Electricity interconnector cost to far exceed €1.9bn, MPs told
The summary, key facts and analysis below are generated by AI from reporting by In Cyprus and reviewed for accuracy against the original. Read the original for the full story.
The Great Sea Interconnector project, a vital subsea link between Cyprus and Greece, is facing a significant financial reality check as officials admit the initial €1.9 billion price tag is insufficient. This figure primarily covers the physical cable, leaving out critical expenditures for insurance, storage, and long-term maintenance that will drive the final budget much higher. The entry of French infrastructure giant Meridiam as a majority shareholder marks a pivotal shift toward private-sector leadership, yet it raises questions regarding sovereign control and the ultimate impact on energy costs. As the European Investment Bank prepares a revised viability study, the Cypriot government remains cautious about its level of financial participation, balancing the need for energy security against the risk of escalating public debt.
Background & Context
The Great Sea Interconnector, formerly known as the EuroAsia Interconnector, is a flagship EU Project of Common Interest designed to end the energy isolation of Cyprus. For years, the project struggled with financing and regulatory hurdles under its original promoters before the Greek grid operator IPTO took over as the project developer. The recent involvement of Meridiam, a major French infrastructure investor, represents a move to professionalize the project's management and secure the massive capital required for such a deep-water subsea undertaking.
Key Facts
- 1Finance Minister Makis Keravnos stated that the €1.9 billion estimate only covers the subsea cable, excluding insurance and maintenance costs.
- 2French investment group Meridiam has signed an agreement to acquire a 66% majority stake in the project from the Greek grid operator IPTO.
- 3The European Investment Bank is currently updating its viability study for the interconnector, with results expected by the end of 2024.
- 4The project is now scheduled to become fully operational from 2031 onwards, according to CERA member Akis Hadjigeorgiou.
- 5IPTO will retain a 34% minority stake and will continue to serve as the technical lead and operator of the interconnection.
- 6The Cyprus Energy Regulatory Authority (CERA) warned that the project might not lead to lower electricity prices despite the massive investment.
- 7The Cypriot government is delaying a final decision on its equity participation until the revised total costs are clarified.
Impact Analysis
The upward revision of costs places a heavy burden on the project's financial model, potentially requiring higher tariffs or more significant state subsidies. From a strategic perspective, the transition to French majority ownership reduces the direct influence of the Greek and Cypriot governments over the asset, though it increases the likelihood of successful completion through private capital. For the maritime and industrial sectors in Cyprus, the delay until 2031 for operational status means that the transition to greener, cheaper energy for port operations and ship-to-shore power will take longer than initially hoped.
What to Watch
The next critical milestone is the release of the European Investment Bank's viability study in late 2024, which will dictate whether the project remains bankable. Stakeholders should also watch for a formal decision from the Cypriot Council of Ministers regarding their equity stake, which will signal the government's level of confidence in the revised budget. Legal complexities regarding previous commitments made in 2021 will also need to be resolved to ensure the project's regulatory stability.
Why It Matters
The interconnector is the cornerstone of Cyprus's future maritime sustainability, as it is required to provide the stable, high-capacity electricity needed for 'cold ironing' at Limassol and Larnaca ports. Without this link, the maritime industry's ability to meet EU decarbonization targets for docked vessels will be significantly hampered.
Frequently Asked Questions
- Why is the €1.9 billion cost estimate being questioned now?
- The €1.9 billion figure was a baseline for the cable procurement itself; however, Finance Minister Keravnos clarified that it does not account for essential ancillary costs like insurance, storage facilities, and the complex engineering required for deep-sea installation.
- What role will Meridiam play compared to IPTO?
- Meridiam will act as the majority financial lead with a 66% stake, providing the necessary capital and infrastructure expertise, while IPTO will retain 34% and remain the technical operator responsible for the cable's daily management.
- How will this project affect electricity consumers in Cyprus?
- While the project aims to provide energy security, regulators have warned that the high capital expenditure and the current structure of energy investments in Cyprus mean that consumers should not necessarily expect a reduction in electricity prices in the near term.
Original Excerpt
The Cyprus-Greece electricity interconnector will cost significantly more than €1.9 billion, officials told parliament’s Energy Committee on Tuesday morning, as MPs reviewed progress on the Great Sea Interconnector project following the decision for French investment group Meridiam to acquire a majority stake in the project. Finance Minister Makis Keravnos told the committee the €1.9 billion […]