The integrated cost-benefit study of the Greece-Cyprus Great Sea Interconnector (GSI) will be handed over by ADMIE management to the Minister of Energy, Trade and Industry of Cyprus, Mr. George Papanastasiou, on 11 July, when he will make another visit to Nicosia. The main findings of this report were presented to the Cypriot authorities in early June.
As the Administrator reports, during its visit to Nicosia, the ADMIE management will hold working meetings with the Cyprus Energy Regulatory Authority in order to clarify all the parameters necessary to define the regulatory framework in a timely manner by the Cypriot regulatory authority and not risk being suspended due to delays, the cost of which, moreover, will be borne by consumers.
It will also hold meetings with financial and other economic entities in Cyprus, as well as with representatives of the Cypriot press, in order to present in detail the benefits of electricity interconnection for Cypriot consumers.
Important step towards the regulatory framework
Meanwhile, the Greek Regulatory Authority has issued the decision on the methodology for calculating the regulated income of the project, which ADMIE describes as an important step towards completing the regulatory framework. As it states:
- The Greek regulatory authority recognizes the need to pay revenues from the beginning of the construction period, in alignment with the Cyprus regulatory authority (CERA), which took a corresponding decision in summer 2023 (on the previous Executive Agency).
- Furthermore, it determines the sharing of operating costs at a rate of 50-50%, adopting ADMIE’s proposal to assume a larger share of operating costs compared to the 37% foreseen for Capex.
- The methodology provided by ERA includes a stronger provision to cover the geopolitical risk of the project, explicitly stating that the costs will be fully covered through the regulatory asset base, which is also expected from the corresponding CERA decision due to the national importance of the project and for both countries.
The FSA’s decision, according to ADMIE, is of extreme importance, as based on the prospect of issuing this decision, the suspension of production by the submarine cable manufacturer Nexans, due to regulatory uncertainty, was avoided.
ADMIE further states that the next milestone is the issuance of two additional decisions by the regulatory authorities of Greece and Cyprus in order to complete the regulatory framework governing the project by mid-August, in order to eliminate the regulatory risk that still exists at this time, and a full notice to proceed must be given to the company Nexans, but also to accelerate the entry of investors who are awaiting the final regulatory framework to make final investment decisions. Although the regulatory framework is not complete, ADMIE has received binding financing conditions (term sheet) from a commercial bank and has already submitted to both regulators its revenue proposal (wacc), which includes them together with the degree of technical complexity of the project.
The need to close the outstanding regulatory issues by mid-August at the latest was underlined by the Commission in a meeting held in the previous days with the Greek and Cypriot regulators and the Implementing Agency. In addition, the Commission convened a meeting early next week to review progress in the implementation of the co-financed project, specifically progress regarding the regulatory framework, the participation of the Republic of Cyprus in the project and the ongoing discussions with the European Investment Bank.
On a financial level, in addition to the commitment form from a commercial bank, ADMIE is in consultation with the European Investment Bank to re-examine the financing of the project based on the revised cost-benefit study, while progress is being made in discussions with the US state investment fund, DFC.
At the same time, Nexans has initiated the procedures for the detailed marine survey and is continuing the construction of the cable, while the Implementation Agency is in intensive negotiations with the contractor for the Siemens converter stations in order to conclude the relevant agreement and sign the contract within 2024.