ATHENS – European Union worries about growing Chinese influence in the bloc often turn to Greece, where the Chinese company COSCO is operating the key port of Piraeus, making it one of the bloc’s busiest and most successful and with more Chinese investors eyeing the country.
It’s happening on Greek islands where those such as the popular tourist destination of Mykonos no longer have to rely on a now-closed diesel-powered energy plant that polluted the air with bilious fumes.
Since 2016, China’s State Grid Corporation became a strategic investor in IPTO, or the Independent Power Transmission Operator, the Greek company that is linking the islands with Greece’s mainland power network.
State Grid acquired a 24 percent stake in IPTO for 324 million euros ($356.3 million) in a deal that caused much consternation in Brussels, seat of the European Commission, and anxiousness in other bloc capitals that China was gaining a bigger foothold.
That was part of demands from Greece’s international creditors who put up 326 billion euros ($358.5 billion) from 2010-2018, requiring the privatization of many Greek state enterprises and assets, putting them in the hands of companies like State Grid, one of the world’s largest.
Greece needed China’s help and the deal opened access to hundreds of millions of euros of funding from Chinese banks to help pay for investments at half the rate offered by Greek lenders, officials told Fortune in a report.
The magazine noted how more than 20 years ago, Greece began putting in place a complex submarine power transmission network spanning the Aegean Sea, with the hope of bringing power to islands, a key cog in tourism, the country’s biggest revenue engine.
Greece’s IPTO is rolling out more than 300 kilometers (186.41 miles) of cable at depths of up to 550 meters (0.34 miles) linking dozens of islands. The company manages the grid network that transports electricity from energy plants to substations throughout Greece.
The first phase of the project was completed in 2018 when the islands of Paros, Syros and Mykonos went online. The second stage, connecting with Naxos and Andros is due to be finished in time for the summer tourist surge.
The third stage will begin later this year to strengthen the Syros link, while the fourth stage will gradually commence in 2023 and include the southern Cycladic islands of Santorini, Milos and Folegandros, among others.
IPTO’s 10-year investment plan is aimed at making power links more reliable on the islands, cut electric bills and be more environmentally friendly. “The energy isolation of the islands will be ended as the size of the country’s electricity market grows,” said IPTO to the magazine.
It’s costly though, about 800 million euros ($879.74 million) and likely to get even more expensive as the grid connection spreads to more and remote islands as far as Crete, an undersea line there set to cost an additional one billion euros ($1.1 billion) in investments, which the Chinese company wants to undertake.
Despite the EU’s concerns, Greece wants to do more business with State Grid after the bloc allowed a 24 percent stake, if reluctantly, the agreement requiring close monitoring of the network for security risks.
Greece holds a 51 percent stake in IPTO, but State Grid has been given extensive co-decision rights and has three of the nine positions on the board of directors, including the Deputy Chief Executive, a spot of power.
Greek officials said they had to sell the stake to State Grid during a time when the creditors wanted privatizations, conflicting with worries about influence from China, which wants to make Piraeus a key entry point into the EU as part of its New Silk Road aims.
“There was also interest from the French and the Italians. The French, however, stopped short of actually making an offer, while the Italians offered a very low amount,” an official, who was close to negotiations, told Fortune.
“The Chinese brought cash to the table in the highest bid. It was an offer that had a clear, long term outlook. We accepted it,” added the official, who requested anonymity.
Now there are signs that the EU is digging in its heels. In 2017, Germany cited security fears in blocking a bid by China’s State Grid to acquire a 20% stake in the country’s largest electricity transmission company, 50Hertz, the bloc’s leaders calling China a “systematic rival.”
That’s all politics to residents and tourists who won’t have to worry about power losses while the EU worries about a power shift over the Chinese.