Cyprus: Setback for plans to import gas

Cyprus efforts to import natural gas to power its electricity grid looked set to further delays after complications emerged in the tender process for the construction of an LNG import terminal at Vassilikos Port.

The latest obstacle to the effort spanning some 14 years concerns an appeal lodged by a company against a decision to exclude it from the project because of links to an entity implicated in a waste treatment scandal.

Aktor SA is part of a consortium comprising China Petroleum Pipeline Engineering Co Ltd (CPPE), Aktor SA and Metron SA, Hudong-Zhonghua Shipbuilding Co. Ltd and Wilhelmsen Ship Management Ltd that won the tender for the construction of a floating storage regasification unit (FSRU), a jetty for the mooring of the FSRU, pipelines, port and other facilities.

Aktor is the sister company of Helector, facing corruption charges related to waste management plants in Paphos and Larnaca. Aktor is also accused of fraud relating to projects in the Balkans. Both companies are fully owned by Greece’s Ellaktor Group.

Because of this, the natural gas company (Defa) decided to exclude Aktor from the €500m project, prompting it to seek recourse before the tender review board.

Defa was poised to push ahead with the procedure but Aktor has asked the tender review board to halt all actions pending adjudication of its appeal. The board is set to issue its decision interim decision in the next days.

The contracts were scheduled to be signed on November 6.

Auditor-general Odysseas Michaelides has written to Defa suggesting that the entire consortium should have been excluded from the start because of Aktor’s participation. An additional reason for not signing the contracts was the fact that Defa had not yet secured funding for the project, worth €300m plus €200m for maintenance over 20 years, according to Michaelides.

“You cannot legally proceed with signing any contract without having secured the necessary funding,” the auditor said.

Michaelides argued that the consortium should have been excluded from the preselection phase of the competition because of Aktor’s participation. Aktor, the auditor said, had been fined €40m by Greece’s competition watchdog for unfair practices and it was also linked to a company that has been banned for five years from taking part in Cypriot projects.

Defa had decided to exclude Aktor SA from the consortium that landed the project, worth over €800 million because it belongs to the same group of companies as Helector, which is banned from bidding for public contracts because of its involvement in the corruption scandal of the Paphos waste treatment plant.

Aktor has appealed to the tenders’ review board against its exclusion and a decision was expected in the next few days, but Michaelides’ intervention could thwart the deal even if the board rejects the appeal. In a letter marked ‘urgent’ sent to the Defa president, the auditor-general argues that Aktor should have been excluded from the start of the tenders’ procedure and not after the consortium in which it was participating was chosen. He added the CPPE consortium should have been excluded from the start, because of Aktor’s participation, and its tender not evaluated. He also found an alleged irregularity in the way the bid was evaluated, claiming it had been altered, giving the bid a 75.05 per cent mark, instead of 74.85 per cent which would have made it ineligible for the project; there was no signature on the evaluation document, he wrote.

Are these serious objections? Is there the slightest hint of corrupt practices in what Michaelides cites? Would the taxpayer lose any money, because Aktor would be excluded from the consortium or by the 0.20 percentage points difference in the marking, considering the winning bid received much higher marks than rival bids? After 14 years of failed efforts to import gas, a viable option has been offered which could be rejected because of some petty procedural objections by an auditor-general that obsesses over minor technicalities and turns a blind to the bigger picture. Aktor was a minor partner in the consortium which gave the latter no advantage in its tender and the project will not be affected by its exclusion. As for the issue of the mark, this is a pretext by a person who is hell-bent on stopping the project going ahead, for some unknown reason,

The truth is that by blocking this deal, Michaelides, the alleged protector of the taxpayer, will be imposing a higher cost to the economy than if it went through. The reduction of carbon emissions by our power stations would be further delayed, meaning more fines that would be translated into higher electricity bills for households and businesses over the next few years. For 2020, the Electricity Authority has budgeted €85.6 million for the purchase of CO2 emissions allowances, more than double the cost of last year. This cost will be passed on to the consumer and the longer it takes to import natural gas for the power stations, the longer everyone will be paying higher electricity bills, especially as the emissions penalties are set to rise.