CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
• asset ownership and corporate risks; • authority/capacity of the counterparty to enter into the transaction; • governmental or other authorisations or permits;
their home jurisdiction. ECA finance is a type of trade credit that benefits both exporters and for- eign purchasers. The following may be used, but this is seldom the case in Cyprus. • Project bonds – project bonds are debt securities issued by the project company to raise funds for the project. Institutional investors can engage in infrastructure projects using project bonds, as they are listed, tradable instruments that can provide higher risk-adjusted returns. • Alternative sources of financing: (a) streaming or royalty financing – is a type of alternative financing arrangement commonly used in the mining and natural resources industries. In this financing model, a com- pany provides upfront capital to a mining or resource-extraction project in exchange for the right to receive a portion of the project’s future production or revenue; and (b) commodity trader financing – is a subset of commodity finance that refers to the financing of the underlying commodity exchange from supplier to buyer and is linked to the asset con- version cycle. 8.7 Natural Resources Different legislation is in place for each type of natural resource in Cyprus and, depending on the industry of the project, various and/or different licences may be required prior to commencing any actual work. A licence to carry out mining activities from the Mining Service of Cyprus is required for any exploration and exploitation of minerals as per the Mines and Quar- ries Law Chapter 270, as amended. A recent exam- ple is the discovery of hydrocarbons in the region of Cyprus, which prompted the Hydrocarbon (Prospec- tion, Exploration and Exploitation) Laws of 2007 to 2019. The EU Directive has been incorporated into Cypriot law, specifying the conditions for approv- ing and authorising the prospection, exploration and production of hydrocarbons. Any successful licensee will be required to enter into an Exploration and Pro- duction Sharing Contract (EPSC), with the Ministry of Energy, Commerce, Industry and Tourism, as the
• financing structure; and • security and collateral.
In terms of legal form, project vehicles are likely to take the form of a limited liability entity potentially coupled with either a shareholders’ agreement or a partnership at ownership level to allow for increased flexibility and discretion in decision-making. Local rules and legislation may have an impact on the overall structuring beyond the customary employment, health and safety legislation (eg, the Safety and Health at Work Law of 1996 (89 (Ι)/1996)). For example, the hydrocarbon exploration and exploitation activities in the Republic of Cyprus are governed by the Hydrocar- bon (Prospection, Exploration and Exploitation) Law of 2007 (No 4 (I)/2007) and the Hydrocarbon (Prospec- tion, Exploration and Exploitation) Regulations of 2007 and 2009 (No 51/2007 and No 113/2009). Finally, in view of the ESG drive, relevant factors should also be considered, especially for projects in the energy sector. 8.6 Common Financing Sources and Typical Structures Most project finance in Cyprus takes the form of either equity (capital) finance or bank finance (or a combina- tion of both). A few examples of export credit agency financings are the following. • Bank financing – traditional bank loans or credit lines are one of the most common sources of project financing. Banks may provide loans directly to the project company or participate in syndicated loans with other financial institutions. • Private equity (capital) funding – private equity (either own or from third parties) provides equity capital to the project in exchange for ownership stakes. • Export credit agency (ECA) finance – refers to transactions in which representatives of specific nations grant financial assistance to the export of qualifying capital goods and related services from
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