Filenews 8 September 2024 - by Chrysanthos Manoli
The cost of geopolitical risk and potential disruption of the electricity interconnection by Turkey is the most important issue to be discussed at Tuesday's meeting chaired by President Christodoulides, but it will not be the only one.
The Government is also deeply concerned about an issue that is directly related to geopolitical risk, but also has other implications. As the non-completion of the project can theoretically be caused by other external – unforeseen factors, which will fall under the definition of "force majeure".
What will happen in such a case? How much money will the Republic of Cyprus and the Hellenic Republic have to pay to ADMIE (and Nexans, which manufactures the cable), through electricity consumers, with 63% and 37% respectively?
It is widely stated that in the event of a major reversal that will result in interruption without the responsibility of the implementing body, CERA "may" approve ADMIE's requests for recovery of the expenses already incurred by the company.
However, the Government is strongly concerned about the possibility that a project interruption without the responsibility of the promoter will automatically create a liability for Cyprus (and Greece) to pay ADMIE (and Nexans) the total or very large part of the cost of the cable (as described in the contract signed by the French company with EuroAsia and then undertaken by ADMIE) and not only the cost of the cable that will have been built or laid until that the point.
That is, according to government sources, if on Tuesday the meeting reaches an agreement on the changes requested by IPTO after the undertaking of the project in the regulatory framework (this is what is at stake and not the construction or not of the cable), and the implementing body gives Nexans the coveted Full Notice to Proceed (final order for the construction of the cable, based on the agreement signed at the time EuroAsia), then the two governments undertake, perhaps, the obligation to pay all or the greater value of the contract (total value of €1.4 billion), regardless of the point in time when work may be interrupted due to external risk.
Fileleftheros reports that Nexans' invitation by the government to Tuesday's meeting is directly linked to the need to discuss ways to substantially reduce the burden on consumers in Cyprus and Greece, in case the cable will be built in only part, but the contract signed by the companies is invoked – in the absence of the governments – and consumers are required to repay the contract at 100% of the total worth. That is, to pay BOTH for a project that may not work but ALSO for a cable that will not be built.
The available information is not secure as to the obligations of IPTO – and ultimately consumers of the two countries – towards Nexans if the project sinks under the responsibility of a third party. Information from Fileleftheros, which could not be confirmed by an official source, says that ADMIE has informed that the cost of a reversal of plans by Turkey's intervention will be at least €500 million but the Cypriot government is concerned that the minimum cost could be much higher. And he wants to hear, on Tuesday, Nexans' position.
The meeting will ask to discuss many aspects of this aspect, both with Nexans and with the European Commission, so that consumers and the EU contribute as little as possible to the compensation of the promoter and Nexans for the cable, as equipment, (through the sponsorship of €657 million and not only). In case the predictions (and of the companies themselves) about possible Turkish intervention are confirmed. Even in the initial stages of the project (eg soundings, etc.).
