Great Sea Interconnector Unplugged, as government still finds draft agreement unacceptable
Source: in-cyprus.com
Connection in Athens loud and clear, as Energy Minister Yiorgos Papanastasiou, following legal advice, has sent a message that the draft concession agreement involving the Greek Government and the country’s Independent Power Transmission Operator transferring the role of implementing body for the electrical interconnection to the Great Sea Interconnector (GSI) is unacceptable in its current form.
Therefore the Republic will not be investing in the project as long as the document remains in its present form.
Papanastasiou conveyed at top government level that significant structural amendments must be made to the GSI, including the responsibilities and rights of its shareholders, as indicated by the American law firm Curtis, Mallet-Prevost, Colt and Mosle LLP, a consultant to the state.
Diverging approaches in Nicosia
There do seem however to be, two government trends involving next steps on the GSI, as Nicosia heads into crucial negotiations with Greece, starting on Friday.
One of the approaches is adopted by the Presidency and the Ministry of Energy, who believe that the issue of the country’s participation in the equity capital of GSI has not been definitively closed, as the Government maintains its interest in participating in the company that will build the interconnection, claiming a part in the agreement, including cost, payments to contractors and subcontractors, and ultimately, the beneficial operation of the interconnection for Cypriot citizens.
Nicosia wants the cost to be kept at the lowest possible minimum, limiting the burden on Cypriot consumers, since the project is already covered by a regulatory decision for a guaranteed return of 8.3% on (any) capital, for 17 years, through electricity bills.
The second trend stems from the Ministry of Finance which viewed the entire electrical interconnection project and its enormous cost unfavourable from the outset of negotiations.
Makis Keravnos openly questions the possibility of any real benefits for Cypriot electricity consumers and electricity investments in Cyprus, both in the medium and long term.
According to Philenews sources, the Ministry of Finance feels vindicated by the Curtis cost and benefits analysis study, arguing that Cyprus must not participate in the equity capital of the next implementing body as conditions stand today and without significant negotiation.
The government is currently towing the more cautious line towards the Greek government, still firm but not definitively shutting doors just yet, with the Energy Minister maintaining close contacts with Athens on the matter.
Papanastasiou makes clear however that Cyprus does not accept the Concession Agreement submitted by the national Independent Power Transmission Operator of Greece to the Cyprus Energy Coordinating Authority as it stands, but will enter into discussions, in a two pronged approach.
Firstly, explaining its objections and concerns and secondly, requesting substantial changes to the draft Concession Agreement. If the Greek side agrees to these terms, then a significant obstacle will be removed on the way to completing the evaluation of the GSI’s comprehensive benefit to Cyprus.
The issue of whether or not to build the interconnection has already been decided (by the previous administration) and cannot be reopened, given the strong EU desire for Cyprus (and possibly Israel at a later stage) to be connected to the European electricity grid.
The Independent Power Transmission Operator of Greece is legally and regulatory free to proceed with the construction of the project, provided it secures the necessary financing.
The Nicosia orientation to enter into deliberations and hope for a positive outcome, is confirmed by the decision to launch negotiations with the Greek Ministry of Energy, IPTO, and the Great Sea Interconnector in Athens on Friday, December 27.
There has been no official report as to the political or technocratic level of the meeting, but according to Philenews sources the energy minister will be travelling to the Athens, accompanied by ministry officials and advisors from the Legal Service.
The Greek government representation is likely to be at the same level.
Without the Finance Ministry
But there appears to be an internal rift here, as Philenews reports that the ministry of Finance does not wish to be represented at Friday’s meeting, despite the Presidency’s requests for ministry participation, either through Makis Keravnos, the general director or even the official responsible for the project at technocratic level.
The Ministry of Finance maintains its disagreement both regarding the electrical interconnection project and – now – mainly the state’s participation in the GSI company with 100 million euros, expressing concern that this investment, as warned by the American consultants, will open the door of the state’s exposure to expenses or guarantees of hundreds of millions, with the visible risk of economic damage and a serious impact on public finances.
The cautious finance ministry stance could change if the European Investment Bank (EIB), approved IPTO’s request for a loan of approximately half a billion euro, to which the bank has yet to respond, following several months of discussions.
A previous request for a loan of hundreds of millions, submitted by the previous implementing body (EuroAsia Interconnector), was rejected by the EIB, which at the time appeared to favour the solution of installing storage systems (batteries) for the further utilization of RES and the energy security and autonomy of the country.
The original article: belongs to in-cyprus.com .
