Electrical interconnection between Greece and Cyprus: The next steps after approval

Green light was given yesterday (17.9.2024) by the Cyprus Cabinet for Greece – . As they broadcast yesterday valid Cypriot instruments the two countries’ framework says that if costs exceed 1,94 billion euros, consumers in the two countries will be distributed 50% of the additional cost. Under the existing regulatory framework, cost sharing would be 63% (Cyprus) – 37% (Greece), regardless of the final cost for interconnection. Under an agreement approved yesterday by the Cabinet (without reference to the official statement by Energy Minister George Papanastasiou) the following include: The premium WACC, which had been decided by the Cyprus Energy Regulatory Authority (RAEK) to be determined as a whole (including the usual WACC recognized in AEK -4.6%) at 8.3% and to apply for 12 years, will apply for 17 years to cover the 5 year period of construction of the interconnection. The RAEC Decision on cross-border cost sharing (CBCA) is amended only in respect of the external risks that may prevent its interconnection or operation from being completed, without the responsibility of the implementing body. Instead of today’s 63% (for consumers in Cyprus) and 37% for consumers in Greece, today’s decision provides for a 50-50 cost sharing in case the interconnection does not work. Mr Papanastasiou previously announced that only that the Cabinet decided that the recovery of part of the implementation body’s expenditure would begin within 2025 and 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 decision taken by the Cabinet yesterday (in the part not announced) states that Cyprus’ participation in the share capital of Great Sea Interconnectedor will be decided at a subsequent stage (p.p. towards the end of the year), after various studies are completed under conditions and conditions.