 307 quotations were issued. The Section also handled 169 cases of damage to Corporation property by third parties.

FINANCE DIVISION

SUPPORTING THE OPERATIONS OF THE CORPORATION The Finance Division manages the Corporation’s accounting systems and credit control. It also manages the Corporation’s treasury functions and internal control systems. FINANCIAL REVIEW FOR THE PERIOD ENDED 31 DECEMBER 2008 In accordance with the provision of the Enemalta Act, the Corporation has changed its financial year end from 30 September to 31 December. The first reporting period affected by this decision relates to fifteen months from 1 October 2007 to 31 December 2008. The financial year starting 1 January 2009 shall revert to a twelve month period. The events experienced during the financial period ended 31 December 2008 have placed a significant strain on the Corporation’s financial resources. Tough but necessary measures were taken to bring to an end the undesirable impact of fuel price increases on the operations and finances of the Corporation that impacted the 2008 results through tariff revisions. The Corporation registered a loss after tax of €46,601,000 for the 15-month period ended 31 December 2008, compared to a loss of €16,529,000 reported in the previous 12-month period ended 30 September 2007. The shift in profitability of €30,072,000 is principally due to operational reasons, mainly

attributable to the increase in the cost of fuel. The price of fuel on the international market increased significantly from the previous reporting period. In 2008, Ice Brent average was $98, when compared to $78 in 2007. The Electricity division reported an operating loss of €20,209,000 a shift of €27,594,000 over the operating profit of €7,385,000 in the previous reporting period. Revenue increased by €117,147,000 in view of a higher fuel surcharge and the introduction of the new tariff structure. The cost of generation increased by €137,208,000 to €307,842,000. Transmission and distribution costs increased from €19,846,000 to €25,440,000 while administrative expenses increased from €12,484,000 to €16,502,000. Besides the impact of the change in the monthly reported periods being disclosed, and the increase in fuel costs, the other main contributor to these major shifts was payroll expenses. The Petroleum division was impacted by major fuel increases that were not reflected in the Petroleum product prices, thus resulting in an operating loss before impairment charges of €4,237,000. In 2008, the Corporation recognised an impairment on the Petroleum division’s property, plant and equipment of €7,719,000 which is mainly attributable to land and operational property. The related assets have been written down to their estimated recoverable amounts based on the management’s best estimate. The Gas division remained loss making, with an increased operating loss of €5,429,000

compared to a loss of €1,202,000 in 2007. This was the result of increased purchasing costs of liquefied petroleum gas and commissions to distributors. On 27 November 2008, a number of agreements were signed between the Corporation, Gasco Energy Limited and Liquigas Malta Limited for the commercialisation of the Gas Division. Under the terms of these agreements the Corporation sub-leased the land at Benghajsa to Gasco Energy Limited for a period of 33 years. During the period under review, the Corporation increased its properties by €8.3 million of which €6.8 million were transferred from the Government of Malta. A further €22.5 million in plant and equipment, largely in transmission and distribution equipment were invested by the Corporation. Operational losses, movements in working capital and capital assets have largely been financed by external borrowings. These increased from €322.2 million to €424.5 million.

ANNUAL REPORT 2009 and financial statements 2008

FINANCIAL HIGHLIGHTS FOR THE LAST 5 YEARS Year ended Year ended Year ended Year ended 30 September 30 September 30 September 30 September 2003/4 2004/5 2005/6 2006/7 € ’000 € ’000 € ’000 € ’000 Summary P&L Turnover (net of subventions) 306,925 326,965 456,275 451,740 Fuel costs (176,634) (241,386) (327,789) (310,149) Government subventions - 19,359 49,700 41,957 Excise duty (56,275) (58,747) (72,509) (83,713) Staff costs (34,465) (33,892) (33,664) (34,694) Other operating costs (58,933) (59,634) (63,727) (64,048) Other operating income 6,150 8,400 9,793 10,776 Operating profit / (loss) Finance costs Non-operating costs

(13,233) (12,763) -

(2,935) (12,269) -

18,078 (12,124) -

Period from 1 October 2007 to 31 December 2008 € ’000 690,654 (579,527) 76,815 (103,912) (,45,576) (88,269) 12,221

11,868 (14,274) (14,074)

(37,594) (21,753) -

Profit / (loss) before tax (25,996) (15,204) 5,954 (16,480) Year ended Year ended Year ended Year ended 30 September 30 September 30 September 30 September 2003/4 2004/5 2005/6 2006/7 € ’000 € ’000 € ’000 € ’000 Segmental results

(59,347)

Electricity Division Turnover 127,580 148,095 206,261 202,553 Operating profit / (loss) (29,737) (23,312) (2,225) 7,384 Petroleum Division Turnover (net of inter-divisional) 172,243 207,133 242,015 241,710 Operating profit / (loss) 19,716 20,023 18,344 5,686 Gas Division Turnover 7,102 7,738 7,999 7,469 Operating profit / (loss) (3,212) 354 (2,490 (1,202) Corporation Turnover 306,925 362,965 456,275 451,740 Operating profit / (loss) (13,233) (2,935) (18,078) 11,868

Period from 1 October 2007 to 31 December 2008 € ’000

319,700 (20,209)

360,016 (11,956)

10,938 (5,429)

690,654 (37,594)

Period from 1 October Year ended Year ended Year ended Year ended 2007 to 30 September 30 September 30 September 30 September 31 December 2003/4 2004/5 2005/6 2006/7 2008 € ’000 € ’000 € ’000 € ’000 € ’000 Capital Expenditure by Division Electricity 14,342 13,492 12,492 55,178 29,180 Petroleum 1,426 1,058 228 3,131 712 Gas 368 950 1,032 1,752 950 Corporation 16,136 15,500 13,522 60,061 30,842 Period from 1 October Year ended Year ended Year ended Year ended 2007 to 30 September 30 September 30 September 30 September 31 December 2003/4 2004/5 2005/6 2006/7 2008 € ’000 € ’000 € ’000 € ’000 € ’000 Cash-flow & Financing Operating profit Non-cash items Working capital changes

(13,233) 28,267 2,690

(2,935) 12,353 20,296

18,078 7,410 (40,769)

11,869 19,485 7,144

(37,594) 49,424 (67,770)

Cash-flow from operations Financial costs Investing activities

17,724 (11,433) (16,136)

29,713 (12,332) (14,125)

(15,281) (12,269) (13,445)

38,498 (14,274) (15,395)

(55,940) (21,815) (23,963)

Net cash-requirements

(9,844)

3,256

(40,995)

8,828

(101,718)

Funded by: Bank loans increases / (decreases) 4,184 56,797 46,145 (7,785) Cash and overdrafts increases / (decreases) 5,660 (60,054) (5,150) (1,044) 9,844 (3,256) 40,995 (8,828) Net borrowing at the end of year 265,022 279,022 327,133 322,164

33,965 67,753 101,718 424,507

ANNUAL REPORT 2009 and financial statements 2008

Due to the change in financial year end from 30 September to 31 December, the period ending 31 December 2008 covered 15 months. In order to be able to graphically compare the units sent to the grid by period, the data for the 15 months ending 31 December 2008 was annualised as per below by taking an average for 12 months.

ACTUAL QUOTATIONS

12 MONTHS

Period

Number of Months

KWhâ&#x20AC;&#x2122;000

2003/4

12 months

2,087,115

2004/5

12 months

2,132,140

2005/6

12 months

2,129,961

2006/7

12 months

2,133,457

2007/8

12 months

2,710,356

2,168,277

Units generated but not Billed Due to the change in financial year end from 30 September to 31 December, the period ending 31 December 2008 covered 15 months. In order to be able to graphically compare the units generated but not billed by period, the data for the 15 months ending 31 December 2008 was annualised as per below by taking an average for 12 months.

ACTUAL

12 MONTHS

Period

Number of Months

KWhâ&#x20AC;&#x2122;000

% of the total units sent out

KWhâ&#x20AC;&#x2122;000

2003/4

12 months

365,750

17.5

365,750

2004/5

12 months

337,791

15.8

337,791

2005/6

12 months

276,944

13.0

276,944

2006/7

12 months

279,486

13.1

279,486

2007/8

12 months

336,613

12.4

269,290

FINANCIAL STATEMENTS

ENEMALTA CORPORATION Annual Report and Financial Statements 31 December 2008

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Pages Directors’ report Statement of directors’ responsibilities

1-2 3

Independent auditor’s report

4-5

Statement of financial position

6-7

Income statement

Statement of changes in equity

Statement of cash flows

Notes to the financial statements

11 - 55

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Directors’ report The directors present their report and the audited financial statements for the period ended 31 December 2008. Principal activities The Corporation’s principal activities, which are unchanged since last year, are the generation, transmission and distribution of electricity and the distribution of petroleum and gas products in Malta. Change in financial year end In accordance with the provision of the Enemalta Act, the Corporation has changed its financial year end from 30 September to 31 December. The first reporting period affected by this decision relates to fifteen months from 1 October 2007 to 31 December 2008. The financial year starting 1 January 2009 shall revert to a twelve month period. Review of the business and results The income statement for the Corporation is set out on page 8. The events experienced during the financial period ended 31 December 2008 have placed a significant strain on the Corporation’s financial resources. Tough but necessary measures were taken to bring to an end the undesirable impact of fuel price increases on the operations and finances of the Corporation that impacted the 2008 results through tariff revisions. The Corporation registered a loss after tax of €46,601,000 for the 15-month period ended 31 December 2008, compared to a loss of €16,529,000 reported in the previous 12-month period ended 30 September 2007. The shift in profitability of €30,072,000 is principally due to operational reasons, mainly attributable to the increase in the cost of fuel. The price of fuel on the international market increased significantly from the previous reporting period. In 2008, Ice Brent average was $98 as compared to $78 for 2007. The Electricity division reported an operating loss of €20,209,000 a shift of €27,594,000 over the operating profit of €7,385,000 in the previous reporting period. Revenue increased by €117,147,000 in view of a higher fuel surcharge and the introduction of the new tariff structure. The cost of generation increased by €137,208,000 to €307,842,000. Transmission and distribution costs increased from €19,846,000 to €25,440,000 while administrative expenses increased from €12,484,000 to €16,502,000. Besides the impact of the change in the monthly reported periods being disclosed, and the increase in fuel costs, the other main contributor to these major shifts was payroll expenses. The Petroleum division was impacted by major fuel increases, that were not reflected in the Petroleum product prices, thus resulting in an operating loss before impairment charges of €4,237,000. In 2008, the Corporation recognised an impairment on the Petroleum division’s property, plant and equipment of €7,719,000 which is mainly attributable to land and operational property. The related assets have been written down to their estimated recoverable amounts based on management’s best estimate. The Gas division remained loss making, with an increased operating loss of €5,429,000 compared to a loss of €1,202,000 in 2007. This was the result of increased purchasing costs of liquefied petroleum gas and commissions to distributors. On 27 November 2008, a number of agreements were signed between the Corporation, Gasco Energy Limited and Liquigas Malta Limited for the commercialisation of the Gas Division. Under the terms of these agreements the Corporation sub-leased the land at Benghajsa to Gasco Energy Limited for a period of 33 years.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Directors’ report - continued Review of the business and results - continued During the period under review, the Corporation increased its properties by €8.3 million of which €6.8 million were transferred from the Government of Malta. A further €22.5 million in plant and equipment, largely in transmission and distribution equipment were invested by the Corporation. Operational losses, movements in working capital and capital assets have largely been financed by external borrowings. These increased from €322.2 million to €424.5 million. Directors The directors of the Corporation who held office during the period were: Ing. A. J. Tranter (Chairman) Mr. E. Gatt Baldacchino (Deputy Chairman) Mr. J. Cutajar Mr. A. Abela - terminated on 21 April 2008 Mr. A. Debono (Worker Director) - terminated on 13 November 2007 Mrs. M. Attard - terminated on 21 April 2008 Mr. S. Vella - terminated on 21 April 2008 Mr. J. Portelli - terminated on 21 April 2008 As a result of the directors’ terminations noted above, the following directors were appointed on 22 April 2008 in their stead: Mr. W. Spiteri Bailey Mr. F. Xerri de Caro Mrs. V. Galea Pace Dr. A. Fenech - resigned on 29 May 2008 Ing. S. Pule On 22 July 2008, the following directors were appointed: Ms. S. Vella Mr. P. Buttigieg On 31 May 2010 Ing. A.J. Tranter ended his tenure as Chairman. On 1 June 2010 Mr. E. Gatt Baldacchino was appointed as Acting Chairman in his stead.

