No guarantee investors will cover Great Sea Interconnector cost overruns

Economy CERAelectricityenergyGreat Sea InterconnectorGreeceTop News No guarantee investors will cover Great Sea Interconnector cost overruns No Guarantee Investors Will Cover Great Sea Interconnector Cost Overruns Relevant News No guarantee investors will cover Great Sea Interconnector cost overruns 17 September 2026 Anastasiades’s law firm sues anti-corruption authority over ‘Mafia State’ report 17 September 2026 Shots fired at Limassol building linked to Ukrainian businessman (photos) 17 September 2026 Chrysanthos Manoli 17 September 2026 FacebookXWhatsAppEmailPrintViber A reading of the regulatory decisions issued by Cyprus’s energy regulator, CERA, and its Greek counterpart, RAAEY, on the Great Sea Interconnector shows there is no legal or procedural guarantee that investors will cover any cost above the budgeted 1.9 billion euros. The project’s investors are the Great Sea Interconnector (GSI) company, currently 66% owned by French investment fund Meridiam, with Greek grid operator IPTO holding the rest. CERA’s Decision 300/2024, dated September 20, 2024, instead lays the groundwork for a future negotiation between the regulator and GSI over who pays if costs rise more than 5% above the 1.9 billion euro budget — that is, if they reach or exceed 2 billion euros. Given the delays already recorded, that outcome now looks all but certain. Many other EU electricity interconnections have seen the same pattern, including the Crete-Attica link, also built by IPTO. A cost overrun is not a remote possibility here; it is the most likely outcome. Promises, not obligations No one can convincingly argue that GSI is committed to covering, from its own capital, any cost beyond 1.9 billion euros. GSI cannot be confident either that, if the final cost approaches 2.5 or 3 billion euros or more, CERA (and RAAEY in Greece) will let it recover the full amount over 35 years, at a guaranteed capital return of 8.3% over 17 years, through the regulatory formula paid mainly by electricity consumers in Cyprus (63%) and Greece (37%). Either way, the cost will be recovered over 35 years. Given the sharp rise in electricity consumption expected over that period, CERA’s initial estimates put the cost per kilowatt-hour for consumers at a manageable level — a figure that doesn’t yet account for a possible fall in average production costs through competition, cheaper electricity imported from the European grid, the investors’ revenue from energy transmission, or revenue from the interconnector itself once operational. The companies’ assurances CERA’s decision states, in places, that it was adopted as an incentive for IPTO (now GSI) to build the interconnection under relevant EU rules — issued after the then Cypriot and Greek energy ministers signed a Framework Agreement, and on the basis of assurances from the Greek state operator, which now bind the “French” GSI, and from French company Nexans. The two companies assured CERA “that the total cost of the project, set at €1,939,200,000, will not increase by more than 5% following completion of the seabed survey being carried out by Nexans Norway AS in parallel with the cable’s construction, nor following completion of the final bid by the contractor building the conversion stations.” CERA’s decision records the existence of written assurances from the project’s implementer — still formally IPTO on paper, pending GSI’s registration — that costs would rise by no more than 5% at most. It remains unclear whether that 5% assurance also covers the cost of laying the cable itself. That assurance does not bind GSI to cover any additional cost itself without passing it on to consumers — but it doesn’t stop CERA reopening cost-sharing talks either, if the total reaches 2.5 to 3 billion euros. CERA has particular grounds to do so: the CBCA (Cross-Border Cost Allocation) decision, which governs how the cost is split between Cypriot and Greek consumers, carries its own regulatory reservation requiring the implementer to obtain the regulators’ consent before proceeding, should costs rise. Technocrats and officials Phileleftheros spoke to said Cyprus and Greece are likely to raise the issue of additional EU funding — currently set at 658 million euros, a figure fixed when the project’s budget stood at 1.4 billion euros — if it becomes clear the final cost will exceed 1.9 billion euros. That could emerge either during the European Investment Bank’s ongoing assessment of IPTO’s request for a 1 billion euro loan, or during the cable’s construction and laying. What went into the decision CERA’s September 20, 2024 decision, which also approved a government