Cyprus’ international lenders have reportedly flat-out rejected the government’s proposal regarding the future of the state power company.
The troika has turned down a proposal to delay the EAC’s ownership unbundling by a year, insisting that the legal separation must be carried out without caveats, and wants partial privatisation of the EAC.
The troika’s response – leaked on Wednesday – backs the government into a corner, after repeated assurances from the energy minister that the EAC would not be privatised and would remain in state hands.
According to a convenience translation of the troika missive, the lenders believe that the transmission and distribution grid should be owned by a private operator, “creating the prospects for open and equitable access to the energy market.
“The unbundling of the EAC will benefit the economy only if coupled with a boosting of competition and the regulatory authorities.”
Energy minister Giorgos Lakkotrypis was on Wednesday evening set to brief the President of the troika’s reply, and on Thursday would officially brief the EAC board and management.
The government proposal, forwarded to the troika last week, called for breaking up the EAC into two separate organisations: a distribution monopoly, and a power-producing entity competing in the liberalised electricity market.
Although the transmission and distribution grid would remain a monopoly, private operators (energy suppliers) would be able to use it.
Two public-law entities would be created – effectively two semi-governmental organisations – both owned by the state.
In addition, the government proposed to repeal a decree privatising the EAC.
The Memorandum of Understanding with the international lenders calls for the “efficient and effective” splitting up of the state power company.
It is a ‘prior action’ for the release of the next tranche of Cyprus’ bailout programme.
EAC trade unions are meantime threatening strikes should the government set privatisation in motion.
With the troika’s position in hand, the government must now reconsider before taking a final decision on the EAC’s fate.