Under the Enemalta contract, EGM was required to source and provide electricity to Enemalta for 18 years and ensure LNG supply at a fixed price for five years.
EGM arranged to provide LNG supply at a fixed price for five years through an agreement with SOCAR Trading. In order to fulfil the conditions of the agreement, SOCAR Trading was required to be able to guarantee logistics and delivery of LNG over the five-year period and to absorb risk due to fluctuations in the price of LNG.
In order to meet the demand of an extremely long fixed-price requirement, SOCAR Trading put in place a series of agreements with multiple providers to ensure supply over five years. Through the use of hedging products, SOCAR Trading was able to ensure that the price could be fixed. SOCAR Trading fees were calculated according to the volumes delivered and not the price of gas, meaning that the fees charged would not change regardless if the market price of gas went up or down.
SOCAR Trading was required to also arrange for the logistics and transportation of the LNG supply, which requires the use of purpose-built, state-of-the-art LNG carriers.
Regular deliveries of LNG began in April 2017.