Cyprus Mail
Opinion

Our View: Defa should ignore the auditor-general on LNG tender

Auditor-general Odysseas Michaelides

OUR EFFORTS to import natural gas can only be described as a running joke. They started some 14 years ago when interest was expressed to build a floating power plant off the Cyprus coast, by LNG company Golar, but the plan was abandoned because of a glaring case of conflict of interest. Since then, there have been close to a dozen attempts to secure the supply of natural gas for the EAC’s power stations but a contract has been as elusive as the settlement of the Cyprus problem.

One plan was aborted on the ludicrous grounds that we would soon have our own gas on tap from the Aphrodite field so there was no need to invest in infrastructure for bringing in natural gas. This was more than 10 years ago, while it is now estimated that we will not have gas on tap before 2025. In 2008 the Council of Ministers set up the natural gas company Defa as the sole importer and distributor of natural gas in Cyprus, but 11 years later it has still not imported any, although it is getting closer.

In 2016, the government vetoed the signing of a deal, after going through the tenders’ procedure, because the small quantities of gas that would be imported did not justify the big investment in an LNG import terminal at Vassliko. At the time, the government used the predictable excuse for abandoning the plan saying, “the import of gas for power generation would be put off until at least 2020 when it is expected that gas would be pumped from the Aphrodite in block 12.”

Defa came the closest ever to a deal this week, until auditor-general Odysseas Michaelides threw a spanner in the works, citing procedural irregularities in the tenders’ process. Contractual negotiations were set to start in the coming week with the consortium, headed by China Petroleum Pipeline Engineering (CPPE), that won the tender to build a floating storage regasification unit. 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.

This is why, Defa and the government should ignore the auditor-general who, in this case, is certainly not protecting the interests of the people.

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