On behalf of the board

Mr. E. Gatt Baldacchino Acting Chairman

Mr. W. Spiteri Bailey Director

Central Administration Building Church Wharf Marsa Malta 7 July 2010 2

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Statement of directors’ responsibilities The directors are required by the Enemalta Act to prepare financial statements which give a true and fair view of the state of affairs of the Corporation as at the end of each reporting period and of the profit or loss for that period. Although the Enemalta Act does not specify the accounting framework to be used by the Corporation in the preparation of its financial statements, the directors have drawn up these financial statements in accordance with International Financial Reporting Standards as adopted by the EU, as prescribed by the Maltese Companies Act, 1995 and in accordance with the Malta Resources Authority Act. In preparing the financial statements, the directors are responsible for:    

ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU; selecting and applying appropriate accounting policies; making accounting estimates that are reasonable in the circumstances; ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Corporation will continue in business as a going concern.

The directors are also responsible for designing, implementing and maintaining internal control relevant to the preparation and the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Enemalta Act. They are also responsible for safeguarding the assets of the Corporation and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Independent auditor’s report in accordance with section 22(2) of the Enemalta Act To the Stakeholders of Enemalta Corporation Report on the Financial Statements We have audited the accompanying financial statements of Enemalta Corporation on pages 6 to 55 which comprise the statement of financial position as at 31 December 2008 and the income statement, statement of changes in equity and statement of cash flows for the period then ended and a summary of significant accounting policies and other explanatory notes. Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and with the requirements of the Enemalta Act. As described in the statement of directors’ responsibilities on page 3, this responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit in accordance with section 22(2) of the Enemalta Act. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements  

give a true and fair view of the financial position of the Corporation as at 31 December 2008, and of its financial performance and its cash flows for the period then ended in accordance with IFRS as adopted by the EU; and have been properly prepared in accordance with the requirements of the Enemalta Act.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Independent auditor’s report in accordance with section 22(2) of the Enemalta Act - continued Emphasis of matter Without qualifying our opinion we draw attention to Note 28 to the financial statements which explains how, in the opinion of the directors, the requirements of IAS 24, “Related Party Disclosures”, have been addressed within the parameters available in the Corporation’s billing system. Report on Other Legal and Regulatory Requirements We also have responsibilities to report to you if, in our opinion:     

The information given in the directors’ report is not consistent with the financial statements. Adequate accounting records have not been kept, or that returns adequate for our audit have not been received from branches not visited by us. The financial statements are not in agreement with the accounting records and returns. We have not received all the information and explanations we require for our audit. Certain disclosures of directors’ remuneration specified by law are not made in the financial statements, giving the required particulars in our report.

We have nothing to report to you in respect of these responsibilities.

167 Merchants Street Valletta Malta

Simon Flynn Partner 7 July 2010

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Statement of financial position As at 31 December

As at 30 September

2008 €’000

2007 €’000

388,430 17,234 -

408,616 7,247 808

405,664

416,671

99,555 191,278 11,402 14,788

78,465 134,530 3,055 47 14,163

Total current assets

317,023

230,260

Total assets

722,687

646,931

Notes

ASSETS Non-current assets Property, plant and equipment Investment property Derivative financial instruments

4 5 6

Total non-current assets Current assets Inventories Trade and other receivables Derivative financial instruments Current tax asset Cash and cash equivalents

7 8 6 9

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Statement of financial position - continued

Notes

As at 31 December

As at 30 September

2008 €’000

2007 €’000

GOVERNMENT FUNDS AND LIABILITIES Government interest and reserves Government interest Permanent capital contribution Revenue reserve

10 10

Hedging reserve

134,782 64,086 (71,178)

134,782 45,875 (6,366)

127,690 (58,953)

174,291 (1,419)

68,737

172,872

651 2,985 292,191 13,021 4,493

12,700 3,149 262,947 13,021 -

313,341

291,817

146,702 132,316 61,591

117,524 59,217 5,501

Total current liabilities

340,609

182,242

Total liabilities

653,950

474,059

Total Government funds and liabilities

722,687

646,931

Non-current liabilities Deferred taxation Other provisions Bank borrowings Other borrowings Derivative financial instruments

12 13 14 15 6

Total non-current liabilities Current liabilities Trade and other payables Bank borrowings Derivative financial instruments

16 14 6

The notes on pages 11 to 55 are an integral part of these financial statements. The financial statements on pages 6 to 55 were authorised for issue by the Board of Directors on 7 July 2010 and were signed on its behalf by:

Mr. E. Gatt Baldacchino Acting Chairman

Mr. W. Spiteri Bailey Director

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Income statement Period from 1 October 2007 to 31 December

Year ended 30 September

2008 €’000

2007 €’000

Notes

Revenue Cost of sales

17 18

696,769 (664,308)

456,632 (399,727)

Gross profit Transmission and distribution costs Administrative expenses Other operating income

18 18 20

32,461 (44,717) (37,559) 12,221

56,905 (34,046) (21,766) 10,776

Operating (loss)/profit Non operating losses Finance costs – net

21 22

(37,594) (21,753)

11,869 (14,074) (14,275)

Loss before tax Tax credit/(expense)

(59,347) 12,746

(16,480) (49)

(46,601)

(16,529)

Loss for the period/year The notes on pages 11 to 55 are an integral part of these financial statements.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Statement of changes in equity

Government Notes interest €’000

Permanent capital contribution €’000

Revenue reserve €’000

134,782

45,875

10,163

1,994

Net income not recognised in the revenue reserve

1,994

Loss for the year

(16,529)

Total recognised expense

(16,529)

1,994

(14,535)

134,782

45,875

(6,366)

(1,419)

172,872

(57,534)

Net expense not recognised in the revenue reserve

(57,534)

Loss for the period

(46,601)

18,211

(18,211)

Total recognised expense

18,211

(64,812)

(57,534)

(104,135)

Balance at 31 December 2008

134,782

64,086

(71,178)

(58,953)

68,737

Balance at 1 October 2006

Cash flow hedges net of deferred deferred tax

Balance at 30 September 2007

Cash flow hedges net of deferred tax

Transfer to Permanent capital contribution in relation to 2007

Hedging reserve €’000

(3,413)

Total €’000

187,407

(46,601)

The notes on pages 11 to 55 are an integral part of these financial statements.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Statement of cash flows Period from 1 October 2007 to 31 December

Year ended 30 September

2008 €’000

2007 €’000

Notes

Cash flows from operating activities Cash (used in)/generated from operations Interest received Interest paid Tax paid

25 22 22

(55,940) 1,957 (23,710) (62)

38,498 296 (14,571) -

(77,755)

24,223

(23,963)

(15,395)

(23,963)

(15,395)

145,000 (111,035)

(7,785)

33,965

(7,785)

Net movement in cash and cash equivalents

(67,753)

1,043

Cash and cash equivalents at beginning of period/year

(34,018)

(35,061)

(101,771)

(34,018)

Net cash (used in)/generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment

Net cash used in investing activities Cash flows from financing activities Proceeds from bank loans Repayments of bank loans

14 14

Net cash generated from/(used in) financing activities

Cash and cash equivalents at end of period/year

The notes on pages 11 to 55 are an integral part of these financial statements.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Notes to the financial statements 1.

Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. 1.1 Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and with the requirements of the Enemalta Act. The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. It also requires directors to exercise their judgment in the process of applying the Corporation’s accounting policies (see Note 3 – Critical accounting estimates and judgments). At 31 December 2008 the Corporation had net current liabilities of €23.5 million. The board has taken cognisance of the losses and of the negative cash flows of the Corporation in the past years, including those incurred after the financial period being reported upon (i.e. in the year ended 31 December 2009). This negative performance has substantially eroded the Corporation’s revenue reserve. In assessing the Corporation’s ability to operate as a going concern, the directors have taken into consideration the expected net future operating cash flows of the Corporation, its commitments related to the repayment of current borrowings and planned future capital investments in electricity generation and supply. The timing of the latter is conditioned by onerous emissions commitments that Malta has with the EU. The Corporation continues with its efforts to reduce costs and pursue its strategy to generate revenues that meet its operational expenditure. In this respect, it announced various tariff revisions, most recently as from 1 January 2010, aimed at providing a revenue structure that will absorb its running expenditure. The Corporation is confident that the financial challenges that it faces will be counteracted by the increase in revenue emanating from the new electricity tariffs. This is evidenced in the 2010 financial estimates and by its actual performance observed up to March 2010 which shows a reversal of the negative trends seen in 2008 and 2009. The impact of the commercialisation of the Corporation’s non strategic divisions should also positively improve its cash flows. Letter of support from Government of Malta In addition, the Corporation has obtained a letter of support from the Government of Malta, whereby the Government has committed that should the steps taken by the Corporation to meet its present and forecast financial commitments not prove to be sufficient, it will support it in meeting any resultant shortfall such that the Corporation will at all times be in a position to meet its liabilities as and when they fall due. Assessment of going concern After considering the above, and having made an appropriate assessment of going concern, the directors, at the time of approving these financial statements, have determined that there is reasonable expectation that the Corporation has adequate resources to continue operating for the foreseeable future. For this reason, these accounts have been prepared on a going concern basis which assumes that the Corporation will continue in operational existence for the foreseeable future and will meet its financial obligations as and when they fall due. 11

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.1 Basis of preparation - continued Standards, interpretations and amendments to published standards effective in 2008 During the current reporting period, the Corporation adopted new standards, amendments and interpretations to existing standards that are mandatory for the Corporation’s accounting period beginning on 1 October 2007. The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the Corporation’s accounting policies. Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are mandatory for the Corporation’s accounting periods beginning after 1 October 2007. The Corporation has not early adopted these revisions to the requirements of IFRSs as adopted by the EU and the Corporation’s directors are of the opinion that there are no requirements that will have a significant impact on the Corporation’s financial statements in the period of initial application. IAS 1 (revised), Presentation of financial statements, and IFRS 7 ‘Financial instruments Disclosures’ (amendment), are both effective for periods beginning on or after 1 January 2009, but do not have any impact on the classification and measurement of the Corporation’s elements of the financial statements. IAS 1 (revised) requires ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income, while IFRS 7 (amendment) requires enhanced disclosures about fair value measurement. In 2009, the International Accounting Standards Board (“IASB”) published a revised IAS 24, Related Party Disclosures. Government-related entities are now defined as entities that are controlled, jointly controlled or significantly influenced by Government. The amendment introduces an exemption from all of the disclosure requirements of IAS 24 for transactions between Governmentrelated entities and Government, and all other Government-related entities. Those disclosures are replaced with a requirement to disclose: (a) the name of the Government and the nature of its relationship; and (b) (i) the nature and amount of any individually-significant transactions with Government and other Government-related entities; and (ii) the extent of any collectively-significant transactions qualitatively or quantitatively. The new disclosures are intended to provide more meaningful information about the nature of an entity’s relationship with Government and material transactions. 1.2 Foreign currency translation (a) Functional and presentation currency Items included in these financial statements are measured using the currency of the primary economic environment in which the Corporation operates (‘the functional currency’). The euro is the Corporation’s functional and presentation currency. Following Malta’s adoption of the euro as its national currency on 1 January 2008, the Corporation’s functional currency was changed from Maltese lira to euro. The effects of the change in functional currency have been accounted for prospectively and all items have been translated into the new functional currency using the exchange rate at the date of the change.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.2 Foreign currency translation - continued In view of the redenomination of Government interest from Maltese lira to euro, the Corporationâ&#x20AC;&#x2122;s presentation currency also changed to euro. Accordingly, the results and financial position relating to the comparative reporting period were translated and presented in these financial statements at the Irrevocably Fixed Conversion Rate of â&#x201A;Ź1:Lm0.429300 as at 1 January 2008. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement except where deferred in equity as qualifying cash flow hedges. The Corporation enters into foreign exchange forward contracts in order to manage its exposure to fluctuations in foreign currency rates on specific transactions. Further information is disclosed in Note 1.6. All foreign exchange gains and losses are presented in the income statement within cost of sales. 1.3 Property, plant and equipment The Corporation operates a number of owned assets and other assets, whose legal title has not been passed to it as at year-end. The non-owned operating assets are being utilised by the Corporation at no cost, and are not recognised in the financial statements. Owned property, plant and equipment comprising land, buildings and improvements, power stations, electricity transmission and distribution equipment, gas bottling and distribution equipment, and plant, equipment, furniture and fittings are stated at historical cost less depreciation and impairment charges. The cost of self-constructed capital assets undertaken by the Corporation includes direct materials and direct labour costs and an appropriate proportion of overheads. Historical cost includes expenditure that is directly attributable to the acquisition of items. Subsequent costs are included in the assetâ&#x20AC;&#x2122;s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation, and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred. Major modifications and improvements to non-current assets are capitalised and depreciated over their estimated useful economic lives. The cost of properties held on long-term leases are amortised over the period of the respective leases and included within depreciation charge for the period. Freehold land is not depreciated.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.3 Property, plant and equipment - continued Depreciation is calculated on the straight-line method to write off the cost of the assets to their residual values over their estimated useful lives as follows: % Land, buildings and improvements Power stations Electricity transmission and distribution equipment Gas bottling and distribution equipment Plant, equipment, furniture and fittings

