New Brussels warning on Crete power project

New Brussels warning on Crete power project

The European Commission has sent a fresh warning to Greece over the crucial project of the electrical interconnection of Crete with Attica, which Athens has unilaterally conceded to state grid operator ADMIE.

The Greek Energy Ministry and the country’s Regulatory Authority for Energy (RAE) received the latest letter from the internal energy market director of the Commission’s Directorate-General for Energy, Klaus-Dieter Borchardt, on Thursday. In the letter, the European official clearly states that the process used to promote the interconnection will not secure its entry into the subsidized cluster of Projects of Common Interest (PCI).

Brussels points out that if the RAE decision continues to apply, the Crete-Attica section will only be considered a national project, with economic and regulatory consequences.

The Commission rejects RAE’s arguments for a two-year delay to the project as originally provided for, as it is part of the international interconnection of Israel with Cyprus, Cyprus with Crete, and Crete with Attica. Brussels argues the two-year delay will expire on December 31, 2018. Borchardt further notes that with its decisions, RAE has created additional delays and this could also have consequences.

The RAE decision is also seen to be at odds with the memorandum of understanding signed between regional interconnection consortium EuroAsia and ADMIE, which clearly provided for the creation of a special-purpose vehicle with minimum stakes for both sides. RAE’s decision provides that the project’s contractor can choose whether to acquire a 39 percent stake within timetable and if that does not happen third parties will be invited to participate in the Ariadne SPV, set up as a 100 percent subsidiary of ADMIE. This, the Commission says in its letter, is different to what the MoU provided for.

Even so, on Friday, just a day after the new intervention by the Commission, RAE sent a formal letter to ADMIE asking it to calculate the weighted average cost of capital (WACC) of the Crete-Attica project investment as part of the PCI cluster. RAE only gave ADMIE a few days for this, citing the urgent character of the project.

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