EuroAsia interconnector loan denied by European Investment Bank

The European Investment Bank will not approve a loan for financing the electricity interconnection project between Cyprus, Greece, and Israel through the EuroAsia Interconnector, as confirmed by a representative from the EIB in an interview with "K" magazine. According to the same spokesperson, both the Commission and the entity responsible for implementing the EuroAsia Interconnector have been informed about the negative evaluation results. The President of the EIB, Werner Hoyer, had discussed the preliminary results with Cypriot officials during his visit to the country in early June.

The implementation body had requested a loan of 600 million euros to cover part of the remaining amount from the total cost of 1.9 billion euros after receiving 657 million euros from the Connecting Europe Facility and 100 million euros from the Recovery and Resilience Mechanism.

It is important to note that the EU co-funding pertains to the section of the project connecting the location of Korakia in Crete to Kofinou in Cyprus, as it involves a Project of Common Interest linking two member states.

Following the confirmation of information by "K" magazine last week regarding concerns from the EIB, along with an article from "Filileftheros" on July 20th suggesting the EIB's lack of favor for project financing, the stance of the government will play a crucial role in the project's implementation efforts. Despite this, there remains the possibility for the implementation body to submit a new request to the EIB. It is worth noting that, according to information from "K" magazine, the implementation body (which is a private initiative and not officially affiliated with the government) has sought state guarantees amounting to 600 million euros from both the previous and current government to attract investors. In terms of the government's perspective, the current Minister of Energy stated in mid-July, according to CYPRUS NEWS AGENCY, that the options are to provide guarantees, participate in equity capital, or not support the project.

Initially estimated at 1.57 billion euros, the project's cost has risen to 1.9 billion euros due to the situation in the global market. With a recent joint decision, the Regulatory Authority for Energy of Cyprus (RAEC) and the Regulatory Authority for Energy (RAE) of Greece have deemed the project mature for implementation.

When responding to a related question from "K" magazine about how the EIB evaluates the project and whether a decision has been made, the spokesperson explained that the EU's investment bank has been evaluating the project for several months and has utilized the tools at its disposal to assess its eligibility for funding. While the project is of interest, the EIB will not be able to provide any loans for its financing based on the results of the economic evaluation, which is applied to every project funded by the organization. The preliminary results were discussed with the Cypriot government during President Hoyer's visit earlier this year and were also presented to the European Commission and the implementation entity, as highlighted by the spokesperson.

On July 21, 2023, RAEC announced the signing of a revised agreement with RAE for the cross-border cost sharing of the Crete-Cyprus interconnection project, acknowledging the reasonable increase in cost. The increased cost was deemed reasonable considering factors such as global market uncertainty, disruptions in the global supply chain, market instability, the impacts of the Russian invasion in Ukraine, and the pandemic's effects on supply chains and the availability of raw materials for cable and converters, as well as volatile material prices, rising interest rates, and high inflation that led to increased operational costs.

The two regulatory authorities also agreed on an updated implementation timeline for the project, which, according to the announcement from the implementation body regarding the cable purchase agreement, is expected in 2029. According to details about the project recorded in the relevant online information platform of the Commission for financing and tenders, the 675 million euros funding from the Connecting Europe Facility covers the design, production, and installation of converter stations at the terminals in Cyprus and Greece, as well as the underwater cable system connecting the two countries.

Key milestones, as outlined by the Commission, include awarding the construction of the voltage converter and the cable works, with a prerequisite being the involvement of the electricity transmission system operator in Greece. The cable procurement issue is considered closed with EuroAsia's agreement with the French-Norwegian Nexans, and procedures for the voltage converter, which will be constructed by Siemens, are said to be ongoing.

EIB has already funded significant energy projects in Cyprus, including funding for energy generation parks from renewable sources. However, as perceived by EIB, the developmental bank of the EU based in Luxembourg, Cyprus' main challenges involve the need to upgrade the electricity distribution network, invest in electricity storage facilities, provide more support for public and private renewable energy generation parks, and invest in energy efficiency promotion. In this context, EIB is willing to discuss investments in areas related to the green transition.

Already in 2022, 250 million euros were allocated for priority investments in Cyprus, which is the largest recipient of EIB support in proportion to its population compared to any other country in Europe. Plans for EIB funding in 2023 include investments in wastewater management, co-financing EU investments related to the green transition such as energy efficiency and innovation and research projects through the State Fund, and private sector investments in renewables, education, and innovation. Projects being promoted include, among others, the new Cyprus Museum, road safety measures, and student housing in Nicosia, Limassol, and Paphos.

[This article was translated from its Greek original]