1–4 2 – 10 2 – 10 10 4 – 25

A charge equivalent to half a year’s depreciation is provided for during the period in which an asset is first brought into use, and half a year’s depreciation is charged during the period in which an asset is disposed of or scrapped. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting period. Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with the carrying amount, and are recognised within ‘other operating income-expense’ in the income statement. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount (Note 1.5). 1.4 Investment property Investment property principally comprises property held for long term rental yields or capital appreciation and is not occupied by the Corporation. Investment property is treated as a long-term investment and is initially carried at cost. The Corporation adopts the cost model under IAS 40 – Investment property, whereby investment property is stated in the statement of financial position at cost less accumulated depreciation and impairment charges. Repairs and maintenance expenses, if any, are recognised as an expense. Subsequent expenditure that increases the value of property is capitalised if it extends the useful life. Depreciation is calculated on the straight-line method to write off the cost of the assets to their residual value over their estimated useful live of 50 years. The cost of properties held on long-term leases are amortised over the period of the respective leases and included within depreciation charge for the period. Freehold land is not depreciated. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount (Note 1.5). Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and stated at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property at the carrying amount.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.4 Investment property - continued If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its carrying amount at the date of reclassification becomes its cost for accounting purposes or subsequent recording. If an item of property, plant and equipment becomes an investment property because its use has changed, the carrying amount at the date of reclassification becomes its cost for accounting purposes or subsequent reporting. The fair value of these properties is disclosed in the financial statements and is based on active market prices and professional valuations, taking into consideration the nature, location or condition of the specific asset. The fair value of investment property reflects, among other factors, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. These valuations are reviewed annually by the directors. 1.5 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâ&#x20AC;&#x2122;s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâ&#x20AC;&#x2122;s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. 1.6 Derivative financial instruments Derivative financial instruments, including forward foreign exchange contracts, interest rate swap agreements, commodity swaps, and commodity options (combined written and purchased options together with other options) and other derivative financial instruments, are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Corporation designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges). The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the reporting period date. Fair values of commodity options and commodity swaps are mainly based on dealer quotes obtained at the reporting date from the Corporationâ&#x20AC;&#x2122;s counterparties. The fair value of interest rate swaps is mainly based on the present value of the estimated future cash flows. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The full fair value of hedging derivatives is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.6 Derivative financial instruments - continued On the date a derivative contract is entered into, the Corporation designates certain derivatives as a hedge of a future cash flow attributable to a recognised asset or liability or a forecast transaction (cash flow hedge). Hedge accounting is used for derivatives designated in this way provided certain criteria are met. In accordance with the requirements of IAS 39, the criteria for a derivative instrument to be accounted for as a cash flow hedge include: 

formal documentation of the hedging instrument, hedged item, hedging objective, strategy and relationship is prepared before hedge accounting is applied;



the hedge is documented showing that it is expected to be highly effective in offsetting the risk in the hedged item throughout the reporting period; and



the hedge is effective on an ongoing basis.

Accordingly, the Corporation documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Corporation also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. (a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (b) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (c) Derivatives that do not qualify for hedge accounting Certain derivative transactions, while providing effective economic hedges under the Corporation’s risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39 and are therefore treated as derivatives held for trading. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognised immediately in the income statement.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.6 Derivative financial instruments - continued The fair value of derivative instruments used for hedging purposes are disclosed in Note 6. Movements on the hedging reserve in equity are shown in Note 11. 1.7 Other financial assets 1.7.1 Classification The Corporation’s other financial assets, which have not been referred to in Note 1.6, are classified as loans and receivables originated by the Corporation in accordance with the requirements of IAS 39 and are measured at cost, that is, the face value of these assets. All regular way transactions in assets classified in this category are accounted for using purchase date accounting. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Corporation provides money, goods or services directly to a debtor with no intention of trading the asset. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Corporation’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position (Note 1.9 and 1.10). A credit risk provision for financial asset impairment is established if there is objective evidence that the Corporation will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of the expected cash flows, including amounts recoverable from collateral, discounted based on the interest rate at inception. The Corporation’s financial liabilities, other than those referred to in the notes above are classified as liabilities which are not held for trading (“other liabilities”) under IAS 39, and are measured at cost, that is, the face value of such instruments. 1.7.2 Recognition and measurement The Corporation recognises a financial instrument in its statement of financial position when it becomes a party to the contractual provisions of the instrument. Loans and receivables are initially recognised at fair value plus transaction costs. All regular way transactions in assets classified in the loans and receivables category are accounted for using settlement date accounting, i.e. on the date an asset is delivered to or by the entity. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Amortised cost is the initial measurement amount adjusted for the amortisation of any difference between the initial and maturity amounts using the effective interest method. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Corporation has transferred substantially all risks and rewards of ownership or has not retained control of the financial asset. The Corporation assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. Impairment testing of trade and other receivables is described in Note 1.9.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.8 Inventories Inventories are stated at the lower of cost and net realisable value and include transport and handling costs. Cost is determined by the weighted average method. Included in other inventory is work in progress, which comprises design costs, raw materials, direct labour and other direct costs and excludes related overheads. This inventory represents trenching and cable works outstanding as at period-end. Where the outcome of cable and trench work contracts can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting period. This is normally measured as the proportion of cost incurred on work performed to date compared to the estimated total contract cost, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. When it becomes probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately in the income statement. 1.9 Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Corporation will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the receivable, probability that the receivable will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within ‘administrative expenses’. When a receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against ‘administrative expenses’ in the income statement. 1.10 Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within bank borrowings in current liabilities in the statement of financial position. 1.11 Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 1.12 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.12 Borrowings - continued Borrowings are classified as current liabilities unless the Corporation has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 1.13 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 1.14 Current and deferred tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Under this method the Corporation is required to make a provision for deferred income taxes on the deprecation on property, plant and equipment, revaluations of derivative contracts and provisions on the difference between the carrying values for financial reporting purposes and their tax base. Deferred tax on unutilised tax credit arising from unabsorbed capital allowances are recognised to the extent that they net-off temporary differences arising from property, plant and equipment. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available such that realisation of the related tax benefit is probable. 1.15 Revenue recognition The Corporationâ&#x20AC;&#x2122;s revenue represents the invoiced value of electricity, petroleum and gas products and related services provided to the local market. Revenue is shown net of value-added tax, returns, rebates and discounts. All Corporation sales are based on separate tariff structures for electricity, petroleum and gas products established by the Corporation after obtaining approval from the Malta Resources Authority. As from 2005, the Corporation in conjunction with the Government of Malta introduced a fuel surcharge on the electricity tariff structure. This surcharge is included in electricity sales. As from 1 October 2008 the Corporation, in conjunction with the Government of Malta announced new electricity tariffs replacing the tariffs and surcharge mechanism, which was in place till 30 September 2008. The Corporation recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Corporationâ&#x20AC;&#x2122;s activities as described below: 19

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.15 Revenue recognition - continued (a) Sales of electricity Revenue from electricity sales includes monies received from the local electricity market, comprising the estimated value of electricity units supplied to customers not yet billed at the period-end. (b) Sale of petroleum and gas products Sale of petroleum and gas products are recognised when the Corporation has delivered products to the customer and wholesaler, the customer has accepted the products and collectibility of the related trade and other receivables is reasonably assured. (c) Other operating income Other operating income mainly consists of electricity-related services and installations as well as revenue from petroleum storage facilities provided by the Corporation. This income is recognised when the service is supplied or installation is energised. Sales of products are recognised when goods are delivered and title has passed along with the risks and rewards of ownership. Interest income is recognised as it accrues, unless collectability is in doubt. 1.16 Government grants Grants that compensate the Corporation for expenses incurred are recognised in the income statement on a systematic basis in the same reporting periods in which the expenses are incurred. This compensation is disclosed in the same reporting line as the related expense. Government grants are recognised in the statement of financial position initially as deferred income when there is reasonable assurance that they will be received and that the Corporation will comply with the conditions attaching to them. Grants that compensate the Corporation for the cost of an asset are recognised in the income statement on a systematic basis over the useful life of the asset to match the depreciation charge. Capital grants are recorded as deferred income and released to the income statement over the estimated life of the related assets. 1.17 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Assets leased out under operating leases are included in investment property in the statement of financial position. 1.18 Government funds Investments made in the Corporation by the Government of Malta are treated as part of equity for accounting purposes.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Summary of significant accounting policies - continued 1.18 Government funds - continued Government interest represents the value of assets vested by the Government of Malta in the Corporation over the years since its incorporation. The original investment relates to the value of assets originally vested in the Malta Electricity Board by the Government of Malta under the Electricity Act of 1963 which have been subsequently transferred to the Corporation in 1977 upon the enactment of the Enemalta Act. Permanent capital contribution originally represented the value of financial investments made by the Government of Malta in the Corporation over the years since its incorporation. In accordance with Section 18(2) of the Enemalta Act, the distribution of the Revenue reserve is subject to such direction as the Minister responsible for the Corporation, after consultation with the Minister of Finance, may from time to time give. 1.19 Provisions Provisions are recognised when the Corporation has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The Corporation recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. 1.20 Borrowing costs Borrowing costs incurred on major fixed asset projects prior to their commissioning are capitalised as part of the cost of the asset. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is based on the average rate of interest on borrowings. All other borrowing costs are recognised in the income statement under ‘finance costs’ as incurred. 1.21 Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

Financial risk management 2.1 Financial risk factors As the national energy utility provider, the Corporation’s activities potentially expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Corporation’s overall risk management, focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Corporation’s financial performance. The Corporation’s board of directors provides principles for overall risk management, as well as policies covering risks referred to above (and specific areas such as investment of excess liquidity).

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued The general hedging guidelines regarding currency, interest rate and fuel price risks are set by the Fuel Procurement Advisory Committee. The Corporation’s Risk Management Committee together with the Finance Department are responsible for the implementation of the hedging policies. In order to manage exposures to risks arising from fluctuations in currency exchange rates and fluctuations in prices on the crude oil and fuel products markets, the Corporation makes use of derivative financial instruments. These instruments mainly comprise foreign currency forward contracts together with fuel hedging instruments. The respective derivative transactions are concluded only with first rate counterparties. (a) Market risk (i) Foreign exchange risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities which are denominated in a currency that is not the respective entity’s functional currency. The Corporation is exposed to foreign exchange arising from various currency exposures, primarily with respect to the US dollar and UK sterling. With respect to the US dollar, the Corporation is in a net payer position from its operating business particularly in view of a significant portion of purchases of fuel denominated in this currency. The expected future cash flows in individual major currencies usually over the coming twelve months are budgeted and analysed, and the Corporation hedges the respective net currency exposure in major currencies, within certain pre-established parameters, by entering into forward foreign exchange contracts. These contracts represent commitments to purchase foreign currency amounts covering the net exposure at a pre-established exchange rate. In accordance with the requirements of IAS 39, the Corporation designates forecast transactions amounting to the net exposure in individual currencies as hedged items. These forecast transactions, qualifying as highly probable, would typically include the Corporation’s purchases of fuel, petroleum and gas products. These expenses are routinely denominated in US dollar. The Corporation is also exposed to an insignificant amount denominated in UK sterling and accordingly management does not consider this exposure to be material. As at 31 December 2008, the Corporation forecasts net payments denominated in US dollar which are equivalent to the notional amounts of outstanding derivatives and are principally reflected as financial liabilities of the Corporation. These exposures were hedged as at the end of the reporting period, in accordance with the policy parameters referred to previously, through the use of derivative contracts having a notional amount of €108,087,000 (2007: €113,546,000). In view of the offsetting of the Corporation’s hedge items and the derivative contracts disclosure of sensitivity analysis attributable to a reasonable shift in exchange rates was not deemed necessary as at 31 December 2008. (ii) Cash flow and fair value interest rate risk The Corporation’s significant instruments which are subject to fixed interest rates comprise bank borrowings (Note 14). In this respect, the Corporation is potentially exposed to fair value interest rate risk in view of the fixed interest nature of these instruments, which are however measured at amortised cost. The Corporation’s interest rate risk principally arises from bank borrowings issued at variable rates (Note 14). The Corporation’s borrowings mainly consist of facilities subject to variable interest rates which are principally based on reference rates. Management monitors the impact of changes in market interest rates on amounts reported in profit or loss in respect of these instruments. 22

