Nicosia: The final cost of the Cyprus-Greece electricity interconnection, the Great Sea Interconnector (GSI), is expected to be significantly higher than the pound 1.9 billion currently estimated capital expenditure (capex), according to Finance Minister Makis Keravnos. The Minister stressed before the Parliamentary Committee on Energy on Tuesday that the project's financial viability and final cost are still to be determined.
According to Cyprus News Agency, Keravnos said that the pound 1.9 billion relates primarily to the cable, pointing out that there are significant additional construction works and other expenses, such as insurance coverage, storage facilities, and maintenance requirements, which will need to be reflected in the updated studies and are expected to substantially increase the project's overall cost.
The Finance Minister emphasized that the Government cannot take a final decision without updated financial data and a clear picture of the investment's viability. As he explained, the state needs to know the actual cost and how it will be financed, particularly because any assumption of the cost by the Republic would affect public finances and the spending margins arising from the European economic governance framework.
Keravnos argued that, if the cost is passed on to consumers, it would not directly burden public finances, but it would create a significant issue for consumers in a country where electricity costs remain high. An earlier estimate by the Cyprus Energy Regulatory Authority (CERA) in 2017 put the cost to consumers at approximately 3.7 cents per kilowatt-hour, depending on the use of the cable and the repayment of part of the cost through its use.
The Finance Minister also referred to a feasibility study commissioned to a US company by a previous Cabinet decision, noting that its findings were not encouraging regarding the project's viability. For this reason, an updated study was requested, the results of which the Government is awaiting before deciding on the next steps.
He added that the European Investment Bank (EIB) had already expressed concerns at an earlier stage about the project's financial viability, while in July 2023 it had recommended that energy storage also be examined as an alternative solution. In February 2024, the Cabinet recognized the geopolitical importance of the GSI, but made the completion of due diligence, updated cost estimates, and a business plan prerequisites.
Keravnos stated that Cyprus, as an EU member state, must be interconnected with the other member states so that it does not remain energy-isolated, while noting, however, that the current energy crisis has prompted concerns and discussions among EU Finance Ministers, and it was concluded that electricity interconnections had not provided solutions to the problems currently being faced.
At the same time, Keravnos expressed reservations about whether the interconnection would lead to a reduction in energy costs, stressing that 'we are not certain that the price of energy will decrease,' while noting that it is a particularly costly project.
Both the Finance Minister and Energy Minister Michalis Damianos rejected the suggestion of 'mixed messages' from within the Government, stressing that it cannot be said that the project will proceed regardless of cost. Damianos said that if the cost proves to be high, investors and other financing methods will have to be found.
Damianos described the GSI as more a project of energy adequacy and security than one aimed at reducing electricity costs. He noted, however, that the Government has a responsibility to ensure technical soundness, financial viability, and benefits for consumers. The engagement in the project of French company Meridiam, he said, adds new momentum to the project, but the participation of additional investors is also required.
Regarding the Republic's existing commitments, it was recalled that the previous Government had included the project in the Recovery and Resilience Plan with pound 100 million, on the condition that European funding for its construction was secured. At the same time, since 2021 there has been a government decision for Cyprus to participate in the project, a fact which, as was pointed out, must be taken into account. Whether previous commitments can be amended is, according to the Energy Minister, a 'very complicated legal question.'
Damianos also stressed the project's major geopolitical importance for Cyprus, Greece, Israel, and the wider region, noting that if the cost changes, the involvement of investors or other sources of funding should be explored to cover it, so that Cypriot consumers are not unreasonably burdened. Regarding the surveys being carried out in the field, he said that the issuance of the NAVTEX by the Greek side is expected in the coming weeks to allow the continuation of seabed surveys, with the French government also supporting the French research vessel.
On the other hand, CERA stated that the pound 1.9 billion is the current capex estimate, with 63% corresponding to Cyprus and 37% to Greece, while the remaining expenses are divided 50%-50%. CERA has also raised questions regarding the final role of the Independent Power Transmission Operator (IPTO) and whether it will remain the project implementation body following Meridiam's entry.
CERA Chairman Polys Lemonaris said that the Cyprus-Crete-Israel electricity interconnection is an EU Project of Common Interest and that CERA has a regulatory obligation arising from European legislation. He noted that CERA was informed on 11 August about the IPTO-Meridiam agreement and, on 28 August, together with the Greek competent authority, sent a joint letter with questions, to which it has not yet received a response.
The issue of ownership and control of the cable also remains open. CERA Vice Chairman Alkis Philippou said that, based on the current situation, control and management of the cable would be 100% in non-Cypriot hands, raising the question of whether the Republic of Cyprus should have a stake. CERA member Neophytos Hadjigeorgiou estimated that the project is currently approaching pound 3 billion and that its completion is expected to take place after 2030.
The MPs expressed strong concerns about the cost, financial viability, transparency, and geopolitical risks of the Cyprus-Greece electricity interconnection project. They questioned whether the project would ultimately reduce electricity prices for Cypriot consumers or instead add to their financial burden, and criticized the lack of clarity over the project's total cost, ownership structure, governance, and investment terms.
