By Michalis Persianis
Meridiam’s entry radically changes the data and balances on the electricity interconnection issue. This is because the move, which appears to be a success for Athens and specifically for the Maximos Mansion and which surprised many in Nicosia, provides convincing answers to the questions and concerns that had been causing unease until this morning.
First of all, the agreement finally answers the crucial question of “where are the investors?” Until now the answers to that question had been vague, unclear, and far from convincing. Second, with the majority stake held by a far-from-ordinary company, the parties involved in Athens and Cyprus, both investors and official bodies, now come under the know-how and business culture of a structure that inspires greater confidence than public bodies, semi-state entities, and politically controlled situations.
Third, it answers the major issue of the seabed survey, which remains the big question mark. The results of that study will produce clearer answers on the final cost, operating costs, operational security issues, and the final timeline.
Finally, the agreement further strengthens the French presence, together with Nexans’ role on the construction side, with clear geopolitical implications that are positive for Cyprus and Greece. Under no circumstances should Meridiam’s presence be regarded as a French guarantee, even though the company’s CEO made a clear reference to support from Mr. Macron. The issues of physical security have not been resolved. However, the agreement creates conditions more favorable than those that existed until yesterday, and Turkey’s diplomatic cost in the event of a reaction is substantially higher.
In any case, the matter is now unlocked, and the prospect of a real opening of the market in Cyprus is becoming visible. On the horizon also appears the end of a series of derogations from the acquis, which the consumer is paying for today and which work against the economy and national security. These exceptions form a significant part of the protectionism enjoyed by bodies such as the Electricity Authority of Cyprus (AHK) and certain private producers, and they may help explain some of the reactions against the completion of the project.
It should also be noted that until today many analysts were saying that while the interconnection is desirable and even essential, the more sincere concerns related to the project itself: know-how, details, investors, the absence of a seabed survey, the timeline, the final cost, the governance of the project, and so on. These issues are now being resolved to a large extent. Along with the sincere concerns, the alibis of those who did not want the project completed for reasons other than the national interest are also shrinking.
The agreement makes financing from the EIB as well as from private sources easier. It also brings increased cost control, risk management, contracts, and procedures.
In this way the agreement radically changes the data. It cancels many of the objections and puts the project on a much more realistic path to implementation. The decision by Athens, and possibly by Nicosia, to keep the entire effort to reach an agreement with Meridiam away from leaks has also made preemptive moves by various interested parties more difficult. The result is a checkmate move that is credited to the Maximos Mansion.
Still, the matter should not be considered closed, and it should not be assumed that the entire project is moving toward implementation in the immediate next period. Many questions remain unanswered, including the company’s final share beyond the vague reference to a majority stake. In addition, it must be clarified to what degree the company has secured freedom of movement regarding the management and direction of the project. It should be noted, however, that possible control by Meridiam over administrative decisions should not be regarded as negative, since it would replace the usual practices in Athens and Nicosia with international standards, procedures, and controls. Further questions also exist about the terms of the agreement, including possible conditions in the event of an increase in cost or geopolitical risk.
In any case, the agreement radically changes the game on energy issues for Greece and especially for Cyprus. It opens the field for the removal of distortions, including the exemptions from the acquis, and creates clearly more positive prospects for the energy issue.