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued (ii) Cash flow and fair value interest rate risk - continued Significant exposure to cash flow interest rate risk arises in respect of interest payments relating to syndicated borrowings amounting to €210.0 million that are subject to interest at floating rates linked to EURIBOR. The Corporation entered into an interest-rate swap agreement which provided a cash flow hedging relationship in respect of variability of future floating interest payments. Accordingly, this hedging instrument has been designated as a cash flow hedge of the interest rate risk, i.e. volatility in floating interest amounts. Up to the reporting date, the Corporation did not have any hedging arrangements with respect to the exposure of interest rate risk on other interest-bearing liabilities. Based on the analysis above, management does not consider the potential impact on profit or loss of a defined interest rate shift that is reasonably possible at the end of the reporting period to be significant taken cognisance of the derivative instrument referred to and the resultant extent of unhedged exposures. Accordingly the level of interest rate risk is quite contained. The Corporation’s operating cash flows are substantially independent of changes in market interest rates. (iii) Price risk During the financial period ended 31 December 2008, fuel expenses amounted to €512.0 million (2007: €269.0 million) as disclosed in Note 18 to the financial statements and accounted for approximately 69% (2007: 59%) of the total operating expenses of the Corporation. Fluctuations in crude oil, fuel and other fuel product prices may have a significant effect on the Corporation’s results. Different hedging instruments with regard to the crude oil and fuel products markets are used to limit the fuel price risk. These instruments mainly comprise combined purchased call and written put options, together with other combined options. As at 31 December 2008, the notional amounts of the hedging derivatives outstanding amounted to approximately USD403.0 million (2007: USD122.0 million) in view of the prevailing market and trading conditions (refer to Note 6). Commodity options are contractual arrangements under which the writer (seller) grants the purchaser the right, but not the obligation, either to notionally buy (a call option) or sell (a put option) the notional quantity of a commodity at a predetermined price (strike price) during a set period of time. Such contracts are typically settled on a net basis by comparing the strike price to the reference market price applicable during the set period. Combined purchased call and written put options represent the combination of a purchase of a call option by the Corporation and the simultaneous sale of a put option to the same derivative counterparty. These combination options substantially amount to a collar arrangement with a floor and a cap (fluctuation band) whereby settlements are effected by either party, usually on a monthly basis, if and only if, the reference market price for the particular month during the set period does not fall within the band. Disclosure of sensitivity analysis for price risk attributable to a reasonable shift in the price of fuel products as at the end of the reporting period, reflecting how the results for the period and equity would have been affected by applying the change in the relevant risk variable to the risk exposures in existence at that date, was not deemed necessary in view of the nature and terms of the outstanding fuel derivative hedging instruments as at 31 December 2008 (Note 6). A reasonable shift in the price of fuel products would not have had a material impact on the fair valuation of the derivative contracts as at the end of the reporting period in view of the prevailing market prices at 31 December 2008 and the level of contracted fluctuation bands on strike prices, which were significantly higher than such prevailing market prices. Disclosure of sensitivity analysis for the preceding reporting period was not deemed necessary in view of the low notional amounts of the outstanding fuel derivative hedging instruments as at 30 September 2007. 23

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued (b) Credit risk Credit risk principally arises from cash and cash equivalents and credit exposures to customers, including outstanding receivables and committed transactions. The Corporation’s exposures to credit risk as at the end of the reporting periods are analysed as follows:

Loans and receivables category: Trade and other receivables (Note 8) Cash and cash equivalents (Note 9)

Financial instruments held for hedging: Derivative financial instruments (Note 6)

2008 €’000

2007 €’000

191,278 14,788

134,530 14,163

206,066

148,693

11,402

3,863

217,468

152,556

The maximum exposure to credit risk at the reporting date in respect of the financial assets mentioned above is equivalent to their carrying amount as disclosed in the respective notes to the financial statements. The Corporation has no significant past due or impaired financial assets with the exception of the amounts disclosed in respect of trade and other receivables. The Corporation does not have any significant renegotiated financial asset which would otherwise be past due or impaired and holds no collateral in respect of exposures relating to trade and other receivables. Trade and other receivables The Corporation’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Corporation considers that it is not exposed to major concentrations of credit risk in the event of non-performance of a single customer. The Corporation manages credit limits and exposures actively in a practicable manner such that past due amounts receivable from customers are within controlled parameters. However, the Corporation’s policy is generally to provide for any receivable balance that is outstanding for over one year. Actions taken to mitigate the risk of default typically include formally notifying the clients through set policies and the suspension of electricity supply in certain cases. The credit quality of the Corporation’s trade and other receivables which are not impaired or past due financial assets, reflects the nature of these assets which are principally debts in respect of transactions with customers for whom there is no recent history of default. Management does not expect any losses from non-performance by these customers. At 31 December 2008 and 30 September 2007, no significant trade or other receivables that would otherwise be past due or impaired have been renegotiated.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued The Corporation’s receivables include significant amounts due from related parties that are owned or controlled by the Government of Malta. The Corporation’s credit control function monitors related party exposures at individual entity level on a regular basis and ensures timely performance of these assets in the context of overall Corporation liquidity management. The Corporation assesses the credit quality of these related parties taking into account financial position, performance and other factors and management does not expect any losses from non-performance or default. As at 31 December 2008, trade receivables amounting to €70,472,000 (2007: €44,772,000) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. Categorisation of receivables as past due is determined by the Corporation on the basis of the nature of the credit terms in place and credit arrangements actually utilised in managing exposures with customers. The ageing analysis of past due but not impaired trade receivables is as follows:

Within one year Between one and five years

As at 31 December 2008 €’000

As at 30 September 2007 €’000

70,472 -

42,151 2,621

70,472

44,772

As at 31 December 2008, the Corporation had trade receivables amounting to €26,592,000 (2007: €24,300,000) which were impaired and the amount of the provisions in this respect are equivalent to these amounts. The individually impaired receivables mainly relate to a number of independent customers which are in unexpectedly difficult economic situations and which are accordingly not meeting repayment obligations. The movement in provisions for impairment of trade receivables is analysed as follows: As at 31 December 2008 €’000

As at 30 September 2007 €’000

At beginning of period/year Increase in impairment provisions

24,300 2,292

23,159 1,141

At end of period/year

26,592

24,300

The movements in these provisions are disclosed in Note 8 and are included in ‘administrative expenses’ in the Corporation’s income statement.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued Cash and cash equivalents The Corporation principally banks with local and foreign financial institutions which have high quality credit standing or rating. Derivative financial instruments Credit risk arising from derivative financial instruments lies in the insolvency of the contracting party and as a consequence, in the amount of the sum, on balance, of positive market values vis-à-vis the respective derivative counterparties. Foreign exchange derivative transactions are concluded with first rate local banking institutions only, while fuel derivative contracts are entered into with foreign financial institutions which have high quality credit standing or rating. The Corporation’s main foreign derivative counterparties as at the end of the reporting periods have an external high credit rating as determined by major rating agencies. (c) Liquidity risk The Corporation is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which comprise principally borrowings (Note 14) and trade and other payables (Note 16). Prudent liquidity risk management includes maintaining sufficient cash and committed credit lines to ensure the availability of an adequate amount of funding to meet the Corporation’s obligations. Management monitors liquidity risk by reviewing expected cash flows, and ensures that liquid resources and facilities that are expected to be required over the coming year are in place. Based on the results of the Corporation’s budgeting process, management prepares a liquidity plan covering the subsequent twelve month period that reflects the anticipated liquidity position over the period and ensures that pre-established net liquidity levels are met at all times during the period under review. This process is performed and monitored by the Corporation’s treasury function and the plan is reviewed on an ongoing basis. The overall liquidity requirements of the Corporation involve maintaining available net liquidity equivalent to a number of weeks’ cash outflows from operations depending on seasonality and expected volatility. The risk is actively managed by taking cognisance of the matching of operational cash inflows and outflows including those arising from expected maturities of financial instruments, the collection of receivables, the Corporation’s committed bank borrowing facilities and other financing that it can access as referred to previously. The Corporation will meet the contractual cash outflows arising from financial liabilities disclosed below, extending beyond the subsequent twelve month period, through operating cash flows and other financing cash inflows. The table below presents the cash flows payable by the Corporation under non-derivative financial liabilities by remaining contractual maturities at the end of the reporting period. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within twelve months equal their carrying balances, as the impact of discounting is not significant.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued

At 31 December 2008 Bank borrowings Trade and other payables

At 30 September 2007 Bank borrowings Trade and other payables

Within one year €’000

1-2 years €’000

2-5 years €’000

Over 5 years €’000

Total €’000

142,565 146,702

23,111 -

73,330 -

252,591 -

491,597 146,702

289,267

23,111

73,330

252,591

638,299

72,335 117,524

22,106 -

58,238 -

260,040 -

412,719 117,524

189,859

22,106

58,238

260,040

530,243

The table below analyses the Corporation’s principal derivative financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at 31 December 2008 and 30 September 2007 to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. 3-6 months €’000

6 - 12 months €’000

Over 12 months €’000

At 31 December 2008 Fuel derivatives

(22,645)

(45,579)

(69,693)

At 30 September 2007 Fuel derivatives

(23,006)

Total €’000

(137,917)

(23,006)

The Corporation’s derivatives that will be settled on a gross basis consist principally of forward foreign exchange contracts (Note 6). The table below analyses the Corporation’s derivative financial liabilities that will be settled on a gross basis into relevant maturity groupings based on the remaining period at 31 December 2008 and 30 September 2007 to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Within 3 months €’000 At 31 December 2008: Foreign exchange derivatives - Outflows - Inflows

3-6 months €’000

6 - 12 months €’000

Total €’000

(11,516) 10,808

(7,724) 7,219

(15,366) 14,465

(34,606) 32,492

(708)

(505)

(901)

(2,114)

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.1 Financial risk factors - continued

At 30 September 2007 Foreign exchange derivatives: - Outflows - Inflows

Within 3 months €’000

3-6 months €’000

6 - 12 months €’000

(58,402) 56,365

(21,961) 20,972

(32,466) 31,430

(112,829) 108,767

(2,037)

(989)

(1,036)

(4,062)

Total €’000

2.2 Capital risk management The Corporation’s objectives when managing capital are to safeguard the Corporation’s ability to continue as a going concern in order to provide returns to the Government of Malta and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Corporation may seek further funding. The Corporation monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (as shown in the statement of financial position) less cash and cash equivalents, less Government guaranteed loans. Total capital is calculated as equity as shown in the statement of financial position plus net debt. The Corporation’s gearing ratio as at 31 December 2008 and 30 September 2007 was as follows: 2008 €’000

2007 €’000

437,528 (14,788) (326,647)

335,185 (14,163) (218,735)

Net debt

96,093

102,287

Total equity

68,737

172,872

Total capital

164,830

275,159

58%

37%

Total borrowings Less: cash and cash equivalents Less: Government guaranteed loans

Gearing

The directors, together with the Government of Malta, are constantly reviewing the adequacy of the capital level in the context of the changing business and operational international environment and expected operating results of the Corporation on the basis of management’s budgets and forecasts. Furthermore, the present electricity tariff structure (as per January 2010) review mechanism (which incorporates an ROCE of 8.4%) allows the Corporation to invest in the necessary capital expenditure programme without risking its financial capital base. The monitoring process takes cognisance of the Corporation’s intentions to continue with the ongoing reforms (refer to Note 1.1) that are required to ensure that the operational results and cash flows are such that the capital base is safeguarded and restored to more adequate levels and availability of liquidity resources managed in the manner outlined. 28

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Financial risk management - continued 2.3 Fair values of financial instruments At 31 December 2008 and 30 September 2007 the carrying amounts of cash and cash equivalents, receivables, payables, accrued expenses and borrowings reflected in the financial statements are reasonable estimates of fair value in view of the nature of these instruments or the relatively short period of time between the origination of the instruments and their expected realisation. The fair value of derivative financial instruments is determined in accordance with the Corporationâ&#x20AC;&#x2122;s accounting policy. Fair values are determined using forward exchange market rates at the end of the reporting period for forward foreign exchange contracts and using dealer quotes from counterparties or valuation techniques, including discounted cash flow models, for other derivative contracts (see Note 6). The valuation techniques used are supported by observable market prices or rates since their variables include only data from observable markets.

