EU Clears Greek Subsidy for TAP
The European Commission on March 3 said it has found the Host Government Agreement between the Greek authorities and the Trans Adriatic Pipeline (TAP) to be in line with EU state aid rules.
"Today's decision opens the way for a multi-billion infrastructure project in Greece,” said EU competition commissioner Margrethe Vestager. TAP will invest €5.6bn over five years, of which €2.3bn will be in Greece. With an initial capacity of 10bn m³/yr, TAP will flow gas from the Shah Deniz II field in Azerbaijan to Italy starting 2020 and is a EU ‘project of common interest’ (PCI).
TAP CEO Ian Bradshaw said earlier this week that construction will start in late May or early June in Greece near Thessaloniki.
The Host Government Agreement provides TAP with a specific tax regime for 25 years from the start of commercial operations, for which state aid approval was required. The EC concluded that the project would be unlikely to be built without the subsidy from Greece.
The tax regime has a built-in adjustment mechanism that limits the maximum benefit for TAP. If the Greek equivalent applicable tax rate were to rise or fall beyond 20%, an adjustment mechanism to recalculate TAP's contribution will come into effect, the EC said. However the EC did not provide guidance on how much subsidy Greece is likely to pay to TAP, although it said that Greece will monitor the mechanism to ensure that TAP complies with the methodology and therefore that the aid is limited to the minimum necessary.
Sources in Brussels suggested that the aid cannot be quantified in advance, as the very reason why the aid has to be granted is the impossibility to foresee how the tax regime in Greece will evolve during the next 25 years.
TAP is a Swiss-registered joint venture owned by BP, Azeri state Socar and Italian gas grid operator Snam (20% each), Belgian grid Fluxys 19%, Spanish grid Enagas 16% and Swiss Axpo 5%.
The Azeri gas will be shipped across Turkey to the Greek border by the Tanap pipeline, expected to be ready for operation in 2018. At the Greek border, it will connect to TAP.
Mark Smedley