A due diligence study by US law firm Curtis, Mallet-Prevost, Colt and Mosle LLP has raised significant concerns over the proposed Cyprus-Crete electrical interconnection project, sparking worry among Cypriot officials.
The comprehensive report criticises the terms proposed by Greece’s power grid operator IPTO through its “concession agreement” for Cyprus’s investment in Great Sea Interconnector (GSI), stating they are “insufficient to attract serious strategic investors”.
This may explain why IPTO’s efforts to secure project funding have been unsuccessful over the past 18 months.
The study highlights that IPTO’s terms for Cyprus’s investment in GSI are financially inadequate, offering limited profitability while burdening investors with the responsibility of securing funding for the project, expected to exceed one billion euros.
The US law firm warns that the concession agreement IPTO seeks approval for from Cyprus’s energy regulator CERA is “largely one-sided in IPTO’s favour and creates an unnecessary additional level of risk” for Cyprus and other shareholders.
While initially presented as a co-ownership investment plan based on share capital, the legal study reveals that GSI is being treated as an EPCI (Engineering, Procurement, Construction and Installation) contractor rather than a joint venture.
This means GSI, and potentially Cyprus, would assume all typical contractor obligations for a turnkey project without enjoying co-ownership rights.
The concession agreement stipulates that GSI shareholders may be required to provide project implementation guarantees.
The legal firm emphasises that any investment by Cyprus in GSI could lead to financial losses exceeding the planned €100 million equity investment.
