Privatisation Bids Must Remain Open and Transparent, Says State Aid Commissioner

The preferred method for submitting bids in all types of privatisations should be open, transparent, and accessible to all potential investors, without conditions that could diminish the final price, according to State Aid Commissioner Stella Michaelidou.

Speaking to the Cyprus News Agency (CNA), Michaelidou noted that this observation is particularly relevant to the ongoing discussion surrounding the privatisation of the Cyprus Stock Exchange (CSE). She stressed that any conditions attached to the CSE tender process must be reviewed by her office under state aid rules and, where necessary, by the European Commission itself. “It is important to underline that the preferred method of inviting bids must be open, transparent with equal opportunity for information and without conditions that could potentially lower the price,” she said.

The commissioner underscored the importance of an independent assessment of the CSE’s value carried out by a certified firm. “The sale must be conducted at a price that reflects fair value, without being undervalued,” she stated. She also emphasised that the process should avoid state interference after privatisation. “The adoption of special favourable arrangements or exclusive rights through conditions should be avoided,” she said.

Michaelidou further explained that if the state retains a stake in the CSE following privatisation, this would allow the government to continue participating, monitoring, and exercising some level of oversight in terms of the stock exchange’s development and its contribution to the economy. At the same time, she warned that “post-sale conditions, in the case of full privatisation, should be avoided and additional state guarantees, tax benefits or obligations beyond what a private investor would accept should not be provided.”

Turning to the broader question of privatisation policy, the commissioner said the issue involves both national frameworks and EU state aid rules. “For all types of privatisations, the European Commission encourages member states to conduct competitive tenders to ensure maximisation of revenues from privatisations and legal certainty to the greatest extent possible,” she said.

Michaelidou also pointed to established legal precedent, noting that “if conditions are imposed on the sale of a company that a private investor would not set, it suggests the possible existence of state aid, because a private investor in a market economy would typically sell the company at the highest possible price without imposing conditions that could reduce its value.” She added: “It is important to adhere to market rules and specifically the market economy investor principle.”

The commissioner clarified that where conditions are imposed on a sale, “these conditions should be such that potential buyers, according to the required criteria, can meet them, to avoid exclusion and price reduction.” She stressed that each transaction must be judged on its own merits and that “it must be demonstrated that if conditions are imposed on the sale of the company, they do not constitute state aid.”

Her office, she explained, has already advised the Finance Ministry that any conditions included in the tender process, whether in law or in tender documentation, “should be assessed by our office under state aid rules and, if necessary, by the European Commission itself.” She went on to recommend that for greater legal certainty, member states are encouraged to make use of the preliminary notification procedure with the European Commission, where appropriate, in order to obtain guidance on whether a measure constitutes state aid.

Outlining the risks of state aid, Michaelidou pointed to specific scenarios such as sales conducted below value without an independent valuation, closed or non-competitive tendering processes, and the exclusion of potential buyers. She also noted the dangers of special arrangements that favour the purchaser, including tax concessions, guarantees, debt write-offs, or debt-to-equity conversions that advantage the buyer, as well as the imposition of social or political obligations that a private investor would not typically accept.

“The assessment of risk should include an analysis of what a private investor would do, whether the market is favourable, the risks involved, and the expected returns,” she concluded.

By fLEXI tEAM