Energy minister upbeat on Interconnector investment

The energy minister on Tuesday sounded favourably disposed towards the state investing directly in a mooted subsea electricity cable linking Cyprus to Greece, but MPs pushed back citing the political and technical uncertainties still looming over the project.

During the discussion in parliament, Energy Minister George Papanastasiou said the project promoter has yet to make formal delivery of their cost-benefit analysis for the Great Sea Interconnector – the cable connecting Cyprus to Crete.

The promoter – Greece’s Admie or Independent Power Transmission Operator – is expected to hand over the analysis later this month or in early July. Once this happens, the government will assess the document and then take a decision on whether or not to invest €100 million.

It was in early June that Admie had given a presentation to officials here of the cost-benefit analysis – without however formally delivering it to the government.

Speaking to MPs but also to the media later, Papanastasiou appeared to give the project the thumbs-up.

“The charge [to Cypriot consumers] will be far smaller than the benefit,” he asserted.

According to the minister, the laying of the cable will start next month. Already 50km of cable have been manufactured.

But the minister had to field a series of questions posed by lawmakers, the latter concerned about the viability of the project and the prospect of costs spinning out of control.

One matter raised was whether Cypriot consumers would begin paying a fee towards the project before the electrical connection goes live.

Papanastasiou said this was up to the energy regulator here to decide. As for the counterpart energy regulator in Greece, it has already ruled that Greek consumers may be charged a fee as of January 2025.

Construction of the project is expected to be completed around mid-2029.

“As for us, the state, we believe the charge should time-wise come as close as possible to the operation of the project,” Papanastasiou offered.

The minister said the project “is on the implementation track” and that it is “a European project”.

Should the Cypriot government decide to acquire a direct stake, it would do so via a state agency. The €100 million investment would come from the Recovery and Resilience Facility.

Regarding fears of cost overruns, Papanastasiou said the project involves two contracts which spell out the costs.

“If there is any deviation from the contracts, we expect this to be small.”

Disy MP Averof Neophytou asked how consumers can possibly be required to pay a fee before the project is even finished.

He said consumers would pay 3.7 per cent for the next 30 to 35 years, in addition to a 4.6 per cent charge.

“It would be a mega-scandal to ask Cypriot consumers to pay from now this 8.3 per cent, given the political risks as well as the uncertainty about the technical risks,” he said.

An official with the energy regulator said the charge to consumers would come to 4.6 per cent – going to the EAC. This part has been approved. Plus there would be a 3.7 per cent charge for a period of 12 years.

Disy’s Kyriacos Hadjiyiannis warned the government not to commit to a project, given the several unknowns. First, the cost-benefit analysis is pending; secondly, the study on the construction of the Siemens converter station in Cyprus is likewise pending; and thirdly, the precise route of the subsea cable is unknown.

He said that according to his understanding, the government “is deciding and committing, not on the basis of studies, but on the basis of person-to-person relations with Admie. We need more transparency.”

The MP also claimed that Cyprus faces a great deal of “pressure” to directly invest in the interconnector. Queried about this, he said the pressure comes from both the EU and Greece’s Admie.

The Great Sea Interconnector was formerly known as the EuroAsia Interconnector – after a Cypriot company of the same name. In October 2023 the Cypriot project promoter dropped out of the project, with the baton handed over to Greece’s Admie.

Admie is 51 per cent owned by the Greek state. The State Grid Corporation of China has a 24 per cent stake, with the rest owned by other investors.

In January 2022 the European Commission had approved €657 million under the Connecting Europe Facility (CEF) for the cable project. There was also an additional grant of €100 million through the Cyprus Recovery and Resilience Plan, part of the EU Recovery and Resilience Facility.