Cyprus: Electrical interconnection with Greece approved by the cabinet

According to the information that Cyprus Energy Minister George Papanastasiou has just given to journalists, the Cabinet approved at noon the proposal he submitted for the Cyprus – Crete electrical interconnection. The decision includes an amendment to the existing regulatory framework, which RAEC will incorporate in its decisions over the next few days. RAEC Decision 2/7/24, which provides that the recovery of costs of the implementation body (Great Sea Interconnectedor) by electricity consumers in Cyprus will start after the interconnection begins. With today’s decision, the recovery of part of the implementation body’s expenditure will begin within 2025 and will continue until December 2029. The recovery amount was set at 25 million per year and will come from state funds, in particular from the system for auctioning pollutants rights. A supplementary budget will be submitted to Parliament for the first instalment. Consumers will not be directly affected during the five years of construction. If the interconnection is not completed within 2029, the financing of the GSI will be discontinued and resumed – at consumer charge – after the project operates. If IPTO’s expenditure during the five years 2025-29 is greater than EUR 125 million (something rather certain) the balance will be paid by consumers during the operation of the cable. The Energy Minister made no reference to the extension of the premium WACC (capital-profit performance) of 8.3% for 17 years instead of 12 provided for in the current RAEC decision. This change had been agreed between the two sides (and RAEK) on 2 September but was apparently not included, unknown why, in today’s Cabinet decision. No mention was made of the sharing of the cost of 50-50 between consumers in Cyprus and Greece, in the event of an unexpected event that could hinder the completion or operation of the project, without responsibility for the implementation body. These two decisions (premium Wacc and the distribution of geopolitical risk were allowed to be taken in the next few days by RAEK, although it was expected that reference would be made to the Cabinet decision. There was also no clear mention of the final investment decision for the participation of the Republic of Cyprus in the share capital of Great Sea Interconnectedor, a decision that the Greek side had requested to be accelerated. According to Mr Papanastasiou, “at the very next time, and on the basis of the road map that has been drawn up, we will be in constant communication with both the Greek side and the European Commission, to further progress in the implementation of the project, but also with parts that have already shown real interest in participating in the project.”