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The Greek Regulatory Authority for Energy (RAAEU) has made a significant decision regarding the methodology for calculating the regulated revenue of the Greece-Cyprus electricity interconnection project, marking a crucial step towards finalizing the regulatory framework for the Great Sea Interconnector (GSI) project.
According to a briefing from IPTO, the project's implementing body, on July 11, the agency's leadership will present the complete GSI cost-benefit study to Cyprus's Minister of Energy, Commerce & Industry. Key conclusions from this study were initially shared with Cypriot authorities in early June.
Specifically, the Greek regulatory authority's decision acknowledges the necessity to commence revenue payments from the project's construction phase, aligning with a similar decision by Cyprus's regulatory authority (Cera) in the summer of 2023 regarding the previous implementing body.
In its ruling, RAAEU also specifies a 50-50 allocation for operating costs, endorsing IPTO's proposal for a larger share of operational expenses compared to the 37% originally planned for capital expenditures (Capex).
Additionally, RAAEU's methodology includes enhanced provisions to cover geopolitical risks associated with the project, explicitly stating that these costs will be fully supported through the regulatory asset base. This mirrors expectations from Cera's corresponding decision, underscoring the project's national significance for both countries.
The adoption of RAAEU's decision is deemed critical, as it averts production halts by Nexans, the manufacturer of submarine cables, which faced uncertainty due to regulatory delays.
IPTO highlights the next pivotal milestone: obtaining two additional decisions from Greek and Cypriot regulatory authorities by mid-August to finalize the project's regulatory framework. This aims to eliminate lingering regulatory uncertainties and facilitate Nexans's full engagement, while also expediting investor decisions pending the finalized regulatory framework.
Despite the framework's incomplete status, IPTO has secured binding financing terms from a commercial bank and submitted its revenue proposal (WACC) to both regulators, incorporating these terms alongside the project's technical complexity.
The urgency of resolving pending regulatory issues by mid-August was emphasized during recent meetings between the Commission and Greek and Cypriot regulators and the implementing body. Moreover, a meeting has been scheduled for early next week to review progress on the co-financed project, focusing on regulatory advancements, Cyprus's involvement, and discussions with the European Investment Bank.
In addition to discussions with a commercial bank, IPTO is consulting with the European Investment Bank to reassess project financing based on the updated cost-benefit study. Progress is also reported in discussions with the US sovereign wealth fund, DFC.
Meanwhile, Nexans has initiated detailed marine survey procedures and continues cable construction. IPTO is actively negotiating with Siemens, the station conversion contractor, aiming to finalize an agreement and sign the contract by 2024.
On July 11, IPTO's administration will deliver the full GSI cost-benefit study to Cyprus's Minister of Energy, Commerce & Industry, George Papanastasiou. This visit to Nicosia will include working meetings with Cera to clarify all necessary parameters for timely establishment of the regulatory framework by the Cypriot Regulatory Authority, thereby avoiding suspension risks due to delays, which would ultimately impact consumers.
Additionally, the implementing body will meet with Cyprus's financial and economic stakeholders, as well as representatives from the Cypriot press, to detail the benefits of the electricity interconnection for Cypriot consumers.
[Information sourced from CNA]
