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By Nondas Cl. Metaxas
Director General-CEO of the CSE
As is already widely reported, the Republic of Cyprus is currently in an ongoing authorisation procedure regarding the licensing of the plots of the Exclusive Economic Zone of the Republic, for the purpose of extracting hydrocarbons.
The efforts can yield significant benefits to our country, through the development – enhancement of the Energy Sector in Cyprus, via the CSE and the securities market.
Taking into consideration examples of similar cases internationally, the Cyprus Stock Exchange can play a vital role in this effort, for the benefit of the economy and the Republic of Cyprus, in general.
Therefore, towards this direction, among others, the following suggestions are proposed:
a) The State Company for Hydrocarbons should be listed on the CSE. Respective arrangements constitute this practice internationally. Specifically, let’s take to the example of Norway – with the company StatOil — which is indicative of the direction to be followed in the case of Cyprus. Through such an arrangement and the distribution of part of the share capital to investors (domestic and international), it will possible for Cyprus to attract large institutional investors and widen the offered investment products, bringing multiple benefits.
The Cyprus National Hydrocarbons Company could emerge as the national institution for the energy interests of the Republic, and in this context it can establish an independent fund (sovereign fund) which will belong to the Republic, where the State will have the ownership of the majority of the capital of the Company. In other countries, the State still owns the majority of share capital of the equivalent Oil & Gas Company, whereas the remaining share capital is spread over in a number of international, domestic institutions and private investors.
b) Within the forthcoming agreements which are going to be formed between the Republic and the drilling companies of hydrocarbons, which finally will be selected for each plot of the Cyprus’ Exclusive Economic Zone (EEZ), the issue of securities in the form of certificates representing shares (Depository Receipts) and admission for listing on the Cyprus Stock Exchange could be included in the contractual arrangements. With this option, a remarkable energy sector will be established within the CSE market and new products will be offered to investors (domestic and international), which will be particularly attractive for investment in the region of Cyprus.
Through the implementation of the above, it will be possible for the energy sector of Cyprus to have a prominent position in the securities market, domestic and international, and to receive special importance for investment purposes. In this sector, new stock indices and related derivatives products could be created, such as Futures, Options, ETFs, etc.
Similar arrangements were made in neighbouring Israel, where through the energy sector, the companies involved in this sector were further developed. Also, the energy sector has contributed significantly to the further development of the securities market in the country, attracting international investors.
Furthermore, with the implementation of the above recommendations, it will be possible to attract international investment funds to Cyprus, specialising in the energy sector.
This will add further value to Cyprus’ effort to maintain and further develop as a regional financial centre.
The CSE is interconnected with European and neighbouring securities markets and has a very good infrastructure. The utilisation of the CSE in the energy sector, as was done in similar cases in other countries, will bring direct benefits to the Cyprus economy.
