Statement by The Minister for Economic Services, Prof. Josef Bonnici

"Recent statements made on Super 1 Television and in MLP newspaper Il-Kullhadd, give a completely false picture of the shocking impact of the hedging of oil prices entered into by EneMalta under the previous administration.

It is to be noted that after the two hedging contracts entered into by the previous chairman of EneMalta, the consequence of tying up the price of fuel oil, petrol, diesel and jet fuel has been that to this day, EneMalta has suffered a loss of $10 million as compared to a situation of buying on the spot market and not entering into any hedging arrangements.

This loss is a shocking result which could have been avoided if professional advice had been sought. In fact senior persons in EneMalta's management were opposed to the renewal of a new hedging arrangement in August of 1998 precisely because the corporation was losing massively from such hedging arrangements as compared to the practice prevalent before Dr Sant's "modern" style of government took over.

In November 1998, I was approached by the then chairman of EneMalta to approve a new hedging arrangement to cover the purchase of oil for the year 2000. Following the dismal performance of the hedging arrangements entered into so far, I could not understand the need to enter into a contract two years in advance when no rational forecaster could conceivably give a realistic forecast for the price of oil so far ahead. This request was like participating in a game of chance at the country's expense.

The recent claim by "Il-Kullhadd", that had I taken this advice for the hedging in February 1999 (when the price of oil was at its lowest) of oil purchases for the year 2000, EneMalta would have saved $25 million in its oil purchases next year, is completely hypothetical – there are no quoted prices for next year that are given in the article. Nor do we know what next year's price of oil is going to be, and so cannot estimate any loss or gain made. Furthermore, it ignores the fact that the advice was given in November 1998 by Mr. Bonello Cole (when prices of most oil products where still much higher than those in February 1997) and not by the EneMalta chairman or board of directors in February 1999. More worryingly, this stand implicitly accepts the position of the Labour Party that it is right to hedge over such long periods despite the negative experience. This is tantamount to accepting speculation with public funds!

I reiterate that the Opposition, through "Il-Kullhadd" and "Super 1 TV" and "radio" is making unfounded hypothetical claims, and is ignoring the fact that the hedging arrangements entered into by the previous administration have cost this country an unnecessary expenditure of $10 million. It is a shame that this result was obtained and that an attempt should now be made by the media organs of the Labour Party to cover-up this loss by using future hypothetical projections of losses for not following a hedging system which has cost us so much in the past."