The power interconnection of Greece and Cyprus, with the prospect of an extension to Israel, is now back in track after the memorandum of understanding signed on Friday by the two countries’ energy ministers and the Cypriot energy watchdog approved the 125-million-euro investment in the Great Sea Interconnector (GSI).

Early on Friday the Cyprus Energy Regulatory Authority (CERA) approved an annual investment recovery of €25 million for GSI that is co-funded by the European Union, covering the period from January 1, 2025, to December 31, 2029. 

CERA also set a regulatory period of 17 years, beginning January 1, 2025, for a weighted average cost of capital (WACC) premium of 3.7% on the capital invested in the project.

In addition, CERA rejected a request from Greece’s Independent Power Transmission Operator (ADMIE) that is the project’s implementing party, to overturn a previous decision issued in July. The earlier decision had established a four-year regulatory audit cycle for the commercial operations of the interconnector and maintained that there was no need to amend the methodology for adjusting permitted revenues and prices related to the project.

CERA’s decision, which was posted on its website, approves the recovery of actual investment costs for the construction period, but stipulates that no additional costs will be passed on to electricity consumers unless the necessary funds are not allocated by the government. If Cyprus’ fixed Fund does not provide the allocated amount for a given year, consumers will not bear any additional costs.

CERA emphasized that the financial assurances provided by ADMIE and Nexans Norway, the contractor responsible for laying the cable, project the overall cost at €1.939 billion. A potential increase of up to 5% is allowed, pending the completion of the final dredging study.

While CERA has requested full transparency in reporting the project’s costs, it acknowledged the need for further contracts to be finalized, particularly those related to substation construction.

Then in the evening Greek Minister of Environment and Energy Thodoros Skylakakis and Cypriot Minister of Energy, Commerce and Industry George Papanastasiou signed an understanding framework for the promotion of the project. 

According to a joint announcement from the energy ministries of both countries, the signing followed a recent meeting in Athens between Greek Prime Minister Kyriakos Mitsotakis and Cypriot President Nikos Christodoulides.

The project is expected to commence in the coming days. As noted in the Understanding Framework, the GSI will help eliminate Cyprus’ energy isolation by connecting the national electricity transmission system of Cyprus to the corresponding trans-European systems.

The announcement emphasized that this project is of strategic importance for Cyprus, Greece and the entire EU. It will link Cyprus to Europe’s electrical grid, facilitating its energy transition while also supporting Greece’s goal of becoming a corridor for clean energy transportation.