(Adds comment by union boss in twelfth paragraph)
By Stelios Orphanides
Energy minister Yiorgos Lakkotrypis said that state-owned power producer Electricity Authority of Cyprus (EAC) must remain 100 per cent in government hands.
“The possibility of privatising the organisation is completely ruled out and the government is called to take a decision on the best way to split EAC in an efficient and effective manner,” Lakkotrypis said after participating in a meeting between President Nicos Anastasiades and EAC unions that object to its privatisation.
EAC’s unions opposed the privatisation of the company and repeatedly threatened to strike. They also accused the government of treating the company in a similar fashion with that of Cyprus Airways, the airline which run out of cash in January. The power producer with a production capacity of 1,478 megawatts in 2014 has virtually the monopoly on the otherwise liberalised electricity market and is the owner of the transmission and distribution grid.
In October, the minister said that a study on the company’s future carried out by a group of experts commissioned by the government submitted various proposals which including the “prevailing scenario” of splitting EAC into two units, one in charge of a transmission and the other in charge of production and supply. The proposal prompted the chairman of the Cyprus Free and Competitive Energy Market Business Association, a business group representing potential energy market investors, to say that the company would find it difficult to compete in the new environment.
In May, the Cyprus Energy Regulatory Authority announced the new regulatory framework, which will allow private power producers and distributors enter the market in 2016.
Following Monday’s meeting, Lakkotrypis added that the reference to the EAC in the memorandum of understanding which sets out the terms of Cyprus’s bailout “was removed from the privatisation chapter and was moved to the energy chapter, a clear indication of the government’s intentions”.
The company would have to remain “one hundred per cent in state hands” even after its separation into different entities, he said, citing the findings of a report commissioned on the future of the company.
The electricity producer generated a €42m profit in 2014 which does not include a €244.3m shortfall in its pension fund which also emerged last year. In 2013, Cyprus agreed to include the company in a privatisation programme aiming at raising a total of €1.4bn in revenue. According to the initial timetable, the privatisation of EAC was scheduled for 2018.
Lakkotrypis who is also in charge of commerce, industry and tourism, said the government’s decision will have a “two-year horizon”.
“We have to take into account that there is a number of uncertainties with which will have to deal with,” he said.
The government agreed to continue the dialogue with the company’s board of directors and workers in an attempt to find solutions, Lakkotrypis added.
Andreas Panorkos, the boss of EPOPAI, one of the unions representing the company’s workers, said that while unions, which object to the privatisation of the company, also reject any notion of separating it into two entities.
“The president made clear that we are not heading towards privatisation,” Panorkos said in a telephone interview. “The EAC remains as it is (and will become) a verticalised organisation with its operations separated so that there is the right unbundling of accounts to guarantee any investor that charges are done the right way. We insisted that we had to limit things to this point”.
While workers are opposing to the legal splitting of the company in two separate entities, they support the unbundling of its operations and accounts, provided it remains one legal entity, he said.
As a result, the cabinet will take a decision “in principle” on the future of the company in December as provided by Cyprus’s bailout terms which the government will review in two years by taking into account other factors, he said adding that the company will continue to operate “for at least the next two years as we are”.
“The president said ‘worry not, you will not have this treatment’,” Panorkos said in reference to the unions’ concerns that company would have a similar fate as Cyprus Airways.
Panorkos said that it still remains unclear “if and when” other private investors will enter the electricity market in Cyprus which “is open years now”.