commitment to pay the implementer five instalments of 25 million euros each by the end of 2029, recorded that the regulator had taken the following into account: Nexans Norway AS assured CERA, through its representative Pascal Radue, Executive Vice-President for Generation and Transmission, in a videoconference on July 23, 2024, that based on the company’s experience, the cable’s cost is not expected to rise even if the seabed survey changes the cable’s route. IPTO gave a parallel assurance during the same July 23 videoconference that the project’s capital cost — covering the cable and the conversion stations at Kofinou and Korakia — is not expected to change. IPTO followed up in writing on August 6, 2024, stating that all unit prices were locked in once the Nexans contract was signed; that the cable link’s specifications were finalised to the point where a cost increase on that contract is highly unlikely; that it expects the cable segment’s cost to vary by no more than ±5%; that the risk of a budget overrun on the Siemens conversion stations remains low, though that contract had reportedly not yet been signed; and that Siemens’s final bid will not exceed its indicative bid. The position of CERA’s own external legal advisers, addressed below. Why didn’t CERA insist? It is a fair question: why didn’t CERA use its decision to bind the interconnector’s implementer to cover any costs above 1.9 billion euros itself? CERA’s own decision supplies the answer. It records that the regulator’s external legal advisers found that “any provision imposing a condition on the incentive scheme, requiring the Implementer to bear any cost increase beyond €1.9 billion, is general and vague, in a manner that cannot be included in a CERA Decision, and that this matter should instead be examined separately, case by case, and/or if the Implementer submits a relevant request for cost variation.” CERA’s own lawyers stopped it binding IPTO — now GSI — to absorb any extra cost, but they flagged in the same breath that a fresh round of negotiation between regulators and investors would follow if costs do rise. Neither side can take that negotiation’s outcome for granted, least of all the regulators and electricity consumers. The guaranteed rate of return behind all this — 8.3% over 17 years, against 4.3% on paper for investments by Cyprus’s Electricity Authority (EAC), which typically recovers less in practice and only once a project is operational — falls under EU rules allowing extra incentives for electricity interconnectors, projects the EU treats as having uncertain viability without them. The vice-chairman’s dissent CERA’s September 20, 2024 decision was not unanimous: it passed by a 2-1 vote, with two other CERA officials, Poullikkas and Hadjigeorgiou, voting in favour and vice-chairman Alkis Filippou against, and his dissent was recorded in the decision itself. Filippou wrote: “The Implementer is obliged to bind, through contracts, the contractors it appoints, and to present the complete picture of the project. Among other things, those contracts should state the project’s total cost. “In this case, two things remain outstanding: (a) the contract with the contractor who will build the substations, because the Implementer and the contractor are still negotiating; and (b) although there is an agreement with the company that will build the cable, that company has not yet completed the geophysical seabed survey that will determine the cable’s exact route. Although the Implementer and the cable contractor have given assurances that total cost will not rise once these outstanding matters are resolved, in the absence of final contracts I consider there is a serious risk that the project’s total cost will increase significantly once they are. “I would also note that, since the incentives on offer are based on the Implementer’s assurances that costs will not rise, I consider the incentives and the project’s total cost to be linked, and that the Implementer should explicitly commit to covering any cost increase relating to these contracts.” Subscribe to our Newsletter Latest News Anastasiades’s law firm sues anti-corruption authority over ‘Mafia State’ report Shots fired at Limassol building linked to Ukrainian businessman (photos) Cyprus signs Bahrain shipping deal, eyes bigger role as East Med bridge As European aid falls, Cyprus boosts its contribution, report finds Storms and hail forecast for Thursday, cooler weekend ahead French fishers block oil depot in protest over fuel costs Defence accuses Habakkuk Monastery witness of lying, presents ‘forged’ document Follow en.philenews on Google News and be the first to know all the news about Cyprus and the world.