The government is now pondering its options for appeal after the European Commission gave it until November 6 to repay a total of €67.2 million handed out in grants for the construction of the liquefied natural gas terminal at Vasiliko, Energy Minister George Papanastasiou said on Thursday.
He faced a barrage of questions on the matter during an appearance on television station Alpha, and explained that since the project was launched in 2019, the commission has paid a total of €73m to the Cypriot government in grants for the project.
However, he said, the letter sent by the European climate, infrastructure, and environment executive agency (Cinea) to the Cypriot government earlier this week demanded the return of €67.2m of those funds.
The remaining €5.8m, he said, had been spent on parts of the project which “had occurred before the grants were awarded”.
He then explained that the commission had initially demanded in July last year that Cyprus repay the lion’s share of the grants, though the amount demanded has fallen slightly since then with the arrival of this week’s letter.
Initially, he said, the government had “reacted with a detailed response” to the initial demand, but that this week, “we received Cinea’s final response”, which, “despite our letter of response … found nothing different, and I the end demanded €67.2m”.
Once it received this week’s letter, he said, the government had engaged in a discussion regarding the letter’s contents with the legal service, which, he said, “will inform its English legal advisors who specialise in such cases”, before the government as a whole will “decide on its next steps”.
As such, he said, “at this stage, we are awaiting advice from the legal service”.
“Now, what are the next steps? They could be anything. It may be an appeal to the European ombudsman, it may be an appeal to the [Court of Justice of the European Union], bearing in mind that this has nothing to do with any court of arbitrartion. It is an administrative court,” he said.
He later clarified that the government will in any case have to pay the €67.2m before November 6, but that further appeals, either to the European ombudsman or to the Court of Justice of the European Union, will, if successful, see the money returned to the Cypriot government.
“The amount that will be deposited will be deposited regardless of the decision. So, there is the date at which the amount which will have to be deposited will have to be deposited and will then have to be demanded back through the other processes which we have described,” he said.
In its initial demand, the European Commission had sent the energy ministry a letter which, according to the ministry, listed “possible irregularities which occurred during the evaluation period of the tender” for the project.
“These issues concern the evaluation criteria of the China Petroleum Pipeline Engineering Co consortium, Metron Energy Applications SA, Hudong-Zhongua Shipbuilding Group and Wilhelmsen Ship Management Limited,” it added.
The China Petroleum Pipeline Engineering Co consortium and Metron Energy Applications SA together formed the CPP-Metron Consortium (CMC) and were responsible for the terminal’s construction until tearing up their contract with the government in July last year.
At the time, the ministry said the letter “alleges two substantive violations”, the first being the criteria for awarding the tender to the above-listed companies in December 2019 and the second being the signing of the bilateral agreement upon approval of an additional €25m in funding in June 2022.
The money had been provided as part of the European Union’s ‘Cyprus Gas 2 EU’ project, which was listed as an EU “project of common interest” and had been funded by the EU to the tune of €101m.
The European public prosecutor’s office (EPPO) had earlier in the same month publicly announced the opening of an investigation into possible procurement fraud, misappropriation of EU funds and corruption related to the Vasiliko LNG terminal.
Cyprus signed the contract for the LNG project in December 2019. The entire project should have taken 22 months to complete.
Nonetheless, Papanastasiou had insisted to the House energy committee on Tuesday that the project “is feasible, should be completed and will be completed”.
He was quizzed by MPs regarding delays to the project and said they had come about because “there are not many options at the moment because the project is incomplete”.
“We have a ship, which will probably be ready next month after passing the final checks, and when that, the most important asset in this project, is ready, the rest of it will have to be completed in some way so that the ship can dock at the pier to begin gasification and the use of natural gas in conventional power generation,” he said.
The ship to which he was referring is the floating storage and regasification unit (FSRU) Prometheas, which is currently in Malaysia as part of the process of its certification for use.
It had been stated earlier in the year that Prometheas would be certified in October.
A month ago, he had said the government was engaged in “damage limitation” following reports of “serious safety issues” regarding the Vasiliko terminal’s construction, with television channel Omega having reported there were “design and materials issues” with the project.
“There are very serious technical issues, which make it impossible to continue the work at this time. That is why the work on the pier has been at a standstill for months and no timetable has been given by the authorities for the completion of the work,” Omega quoted a “competent source” as having said.
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