Cyprus and Greece appear to be one step closer to an agreement on the nearly €2 billion cable project, called the Great Seat Interconnector (GSI) that will connect the two countries’ power grids. Cyprus’ cabinet has approved one of four major pending issues, signaling the potential resolution of long-standing obstacles, according to reports from OT.gr.
Nicosia’s Partial ‘Yes’
Cyprus’ Energy Minister George Papanastasiou confirmed that the Cabinet has approved a mechanism to recover the costs associated with the project’s construction, specifically those incurred by Cyprus. This decision represents partial progress, but it does not mark full approval of the entire agreement.
The recovery of costs will be achieved through a five-year plan. Starting from January 1, 2025, the Cypriot state will pay €25 million annually until December 31, 2029. This funding is intended to mitigate potential electricity price hikes for consumers during the construction phase of the interconnection.
Cyprus plans to raise these funds by auctioning emissions rights, providing a clear financial path for the project’s execution without imposing an undue burden on taxpayers.
Outstanding Issues Plaguing Agreement
Despite the progress made, there are still unresolved aspects of the agreement. OT.gr reports that Cyprus’ cabinet has delayed making a final decision on its participation in the project’s shareholding structure. Specifically, a €100 million investment by Cyprus into the Greek System Interconnector (GSI) remains undecided. The cabinet is expected to revisit this issue in November, pending an independent evaluation of the cost-benefit analysis conducted by ADMIE, the project’s promoter.
Additionally, Cyprus has not provided a conclusive decision on other critical points. However, unconfirmed reports suggest that the cabinet has approved the premium Weighted Average Cost of Capital (WACC) set by the Cyprus Energy Regulatory Authority (CERA) at 8.3%. This WACC will apply for 17 years, covering the five-year construction phase of the project, which is longer than the initially proposed 12-year period.
Another crucial issue is the distribution of geopolitical risk between Cyprus and Greece. It is reported that both countries have agreed to share this risk equally, with a 50%-50% split. This arrangement reflects the understanding of the strategic importance of the project and the need to balance potential risks between both nations.
Awaiting Final Decisions
While Cyprus has made partial approvals, several other elements remain undecided. The technical and financial specifics of the project, as well as its overall feasibility, are still under review. The outcome of these pending issues is crucial for the project’s future.
Upcoming Athens Meeting: Key to Project’s Future
A pivotal meeting between Greek Prime Minister Kyriakos Mitsotakis and Cypriot President Nikos Christodoulides is scheduled to take place in Athens on Thursday. This meeting is expected to be crucial in determining the final steps towards a full agreement.
Official anouncements are expected following the meeting. In the meantime, Athens’ has stayed silent on the matter.
