Cabinet decision expected over interconnector

The government is expected to make its final decision on Thursday over the regulatory framework of the leg of the Great Sea Interconnector project which runs between Crete and Cyprus.

An extraordinary cabinet meeting is set to take place later on Thursday, while consultations are ongoing between Cyprus’ energy ministry, legal service and finance ministry, as well as with the Greek authorities, Greece’s independent power transmission system operator Admie, and the European Commission.

Once those consultations have concluded, cabinet will then convene and is likely to come to a final decision on the matter.

The main point of contention is Admie’s request for Cyprus to pay a total of €125 million between 2025 and 2029 – before the interconnector is operational, in effect helping finance the project and ensuring that Admie will have a stable income while investing in the project before the project itself turns a profit.

In the end, a solution to the matter had reportedly been reached, with the Cypriot government set to utilise funds made available to it through the European Union’s emissions trading system (ETS) to pay the required €125m.

Admie had reportedly initially driven a hard bargain on the matter but, faced with the spectre of the project’s collapse and the possibility of being liable for tens of millions of euros to cable producer Nexans, which had already been commissioned to start the project, they reportedly eventually backed down.

The €125m payable over five years to Admie is separate from the €100m buy-in to the project’s holding company, which Cyprus is required to pay if it wishes to buy itself into the project.

On that matter, the Cypriot government has demanded access to a cost-benefit analysis and the time to evaluate it before coming to a final decision, but the finance ministry’s permanent secretary George Panteli had said last week that Cyprus’ authorities have not yet seen the project’s financing plan.

In both cases, the matter of “geopolitical risk” is taking increasing precedence, with fears growing regarding the region’s potential geopolitical volatility.

The issue of “geopolitical risk” relates to possible interference with the laying of the cable by Turkish warships in the Aegean. Admie had sought reassurances that should anything occur beyond its control which would hinder the interconnector project, including Turkish interference, it would be able to recover the investments it had made up to that point.

With this in mind, Admie had asked the Cyprus Energy Regulatory Authority (Cera) to “diversify its regulatory framework to cover the geopolitical risk” of the project.

The current regulatory framework provides that the matter of covering costs of the project should it not be completed due to “geopolitical factors” “may” be considered by the regulatory authority, with Energy Minister George Papanastasiou and Cera chairman Andreas Poullikkas both in agreement that the current laws on the matter suffice.

Papanastasiou last week pointed out that Admie had requested six regulatory changes, and that Cera had accepted four of them.

“The two that are left are very important, and we responded in writing to Admie that Cera’s position is clear: consumers cannot shoulder any costs without benefitting,” he said