Critical accounting estimates and judgements The Corporation is required to make certain estimates, judgements and assumptions, concerning future events, based upon information available at the reporting period. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, the Corporation evaluates its estimates using historical experience, consultation with experts and other methods that are believed to be reasonable under the circumstances. Given their nature, these estimates may however differ significantly from actual results. The directors draw attention to revenue recognition in relation to electricity revenue and receivables noted below. Other items where estimates and assumptions utilised have a certain degree of risk of causing material adjustments to the carrying amounts within the next reporting period principally comprise the valuation of property, plant and equipment, the impairment of land and operational property related to the Petroleum division (Note 4), fair valuation of derivative financial instruments (Note 6). Revenue recognition Electricity revenue and accounts receivable Every utility provider expects to suffer technical losses i.e. losses of electricity units generated that cannot be sold for reasons intrinsic to power distribution. However, the amount of losses that the Corporation continues to experience remain at a level which cannot be attributed solely to technical losses according to industry norms. Some are certainly attributable to theft but unfortunately this value cannot be quantified with accuracy. Persistent attempts to curb theft have been undertaken over the years and continue to this very day. The Corporation shares a billing and debt management system with a third party service provider. The system in place lacks the capability to provide sufficiently detailed and timely management information. These limitations hinder the Corporation's management in exercising full control over revenue accounting. This state of affairs is further exacerbated with the implementation of changes in tariffs. While alternative controls are exercised by the Corporation wherever practicable, such as direct monitoring and billing of certain major consumers, the scope for such alternative measures is limited in relation to the large number of smaller customers.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Critical accounting estimates and judgements - continued Similarly, data limitations within the system tend to lead to delays in exercising effective debt control. They may also have an impact on the accurate determination and investigation of technical losses noted above. Alternative controls are exercised by the Corporation in both these areas. Management considers that, except where unforeseen customer failures occur, adequate provisions for debt impairment are maintained. At 31 December 2008, the Corporation was in the process of implementing new IT systems (Note 29) that will provide the necessary billing and debtor management tools. In the interim the Corporation has implemented a number of measures that have resulted in short-term improvements and will continue to do so until implementation of the new IT system. While recognising the nature of the limitations referred to above, the Corporationâ&#x20AC;&#x2122;s directors consider that these have no material impact on the amounts at which revenue and receivables are stated in the financial statements, including the segmental analysis (Note 17).

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Property, plant and equipment

Land, buildings & improvements €’000 At 1 October 2006 Cost Accumulated depreciation and impairment charges

142,213 (8,328)

Gas Electricity bottling & transmission Power & distribution distribution stations equipment equipment €’000 €’000 €’000

Plant, equipment, furniture & fittings €’000

Total €’000

35,732

774,654

369,888

210,636

16,185

(217,806)

(110,019)

(13,543)

(26,042) (375,738)

Net book amount

133,885

152,082

100,617

2,642

9,690

398,916

Year ended 30September September2007 2005 30 Opening net book amount Additions Depreciation charge Other movements Impairment charge

133,885 38,484 (2,311) (14,074)

152,082 (15,309) (498) -

100,617 12,609 (9,350) -

2,642 673 (461) -

9,690 1,307 (1,370) -

398,916 53,073 (28,801) (498) (14,074)

Closing net book amount

155,984

136,275

103,876

2,854

9,627

408,616

180,697

369,390

223,245

16,858

37,039

827,229

(24,713)

(233,115)

(119,369)

(14,004)

155,984

136,275

103,876

2,854

9,627

408,616

155,984 8,341 (2,635)

136,275 289 (18,979)

103,876 17,484 (12,246)

2,854 881 (1,542) (548)

9,627 3,847 (1,613)

408,616 30,842 (1,542) (36,021)

At 30 September 2007 Cost Accumulated depreciation and impairment charges Net book amount Period ended 31 December 2008 Opening net book amount Additions Disposals Depreciation charge Depreciation released on disposal Other movements Transfer to investment property (Note 5) Impairment charge Closing net book amount At 31 December 2008 Cost Accumulated depreciation and impairment charges Net book amount

(27,412) (418,613)

2,712

1,542 -

1,542 2,712

(10,000) (7,719)

143,971

120,297

109,114

3,187

11,861

388,430

163,415

372,391

240,729

16,197

40,886

833,618

(19,444)

(252,094)

(131,615)

(13,010)

143,971

120,297

109,114

3,187

(10,000) (7,719)

(29,025) (445,188) 11,861

388,430

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Property, plant and equipment - continued During 2008, the Government of Malta transferred to the Corporation immovable properties for a total contract value of €6,878,000 to be utilised for purposes determined by the Corporation within its operations. These properties have been classified under land and buildings. The directors confirm that adequate assessment of the values of the transferred properties has been made and are of the opinion that the carrying amount of land and buildings as at 31 December 2008 does not differ materially from that which would be determined using fair values. Together with the carrying amounts of property, plant and equipment noted in the tables above, the Corporation makes use of certain assets at no cost, and for which legal title has not been passed to the Corporation, as at period end. These assets include the land on which the power station at Delimara is built. Property, plant and equipment includes land and property held by title of temporary leasehold since 2004 but which the Corporation had been occupying since its incorporation. These include petroleum storage facilities at Has-Saptan and Kordin. The cost of these assets at the contract date, determined by the Corporation on the basis of their estimated fair value for commercial use, amounted to €93,600,000. In determining the fair value of these assets and other operational property related to the Petroleum division as at the period end, the Corporation has taken cognisance of its current plans for the future commercialisation of the division's activities and the information presently available in respect of the ongoing Petroleum division commercialisation negotiation process (Note 29). The property's recoverable amount at 31 December 2008 amounted to €90,700,000 and represented its value in use based on the discounted estimated net cash flows (applying an appropriate discount rate based on the Corporation’s cost of capital) to be received by the Corporation from the commercialisation of the Petroleum division. This resulted in an impairment charge of €7,719,000 (Note 18) which has been recognised in the income statement for the financial period ended 31 December 2008, under administrative expenses. In 2004, the Government of Malta also transferred land at Benghajsa to the Corporation which in turn earmarked this property as the site for the relocation of the existing gas bottling plant. This site was included in the commercialisation of the Gas Division which was concluded in the latter part of 2008. The property transfer had initially been recognised in the Corporation’s financial statements at its contract value, with a corresponding increase in Government interest in line with the terms of the transfer. On 27 November 2008, a number of agreements were signed by the Corporation, Gasco Energy Limited and Liquigas Malta Limited for the commercialisation of the Gas Division. Under the terms of these agreements the Corporation will sub-lease the land at Benghajsa to Gasco Energy Limited for a period of 33 years after which the land title and the plant will revert to the Corporation. The concession of the distribution business was transferred for a consideration of €4.4 million in addition to the future rental income streams. These agreements have been based on the adjudication offer chosen in April 2007. The terms and related contract values triggered an impairment review of the carrying amount of this land. The land's recoverable value at 30 September 2007 amounted to €10,168,000 and represented its value in use based on the discounted estimated net cash flows (applying an appropriate discount rate based on the Corporation’s cost of capital) to be received by the Corporation from the commercialisation of the Gas division. This resulted in an impairment charge of €14,074,000 (Note 21) which has been recognised in the income statement for the financial year ended 30 September 2007, under non operating losses. As at 31 December 2008, the Corporation transferred land at Benghajsa with a carrying value of €10.0 million to investment property due to a change in intended use as a result of the commercialisation of the Gas division, referred to above.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Property, plant and equipment - continued The existing Petroleum division operational site at Birzebbuga will become available for disposal as operations are relocated to other sites belonging to the Corporation in the foreseeable future. The Corporation is assessing the potential decommissioning and rehabilitation costs through technical assessments which have not yet been finalised (refer to Note 27). Based on information available to date, the directors are of the opinion that the related potential financial impact would not be material. In accordance with the agreements signed with Gasco Energy Limited on 27 November 2008, the Corporation will operate the Qajjenza plant until site closure. Any related decommissioning costs will, contractually, not be borne by the Corporation. As disclosed in Note 27 on contingent liabilities, following Malta’s accession to the European Union, a number of European Union Directives came into effect that will impact the Corporation. Compliance with these directives had both an operational and financial impact on the Corporation. Such compliance may possibly result in the impairment of items of existing plant and equipment but this impact is not expected to be material (Note 29). These Directives particularly impact the operation of the Marsa Power Station since use of some assets at this plant are limited to 20,000 hours as from 1 January 2008 or the year 2015 whichever is the earlier. Since the Corporation believes that the 20,000 hours will be used prior to the year 2015 the net book value of such assets has been depreciated on a time-of-use basis as from the financial year ended 30 September 2006. As explained in more detail in Note 27, the Corporation has not provided for costs related to the dismantling of tangible assets and environmental reinstatement of land or of the seabed at the end of the electricity production activities.

Investment property As at 31 December 2008 €’000

As at 30 September 2007 €’000

Opening net book amount Additions Transfer from property, plant and equipment (Note 4) Depreciation charge

7,247 10,000 (13)

268 6,988 (9)

Closing net book amount

17,234

7,247

2008 €’000

2007 €’000

Cost Accumulated depreciation

17,265 (31)

7,265 (18)

Net book amount

17,234

7,247

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Investment property - continued Investment property owned by the Corporation at the start of the preceding reporting period, consists of the San Lucian petroleum facility, located in Birzebbuga, that has been transferred from property, plant and equipment during 2005. The facilities are operated by third parties under the terms of a rental agreement expiring in 2013. Income arising from the rental of this property amounts to €79,000 (2007: €77,000). The directors have assessed the fair value of this investment and determined that the value is significantly higher than the carrying amount. However, the directors have opted not to disclose the value of this investment in view of the commercialisation process of the petroleum business. On 10 July 2007 the Government of Malta transferred immovable property to the Corporation for a contract value of €6,988,000 which is not expected to the utilised by the Corporation in its current operations. The directors confirm that adequate assessment of the values of the transferred property has been made. As at 31 December 2008, the Corporation transferred land at Benghajsa with a carrying value of €10.0 million due to a change in intended use of the same land as a result of the commercialisation of the Gas division. In the directors’ opinion the carrying amount of property as at 31 December 2008 does not differ materially from that which would be determined using fair values.

