12° Nicosia,
15 July, 2024

No progress on Cyprus-Greece electricity interconnection project

Stalemates and ultimatums threaten EUR 657 million EU funding and project completion


By Chrysa Liangou

No progress was made on the Cyprus side's position regarding the Crete-Cyprus electricity interconnection project during yesterday's teleconference, initiated by the European Commission and involving stakeholders from Greece and Cyprus. On the contrary, the deadlock seems to be deepening. Reports suggest the Commission has issued an ultimatum to resolve the regulatory pending issues by August 14, with the threat of withdrawing the approved Community funding of EUR 657 million. A second ultimatum has been issued by Nexans, the main subcontractor responsible for constructing the submarine cables, warning that work will be suspended if the EUR 108 million installment specified in the contract, totaling EUR 1.43 billion, is not paid by August 31.

These ultimatums were addressed to the Cypriot side, which appears skeptical about the project's economic benefits at both political and regulatory levels. The Cypriot government has backed out of its commitment to invest up to EUR 100 million in the project, complicating efforts to attract third-party investors and secure full funding from banks.

The biggest blow, however, came from the Cyprus Energy Regulatory Authority (RAEK), which refuses to approve the imposition of user charges on consumers starting in 2025, the project's construction start date. In its decision, RAEK clearly states that any costs related to the construction period will not be recognized or recovered from consumers. RAEK insists that cost recovery from the special purpose company 'Great Sea Interconnector,' established by ADMIE as the interconnection promoter, should begin with the project's commercial operation.

ADMIE has submitted a proposal to RAEK to revise its decision, as the operator's management claims that without this amendment, the project cannot be financed and will fail. Both RAEK and the Cypriot Ministry of Energy are awaiting a comprehensive cost-benefit study of the project from ADMIE. According to Cypriot Energy Minister George Papanastasiou, who addressed the Parliamentary Committee on Energy yesterday, ADMIE has been asked to deliver the completed study by Monday, July 15. The study will be evaluated by experts to make a final investment decision. Additionally, ADMIE has been requested to provide the contract with Nexans, which has not yet been delivered.

To keep the project "alive" amidst tight deadlines, the Greek government is reportedly taking the initiative to seek a political solution, emphasizing the geopolitical implications of the project. Contacts at this level are already being prepared, and to facilitate these efforts, ADMIE has reportedly been asked to reduce the constant flow of information about the project's progress, which has caused annoyance on the Cypriot side. "We have difficult deadlines ahead of us, but we hope to achieve a positive outcome," a government official involved in the project told "K."

However, anxiety is high on ADMIE's side, as cancellation of the project would prompt the European Commission to request the return of the EUR 657 million in funding it approved from the Connecting Europe Facility, as the project is included in the list of projects of common interest (PCI). Since last October, when ADMIE took over as project manager, it has disbursed around EUR 165 million in pre-financing, representing 25% of the total EU funding. This amount would need to be returned to the Commission if the project does not proceed. It will then depend on RAEK whether ADMIE can recover it as a regulatory charge from consumers.

[This article was translated from its Greek original]


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