Derivative financial instruments The fair values of derivative financial instruments held for hedging at the end of the reporting period are as follows:

At 31 December 2008 Interest rate derivative - interest-rate swap

Fair values Assets Liabilities €’000 €’000

(445)

Foreign exchange derivatives - currency forwards

8,007

(2,113)

Fuel price hedging derivatives - combined written put and bought put options - combined bought call and written put options - combined bought call, written call and written put options

3,395 -

(51,840) (11,686)

11,402

(66,084)

Total recognised derivative assets/(liabilities) At 30 September 2007 Interest rate derivative - interest-rate swap Foreign exchange derivatives - currency forwards

808

(4,066)

Fuel price hedging derivatives - combined bought call and written put options - other options

3,040 -

(1,435)

Total recognised derivative assets/(liabilities)

3,863

(5,501) 34

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Derivative financial instruments - continued The above are included in the statement of financial position under the following classifications:

Derivatives financial assets Non-current Current

Derivatives financial liabilities Non-current Current

2008 €’000

2007 €’000

11,402

808 3,055

11,402

3,863

(4,493) (61,591)

(5,501)

(66,084)

(5,501)

(a) Interest rate derivatives In 2005, the Corporation restructured its combined currency and interest rate swap. The currency swap was early settled by exchanging the notionals at the pre-established rate and the pay-fixed receive-floating interest rate swap was modified such that the floating leg is now based on EURIBOR. Accordingly, the variable interest amounts are determined by reference to the Euro notional amount based on the applicable EURIBOR rate rather than the six-month USD LIBOR. The interest rate applicable on the fixed leg of the interest rate swap is 3.725% on the principal adjusted to 4.225% if LIBOR is 4% on the day of calculation. The contract involved quarterly settlements subsequent to the end of the reporting period and matured on 22 July 2009. Gains and losses recognised in the hedging reserve in equity (Note 11) on the interest rate swap contract as of 31 December 2008 will be released to the income statement over the period until maturity of the contract. The revised terms of the interest swap provide a continuation of the cash flow hedging relationship in respect of variability of future floating interest payments. Accordingly, this instrument has been treated as a cash flow hedge instrument in terms of the hedge accounting rules as prescribed by IAS 39. The notional amounts of the outstanding interest rate swap contract as at 31 December 2008 was €136.4 million (2007: €136.4 million). (b) Foreign exchange derivatives The currency forward contracts outstanding as at 31 December 2008 have a notional value of USD153.0 million (2007: USD144.3 million) with an average contracted rate of €1:USD1.4566 (2007: €1:USD1.3763). As at 30 September 2007, other currency forward contracts outstanding had a notional value of €20.0 million with an average contracted rate of Lm1: €2.3283. The related fair value of outstanding forward contracts as at period end amounted to a net asset of €5.9 million (2007: net liability of €4.0 million). These contracts mature within a period of two to six months from the end of the reporting period and within the same period of time the forecast transactions designated as items being hedged by these contracts are expected to affect the income statement.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Derivative financial instruments - continued (c) Fuel price hedging derivative The terms and approximate notional amounts of the combined fuel price options held for hedging purposes outstanding at 31 December 2008 are as follows: Combined written put and bought put options: Contract cover

Notional amount

Period to 30 June 2009

USD24,960,000

Fair value Assets €’000

Strike price range Put Put $105

$130

3,395

Strike price range Call Put

Fair value Liabilities €’000

Combined bought call and written put options:

Contract cover

Notional amount

Period to 30 June 2009 USD85,440,000 Period to 31 December 2009 USD121,536,000 Period to 31 December 2010 USD48,000,000

$140 - $165 $93 - $140 $125

$105 - $130 $80 - $115 $75

(17,891) (29,457) (4,492) (51,840)

Combined bought call, written call and written put options: Contract cover

Notional amount

Period to 31 December 2009 USD122,688,000

Strike price range Call Call $120

$140

Put $82

Fair value Liabilities €’000 (11,686)

The terms and approximate notional amounts of the combined bought call and written put fuel price options held for hedging purposes outstanding at 30 September 2007 are as follows: Strike price range Call Put

Fair value Assets €’000

$60 - $62 - $72 - $80

3,040

Notional amount

Strike price

Fair value Liabilities €’000

USD19,440,000

$72

(1,435)

Contract cover

Notional amount

Period to 31 March 2008

USD102,720,000

Contract cover

Period to 31 March 2008

These fuel hedging derivative contracts would typically have monthly exercise or settlement dates and upon monthly net cash settlements, amounts recognised in equity in respect of these contracts would be released to the income statement as the forecast hedged transactions would simultaneously affect the results of the Corporation. 36

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Inventories

Petroleum products Liquefied petroleum gas products Consumable spare parts Work-in-progress Other consumables

2008 €’000

2007 €’000

73,082 748 20,887 3,189 1,649

50,978 881 21,647 3,471 1,488

99,555

78,465

2008 €’000

2007 €’000

160,724 26,847 3,707

99,464 31,288 3,778

191,278

134,530

Trade and other receivables

Current Trade and related receivables Other receivables and Government contribution Prepayments

Trade and related receivables are stated net of provisions for impairment as follows:

Trade and related receivables Other receivables

2008 €’000

2007 €’000

26,592 2,716

24,300 2,716

29,308

27,016

Government contributions classified under other receivables include a net amount of €11.3 million (2007: €21.7 million) due by the Government of Malta in respect of compensation payable to the Corporation in fulfilment of Government social obligations (Note 18). Trade and related receivables include an amount of €132.0 million (2007: €56.0 million) relating to accrued income in respect of electricity units supplied to customers not yet billed at the period end. It is estimated that €72.0 million of this amount relates to accrued income not billed due to the postponement of bills issued as a result of the introduction of the new tariff system that commenced as from 1 October 2008.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

Cash and cash equivalents For the purposes of the statement of cash flows, the period/year end cash and cash equivalents comprise the following: 2008 €’000 Cash at bank and in hand Bank overdrafts (Note 14)

10.

2007 €’000

14,788 (116,559)

14,163 (48,181)

(101,771)

(34,018)

Government interest and permanent capital contribution Government interest represents the value of assets vested by the Government of Malta in the Corporation over the years and amounts to €134,782,000 (2007: €134,782,000) plus a Permanent capital contribution of €64,086,000 (2007: €45,875,000). Government interest of €10,161,000 (2007: €10,161,000) and Permanent capital contribution of €1,223,000 (2007: €1,223,000) bear interest at 7.2% (2007: 7.2%) per annum (Note 22). For the financial period ended 31 December 2008, the Minister responsible for the Enemalta Corporation, at the date of approval of these accounts, approved the transfer of €18,211,000 from the Revenue reserve to the Permanent capital contribution reserve. This transfer was made in respect of 2007 transactions and shall not be subject to interest.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

11.

Hedging reserve The changes in fair values of hedging instruments qualifying as cash flow hedges are recorded in a separate category of equity in the hedging reserve as shown below:

Currency forwards €’000 At 1 October 2006 Gross amounts of gains/(losses) Deferred income taxes

Movement - 30 September 2007 (Losses)/gains from changes in fair value Deferred income taxes (Note 12)

Transferred to income statement Deferred income taxes (Note 12)

At 30 September 2007 Gross amounts of (losses)/gains Deferred income taxes

Movement - 31 December 2008 Gains/(losses) from changes in fair value Deferred income taxes (Note 12)

Transferred to inventories Transferred to income statement

At 31 December 2008 Gross amounts of gains/(losses)

Interest rate swap €’000

Commodity derivatives €’000

Total €’000

457 (161)

(1,556) 545

(4,149) 1,451

(5,248) 1,835

296

(1,011)

(2,698)

(3,413)

(4,852) 1,698

1,782 (624)

172 (61)

(2,898) 1,013

(3,154)

1,158

111

(1,885)

990 (347)

582 (205)

4,396 (1,537)

5,968 (2,089)

643

377

2,859

3,879

(3,405) 1,190

808 (284)

419 (147)

(2,178) 759

(2,215)

524

272

(1,419)

9,945 (1,190)

269 284

(59,040) 147

(48,826) (759)

8,755

553

(58,893)

(49,585)

(3,362) -

(1,522)

(3,065)

(3,362) (4,587)

(3,362)

(1,522)

(3,065)

(7,949)

3,178

(445)

(61,686)

(58,953)

3,178

(445)

(61,686)

(58,953)

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

11.

Hedging reserve - continued The net fair value losses recognised in equity at 31 December 2008 on the interest-rate swap contract will be transferred from the hedging reserve to the income statement during the remaining term of the contract up to July 2009. As at the reporting period date, this contract is designated as hedging anticipated variable interest payments which will also accrue over the term of the derivative contract. The net fair value gains at 31 December 2008 on open forward foreign exchange contracts which hedge anticipated future foreign currency transactions will be transferred from the hedging reserve to inventory when the forecast transactions occur, up to six months from the reporting period date. The net fair value losses at 31 December 2008 on open commodity derivative contracts which hedge anticipated fuel transactions will be transferred from the hedging reserve to the income statement when the forecast transactions occur, up to twenty four months from the reporting period date.

12.

Deferred taxation The movement on deferred taxation is as follows: 2008 €’000 At beginning of period/year Credit to the income statement (Note 23) Tax effect of re-measurement of derivatives (Note 11) At end of period/year

12,700 (12,808) 759 651

2007 €’000 11,624 1,076 12,700

Deferred taxation is calculated on all temporary differences under the liability method using the tax rate of 35% (2007: 35%). Deferred income tax assets and liabilities are offset when the taxes concerned relate to the same fiscal authority. The following amounts are offset in the statement of financial position: 2008 €’000 Deferred tax assets Deferred tax liabilities Net reporting date amount

(41,944) 42,595 651

2007 €’000 (29,895) 42,595 12,700

The directors are confident that the deferred taxation recognised in the financial statements will be realised in the foreseeable future through trading operations conducted by the Corporation. Deferred taxation is principally composed of deferred tax assets and liabilities which are to be recovered and settled after more than twelve months.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

12.

Deferred taxation - continued Deferred tax assets and liabilities, and the deferred tax debited to equity are attributable to the following items:

Liabilities/(assets)

At 1 October 2006

Property, plant and, equipment €’000 42,595

Debited to equity At 30 September 2007

42,595

Debited to equity Credited to income statement At 31 December 2008

42,595

Unabsorbed capital Derivatives Provisions allowances instruments €’000 €’000 €’000 (4,886) (4,886) (4,886)

(24,250) -

Total €’000

(1,835)

11,624

1,076

(24,250)

(759)

12,700

(12,808)

759 -

759 (12,808)

(37,058)

651

At 31 December 2008, the Corporation had unrecognised and recognised deferred tax assets amounting to €30,011,000 (2007: €4,372,000) and €651,000 (2007: €12,700,000) respectively, consisting of unutilised tax credits and temporary differences arising from: Unrecognised 2007 2008 €’000 €’000 Unutilised tax credits arising from: Unabsorbed capital allowances Deductible temporary differences arising on: Tax losses Provisions Re-measurement of derivative instruments Taxable temporary differences arising on: property, plant and equipment

Recognised 2007 2008 €’000 €’000

4,258

105,880

69,285

13,607 17,461 58,953

15,167 -

13,960 -

13,960 2,172

(4,274)

(6,932)

(121,700)

85,747

12,493

(1,860)

(36,283)

Deferred tax assets are recognised for unabsorbed capital allowances and tax losses carried forward, provisions and re-measurement of derivative instruments to the extent that realisation of the related tax benefit through future taxable profits is probable. 13.

Other provisions 2008 €’000

2007 €’000

At beginning of period/year Credit to the income statement

3,149 (164)

3,279 (130)

At end of period/year

2,985

3,149

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

14.

Bank borrowings 2008 €’000

2007 €’000

Non-current Bank loans

292,191

262,947

Current Bank overdrafts Bank loans

116,559 15,757

48,181 11,036

Current bank borrowings

132,316

59,217

Total bank borrowings

424,507

322,164

The Corporation’s banking facilities as at 31 December 2008 amounted to €437,972,000 (2007: €332,720,000). Bank borrowings to the extent of €326,647,000 (2007: €218,735,000) are guaranteed by the Government of Malta. The remaining borrowings are made available on an unsecured basis. The carrying amounts of the Corporation’s bank borrowings are denominated in the following currencies: 2008 €’000

2007 €’000

Maltese Lira Euro

424,507

18,947 303,217

Total bank borrowings

424,507

322,164

The interest rate exposure of the bank borrowings of the Corporation was as follows:

Total bank borrowings: At fixed rates At floating rates

2008 €’000

2007 €’000

45,000 379,507

8,735 313,429

424,507

322,164

The weighted average effective interest rates at the end of the reporting period are as follows:

Bank overdrafts Bank loans

2008

2007

3.78% 3.41%

4.4% 4.4%

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

15.

Other borrowings

Non-current Government loans

2008 €’000

2007 €’000

13,021

Other borrowings relate to funds advanced by the Government of Malta to the Corporation. These loans are unsecured, interest free and the Corporation has the discretion to avoid payment within twelve months from the reporting period.

16.

Trade and other payables

Current Trade payables Deposits and guarantees Other payables Indirect taxation Accruals and deferred income

2008 €’000

2007 €’000

109,753 13,193 975 398 22,383

77,396 7,787 1,437 7,396 23,508

146,702

117,524

Deposits on open work orders in respect of cables and trench works relating to the national electricity distribution network amounted to €6,854,000 (2007: €6,385,000). As at 31 December 2008 deposits include an amount of €4,516,000 related to the commercialisation of the Gas division (Note 4).

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

17.

Segmental information The primary segments are as reported for management purposes and reflect the day to day management of the Corporation’s business. The Corporation’s primary operations consist of the generation, transmission and distribution of electricity and the distribution of petroleum and gas products. These operations are carried out in Malta and therefore segmental reporting is only shown on the basis of business segments. Electricity €’000

Petroleum €’000

Gas €’000

Corporation €’000

Period ended 31 December 2008 Revenue Less: inter-segmental sales

Segment results Financial costs

319,700 -

715,394 (355,378)

17,053 -

1,052,147 (355,378)

319,700

360,016

17,053

696,769

(20,209) -

(11,956) -

(5,429) -

(37,594) (21,753)

Loss before tax Tax credit

(59,347) 12,746

Loss for the financial period

(46,601)

Segment assets Elimination of divisional balances Total assets Segment liabilities Elimination of divisional balances

1,610,452 (1,070,280) 540,172 1,368,975 (1,309,486) 59,489

443,706 (279,881)

18,690 -

163,825

18,690

103,540 (16,840)

27,333 (23,835)

86,700

3,498

2,072,848 (1,350,161) 722,687 1,499,848 (1,350,161)

Unallocated liabilities

149,687 504,263

Total liabilities

653,950

Capital expenditure Depreciation - property, plant and equipment Depreciation - investment property Impairment of property, plant and equipment Increase in provision for impairment of trade and other receivables

29,180

712

950

30,842

32,360 -

2,735 13

926 -

36,021 13

7,719

1,456

836

2,292

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

17.

Segmental information - continued Electricity €’000

Petroleum €’000

Gas €’000

Corporation €’000

Year ended 30 September 2007 Revenue Less: inter-segmental sales

Segment results Financial costs Impairment of property, plant & equipment

202,553 -

410,974 (169,264)

12,369 -

625,896 (169,264)

202,553

241,710

12,369

456,632

7,385 -

5,686 -

(1,202) (14,074)

11,869 (14,275) (14,074)

Loss before tax Tax expense

(16,480) (49)

Loss for the financial year

(16,529)

Segment assets Elimination of divisional balances

1,144,053 (675,166)

442,652 (280,366)

15,758 -

1,602,463 (955,532)

468,887

162,286

15,758

646,931

969,159 (927,407)

88,992 (13,795)

17,740 (14,330)

1,075,891 (955,532)

41,752

75,197

3,410

Unallocated liabilities

120,359 353,700

Total liabilities

474,059

Total assets Segment liabilities Elimination of divisional balances

55,178

3,131

1,752

60,061

25,720 -

2,161 9

920 -

28,801 9

14,074

1,141

1,164

(23)

Gas division revenue during 2008 includes a contribution by the Government of Malta, amounting to €6.1 million (2007: €4.9 million) to compensate the Corporation for applying non-cost reflective prices during the reporting period. Inter-segmental sales mainly represent the sale of petroleum products to other business segments. These inter-segmental transfers are made at cost. Capital expenditure comprises additions to property, plant and equipment and investment property. Segment liabilities comprise trade and other payables and provisions and exclude taxation, borrowings and derivative financial instruments.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008 18.

Expenses by nature

Employee benefit expense (Note 19) Depreciation of property, plant and equipment (Note 4) Impairment of property, plant and equipment (Note 4) Depreciation of investment property (Note 5) Net purchases of petroleum and gas products include: - opening inventory of petroleum and gas products - purchases of petroleum products - compensation for fuel costs (see note below) - closing inventory of petroleum and gas products Fair value (gains)/losses on derivative instruments: - commodity agreements: cash flow hedge (transfer from equity) Maintenance expenses Duty on products sold Movement in provision for impairment of trade and other receivables (Note 8) Bad debts written off Other expenses Total cost of sales, transmission and distribution costs and administrative expenses

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

45,576 36,021 7,719 13

34,694 28,801 9

51,859 604,563 (70,700) (73,830)

48,218 309,394 (37,065) (51,859)

(3,065) 8,493 103,912

4,396 9,853 83,713

2,292 365 33,366

1,141 77 24,167

746,584

455,539

In 2008, the Government of Malta, in fulfilment of its social obligations, compensated the Corporation for fuel cost increases that were not reflected in the electricity tariffs applied during the period for an amount of €70.7 million (2007: €37.1 million). This assistance was classified against the respective expense category and included in net purchases disclosed above. Auditor’s fees Fees charged by the auditor for services rendered during the reporting period ended 31 December 2008 and year ended 30 September 2007 relate to the following:

Annual statutory audit Tax advisory and other related services Other non-audit services

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

105 3 213

105 2 109

321

216

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008 19.

Employee benefit expense Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

42,603 2,973

32,306 2,388

45,576

34,694

Wages and salaries Social security costs

Salaries amounting to €131,000 (2007: €108,000) incurred in relation to works carried out for street lighting maintenance are included above. In addition, during the period the Corporation capitalised staff costs amounting to €2,330,000 (2007: €1,651,000) within property, plant and equipment. Average number of persons employed during the period/year:

Electricity Petroleum Gas Administration

20.

2008

2007

1,172 153 32 263

1,132 149 37 364

1,620

1,682

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

8,546 2,022 1,653

7,642 2,726 408

12,221

10,776

Other operating income

Services and installations Storage fees Other

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

21.

Non operating losses Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

14,074

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

(20,983)

(13,160)

(1,019) (1,708)

(815) (14)

(23,710)

(13,989)

435

296

1,522

(582)

(21,753)

(14,275)

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

Current tax expense Deferred tax credit (Note 12)

62 (12,808)

49 -

Tax (credit)/expense

(12,746)

Impairment of property, plant and equipment (Note 4)

22.

Finance costs - net

Bank loans and overdrafts Government interest and permanent Government contribution Finance and other charges

Interest income Net fair value losses on derivative instruments: - interest-rate swap: cash flow hedge, transfer from equity

23.

Tax (credit)/expense

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

23.

Tax (credit)/expense - continued The tax on the Corporation’s loss before tax differs from the theoretical amount that would arise using the basic tax rate as follows:

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

Loss before tax

(59,347)

(16,480)

Tax on loss at 35%

(20,772)

(5,768)

5,007 2,702 (83) 400

773 4,927 (65) 182

(12,746)

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

Tax effect of: Movement in unrecognised deferred tax Impairment charge on property, plant and equipment Income taxed at different rates Other Tax (credit)/expense

24.

Directors’ emoluments

Salaries and other emoluments

The Corporation has paid insurance premia of €13,000 (2007: €13,000) in respect of professional indemnity insurance in favour of the Corporation’s directors.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

25.

Cash (used in)/generated from operations Reconciliation of operating (loss)/profit to cash (used in)/generated from operations

Period from 1 October 2007 to 31 December 2008 €’000 Operating (loss)/profit Adjustments for: Depreciation on property, plant and equipment (Note 4) Impairment of property, plant and equipment (Note 4) Depreciation on investment property (Note 5) Net movement in contribution by Government of Malta Movement in provision for impairment of trade and other receivables (Note 8) Release of deferred income (Note 13)

Year ended 30 September 2007 €’000

(37,594)

11,869

36,021 7,719 13 3,543

28,801 9 (10,336)

2,292 (164)

1,141 (130)

Change in working capital: Inventories Trade and other receivables Trade and other payables

(23,802) (69,462) 25,494

(4,200) 685 10,659

Cash (used in)/generated from operations

(55,940)

38,498

Non-cash transactions The major non-cash transactions in 2008 related to the net movement in contributions by the Government of Malta amounting to €3.5 million (2007: €10.3 million), in respect of the fulfilment of Government social obligations (Note 18) and the transfer of property in 2008 from the Government of Malta totalling €6.9 million (2007: €44.5 million) classified under property, plant and equipment and investment property (Notes 4 and 5).

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

26.

Commitments Capital commitments At the period end, the Corporation had the following capital commitments in respect of property, plant and equipment:

Authorised but not contracted Contracted but not yet incurred

2008 €’000

2007 €’000

30,322 46,824

69,821 11,230

77,146

81,051

Operating maintenance agreement The future minimum payments payable under the Corporation’s material non-cancellable operating maintenance agreement is as follows:

Not later than 1 year Later than 1 year and not later than 5 years

27.

2008 €’000

2007 €’000

2,844 2,901

2,758 6,406

5,745

9,164

2008 €’000

2007 €’000

8,011

64,456

Contingencies a) Letters of credit

Letters of credit

At 31 December 2008, letters of credit were issued by the Corporation’s bankers in favour of various third parties in respect of the supply of petroleum products and capital expenditure. b) Legal and other claims At 31 December 2008, the Corporation had contingent liabilities arising in the normal course of business in respect of claims made by third parties, for the supply of both operational and capital expenditure, against the Corporation for a value which cannot be determined in a reliable manner. Contingent liabilities are also present from claims made by Corporation employees for compensation due to injuries incurred during the discharge of their duties, the value of which is not considered material.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

27.

Contingencies - continued b) Legal and other claims - continued The Corporation has received claims from the Government of Malta in respect of the cost of pensions and gratuities paid to employees who had accepted permanent employment with the Corporation. These claims relate to the cost of the pensions and gratuities accruing from the date of acceptance of employment. The Corporation has rebutted these claims and, in the opinion of the directors, on the basis of information currently available, at this stage no liability for Enemalta is presently envisaged. Legal proceedings have been instituted against the Corporation and the Government of Malta by employees formerly employed by the Malta Electricity Board for pensionable rights equal to government employees employed before 1979. In this respect the Corporation has not disclosed additional information relating to this contingent liability in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets on the grounds that disclosure may be seriously prejudicial to its interest. Since the Corporation has legally rebutted these claims the directors do not feel that, on the basis of information currently available, there is the need for Enemalta to provide for a liability in this respect. Moreover, should this liability arise, it is also unclear how much of this would accrue to the Corporation and how much will be borne by Government. c) Obligations relating to compliance with laws and regulations The Corporation is continuously assessing the operational and financial impact of compliance with laws and regulations. Generally, environmental compliance results in additional costs being incurred and this may also lead to the possible impairment of existing plant and equipment. Presently, various options of how to comply with these requirements are being considered by the Corporation particularly in respect of future generation plans where the Corporation is committed to comply with specific Directives. The Corporation is also committed to comply with EU Directives regarding fuel quality and emission ceilings as these are determined. With regards to the existing plants at Birzebbuga, steps are being taken for their relocation, decommissioning, and restoration in line with the Governmentâ&#x20AC;&#x2122;s strategy for the commercialisation of the Petroleum divisions. These negotiations are being led by the Privatisation Unit of the Government of Malta. The final plans in this respect have not yet been approved. The directors are not yet aware of any material financial impact that these may have on the Corporation or whether any eventual financial impact will be borne by Government as part of the commercialisation process that it is leading. Accordingly, at this stage, no provision for such costs has been made in these financial statements. d) Site dismantling and reinstatement costs Site dismantling and reinstatement costs refer to costs that will be incurred when electricity generation, gas and petroleum storage and filling plants are relocated, and to the physical activities related to the removal of debris and reinstatement of sites. According to IFRSs as adopted by the EU, the estimated costs of dismantling, asset removal and site reinstatement that will be incurred when the facilities are vacated should be allocated to a specific provision raised which are attached to the assets to which they refer. The estimation of future dismantling and reinstatement costs is a complex process, and to date, except for the Qajjenza site (Note 4), there is no indication as to whether such costs will be borne by the Corporation or will be recovered from the acquirer or concessionaire of the site.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

27.

Contingencies - continued Consequently, the Corporation did not recognise any liabilities with respect to obligations concerning dismantling of tangible assets and environmental reinstatement of land and of the seabed at the end of the production activities.

28.

Related party transactions The Corporation is owned and controlled by the Government of Malta. The directors consider that the following significant transactions with Government should be disclosed.

Government compensation with respect to LPG social obligations included with revenue Government compensation with respect to electricity fuel cost social obligations included under cost of sales Finance costs in respect of Permanent Government contribution

2008 €’000

2007 €’000

6,115

4,892

70,700 (1,019)

37,065 (815)

2008 €’000

2007 €’000

326,647

218,735

2008 €’000

2007 €’000

11,300

21,740

9,513

(13,021) (8,425) (962)

(13,021) (11,398) (1,134)

Government guarantees (Note 14):

Government guarantees in relation to the Corporation’s borrowings Balances with Government relating to:

Assets Government contributions due classified with other receivables Government dues in respect of ex-Malta Drydocks Corporation and Malta Shipyard Limited balances classified under other receivables Liabilities Government loan classified as other borrowings Dues to government in respect of excise duty payable Dues in respect of social security and employee contributions

IAS 24 “Related Party Disclosures”, paragraph 8 states that knowledge of related party transactions, outstanding balances and relationships may affect assessments of an entity's operations by users of financial statements, including assessments of the risks and opportunities facing the entity.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

28.

Related party transactions - continued In November 2009, the International Accounting Standards Board (“IASB”) published a revised IAS 24, Related Party Disclosures. Government-related entities are now defined as entities that are controlled, jointly controlled or significantly influenced by Government. The amendment introduces an exemption from all of the disclosure requirements of IAS 24 for transactions between Government-related entities and Government, and all other Government-related entities. Those disclosures are replaced with a requirement to disclose: (a) the name of the Government and the nature of the relationship between Government and the entity; and (b) (i) the nature and amount of any individually-significant transactions with Government and other Government-related entities; and (ii) the extent of any collectively-significant transactions qualitatively or quantitatively. The new disclosures are intended to provide more meaningful information about the nature of an entity’s relationship with Government and material transactions. The Corporation makes supplies in its ordinary course of business to the Government of Malta, its departments and agencies, public sector Corporations, Local Councils and other entities owned and/or controlled by Government. The Corporation enters into such transactions on an arm’s length basis in the same manner as with all its other customers. Preparing, compiling and verifying all the financial information needed to present the detailed information in respect of these supplies presently required by IAS 24 from the current billing system of the Corporation would entail undue effort and expense. Apart from the difficulty of determining which entities are controlled or significantly influenced by the state, the directors are of the opinion that the disclosure of routine transactions with state-controlled entities carried out at an arm’s length basis does not materially enhance the proper understanding of the profit or loss and financial position of the Corporation. Furthermore, they believe that the cost of meeting the requirements of IAS 24 is not offset by the benefit of increased information for users of the Corporation’s financial statements. Accordingly, after taking cognisance of the matters referred to above, the directors are of the opinion that the information disclosed at the beginning of this note adequately addresses the requirements of IAS 24.

29.

Events after the reporting date The following are the material events that impacted the Corporation after the reporting date: 

The commercialisation of the Petroleum Division entered the final stages of adjudication. An initial call for Expression of Interest was issued on 10 April 2007 and after the bid evaluation process was concluded, the Privatisation Unit is currently negotiating with one preferred bidder. The Corporation expects the commercialisation process to be finalised during the 2010 financial year.



The Corporation is in the process of implementing the Generation and Transmission Plans for the period 2006-2015. A contract notice for the new Delimara Power Station extension project closed on 20 February 2007. The final contract was signed on 26 May 2009 and works are expected to start by mid-2010. The contract value for the plant is €165.0 million. The project has an expected construction period of 26 months. The capital cost is to be partly financed by a loan from the European Investment Bank.

ENEMALTA CORPORATION Annual Report and Financial Statements - 31 December 2008

29.

Events after the reporting date - continued 

The Corporation is proposing that a sub-sea electricity interconnector should link Malta to Sicily following the results of a feasibility study. The estimated cost for the electricity interconnector is €200.0 million and it is expected that it will be in operation by the end of 2012. The European Energy Programme for recovery was established by the European Commission that will contribute to economic recovery, the security of energy supply and the reduction of greenhouse gas emissions of member states. As part of this programme the commission has allocated a total of €20.0 million towards the financing of an underwater connecting cable.



The Corporation jointly with Water Services Corporation have awarded the Integrated Utilities Business Systems (IUBS) contract to IBM Spain. On 25 September 2008 the Corporations signed a first agreement to implement an Automated Metering Management system that will be deployed over a 4 year period following an initial pilot project. The project will revolutionise the way meters are read and managed in Malta and it is expected to generate significant economic benefits through electricity loss reductions. On 29 December 2008 the Corporations signed a second agreement for the implementation of SAP ERP, Billing and CRM systems which went live on 4 January 2010. An Enterprise Asset Management System is expected to go live on 1 September 2010. In July 2009 as part of the IUBS project, Enemalta has awarded IBM and ABB a contract for the provision of a SCADA system for the HV network. This is a three-year contract by which all the distribution centres will be monitored and controlled from the Marsa Operations Room.



30.

On 13 July 2009 the Corporation signed a €27.0 million 15-year amortising loan agreement with Bank of Valletta plc at a floating interest rate. On 21 October 2009 the Corporation drew down the first €15.0 million from the €150.0 million 20 year loan with the European Investment Bank while a further €30.0 million affected drawdown in April 2010 which will be part-financing the new Delimara Power Station extension project. On 15 December 2009 the Corporation entered into a €75.0 million loan with the above noted local bank at floating interest rates. These loans are guaranteed by the Government of Malta.

Statutory information Enemalta Corporation is a body corporate established in Malta by virtue of Act XVI of 1977 Chapter 272.

31.

Comparative information Comparative figures disclosed in the main components of these financial statements have been reclassified to conform with the current year’s presentation format for the purpose of fairer presentation. In view of the change in the Corporation’s presentation currency from Maltese lira to euro, all comparative information in these financial statements have been converted into euro using the Irrevocably Fixed Conversion Rate of €1: Lm0.429300.

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Detailed accounts

Pages

Summary income statement

Electricity Division Income statement

Revenue and cost of generation

Transmission and distribution costs

Administrative expenses

Other operating income

Petroleum Division Income statement

Cost of sales

Distribution costs

Administrative expenses

Other operating income

Gas Division Income statement

Cost of production

Distribution costs

Administrative expenses

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Summary income statement Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Operating (loss)/profit Electricity Division (page 58) Petroleum Division (page 62) Gas Division (page 66)

(20,209) (11,956) (5,429)

7,385 5,686 (1,202)

Impairment of property, plant and equipment Finance costs - net

(37,594) (21,753)

11,869 (14,074) (14,275)

Loss for the period/year before tax

(59,347)

(16,480)

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Electricity Division - Income statement Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 319,700 (307,842)

202,553 (170,634)

11,858

31,919

Transmission and distribution costs (page 60) Administrative expenses (page 61) Other operating income (page 61)

(25,440) (16,502) 9,875

(19,846) (12,484) 7,796

Operating (loss)/profit

(20,209)

7,385

Revenue (page 59) Cost of generation (page 59) Gross profit

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Electricity Division - Revenue and cost of generation Value

Revenue (page 58)

Units sold

Period from 1 October 2007 to 31 December 2008

Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008

Year ended 30 September 2007

€’000

kWh’000

319,700

202,553

2,373,733

1,853,971

Units generated Cost of generation Opening inventory related to generation Wages and salaries Purchases of fuel for electricity generation Demurrage costs and other handling costs Other chemicals and oils Fair value (gains)/losses on derivative instruments: - commodity agreements Maintenance expenses Staff welfare and training costs Insurance costs Excise duty Depreciation of property, plant and equipment Closing inventory related to generation Compensation for fuel costs Other expenses

22,414 20,730

24,069 15,993

339,204

160,023

237 492

454 530

(3,065) 5,740 27 1,050 1,873

3,201 7,538 23 822 1,076

19,088 (29,616) (70,700) 368

15,675 (22,414) (37,065) 709 2,870,897

2,266,103

Electricity used in power stations

(160,551)

(132,646)

Units sent out to the grid

2,710,346

2,133,457

336,613

279,486

12.4%

13.1%

Total cost of generation (page 58)

Units generated but not billed Units not billed as a percentage of total units sent out to the grid

307,842

170,634

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Electricity Division - Transmission and distribution costs Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Maintenance of sub-stations, transformers, mains, cables, lines and ancillary items Wages and salaries Transport costs Materials and spares consumed Rents payable Maintenance expenses Other expenses

Maintenance of meters Transport Wages Materials and spares consumed

Depreciation of property, plant and equipment Cables and trenches Buildings Meters and plant Motor vehicles

Total transmission and distribution costs (page 58)

9,301 220 116 227 1,605 425

7,130 161 121 56 1,467 517

11,894

9,452

2 682 187

580 149

871

729

8,463 280 3,868 64

6,611 214 2,840 -

12,675

9,665

25,440

19,846

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Electricity Division - Administrative expenses Period from 1 October Year ended 2007 to 31 31 December 30 September 2007 2008 €’000 €’000 Directors’ emoluments Office salaries Share of Water Services Corporation billing costs Audit fees Staff welfare and training Maintenance expense General expenses Donations Transport and travel expenses Licences costs Movement in provision for impairment of trade and other receivables Bad debts written off Medical expenses Insurance expenses Conferences and courses expenses Telecommunication expenses Legal and professional fees Depreciation of property, plant and equipment Interdivisional expenses recovered Total administrative expenses (page 58)

60 6,679 2,622 70 378 246 1,094 42 1,013 480 1,456 365 88 117 64 436 894 597 (199) 16,502

89 4,857 2,283 70 340 189 637 2 771 617 1,164 65 93 56 26 310 661 380 (126) 12,484

Electricity Division - Other operating income Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Services and installations income Wages and salaries costs recovered Insurance claims Other

8,546 (13) (7) 1,349

7,642 128 26 -

Total other operating income (page 58)

9,875

7,796

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Petroleum Division - Income statement Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 715,394 (693,467)

410,974 (387,489)

21,927

23,485

Distribution costs (page 64) Administrative expenses (page 64) Other operating income (page 65)

(16,428) (19,715) 2,260

(12,318) (8,428) 2,947

Operating (loss)/profit

(11,956)

5,686

Revenue Cost of sales (page 63) Gross profit

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Petroleum Division - Cost of sales Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

Opening inventory Purchases of petroleum products Duty on products sold Tanker inspectors and other expenses Demurrages costs Storage and handling costs Ocean and volume losses Bridging expenses Other expenses Closing inventory

28,564 604,563 102,039 (61) 86 39 930 424 350 (43,467)

23,788 308,898 82,637 16 44 44 312 126 188 (28,564)

Total cost of sales (page 62)

693,467

387,489

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Petroleum Division - Distribution costs Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Commissions to distributors Wages Transport costs Motor vehicle expenses Depreciation of property, plant and equipment

14,808 1,212 326 81 1

11,111 904 224 77 2

Total distribution costs (page 62)

16,428

12,318

Petroleum Division - Administrative expenses Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Salaries Maintenance expenses Depreciation of property, plant and equipment Impairment of property, plant and equipment Depreciation of investment property Insurance costs Staff welfare and training costs Audit fees General expenses Movement in provision for impairment of trade and other receivables Stationery, printing and postage expenses Transport costs Travelling and entertainment costs Legal and professional fees Motor vehicle expenses Rents payable Advertising promotion Telecommunication expenses Licences and subscriptions costs Bad debts written off Interdivisional recharges Total administrative expenses (page 62)

5,044 894 2,734 7,719 13 1,059 43 28 366 836 19 53 5 326 12 367 1 64 4 128

3,790 657 2,159 9 711 44 28 245 (23) 16 21 2 305 12 296 51 14 12 79

19,715

8,428

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Petroleum Division - Other operating income Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Storage fees Insurance and demurrage claims Other income

2,022 32 206

2,726 65 156

Total other operating income (page 62)

2,260

2,947

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Gas Division - Income statement Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

17,053 (18,377)

12,369 (10,370)

Gross (loss)/profit

(1,324)

1,999

Distribution costs (page 67) Administrative expenses (page 68) Other operating income

(2,849) (1,342) 86

(1,882) (1,349) 30

Operating loss

(5,429)

(1,202)

Revenue Cost of production (page 67)

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Gas Division - Cost of production Period from 1 October Year ended 2007 to 31 December 30 September 2007 2008 €’000 €’000 Opening inventory Purchase of liquefied petroleum gas Wages and salaries Depreciation of property, plant and equipment Other expenses Closing inventory

881 16,174 762 731 576 (747)

361 9,355 636 508 391 (881)

Total cost of production (page 66)

18,377

10,370

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

Commissions to distributors Wages and salaries Transport expenses Other expenses

2,523 164 135 27

1,652 128 79 23

Total distribution costs (page 66)

2,849

1,882

Gas Division - Distribution costs

ENEMALTA CORPORATION Detailed Accounts - 31 December 2008

Gas Division - Administrative expenses

Wages and salaries Staff welfare costs Water and electricity Telecommunication expenses Audit fees General expenses Depreciation of property, plant and equipment Insurance expenses Maintenance expense Transport costs Professional fees Interdivisional recharges Total administrative expenses (page 66)

Period from 1 October 2007 to 31 December 2008 €’000

Year ended 30 September 2007 €’000

865 3 5 14 7 148 195 15 8 11 71

568 5 12 7 270 412 14 2 7 5 47

1,342

1,349