Cyprus and Greece have reached an agreement on the regulatory framework for the Cyprus-Crete electricity interconnection after lengthy negotiations.
The deal, brokered late Monday, involved the governments of Cyprus and Greece, the EU’s Directorate-General for Energy, regulatory authorities from both countries and IPTO, the Greek electricity transmission system operator.
According to Phileleftheros, IPTO initially resisted the proposal agreed upon last Friday by the energy ministries of Cyprus and Greece and the Cyprus Energy Regulatory Authority (CERA). The Greek operator eventually accepted the terms following pressure and the risk of exposure to cable manufacturer Nexans.
Under the agreement, the Cypriot government will fund IPTO’s expenses from 2025 to 2030 with 25 million euros annually, totalling 125 million euros. This funding will come from state revenue from emissions trading, not directly from consumers.
Additional reasonable expenses incurred by IPTO during construction will be recovered through consumer charges after the project’s commencement.
The regulatory framework approved by CERA in 2023 remains unchanged regarding geopolitical risk. It maintains that CERA may approve the recovery of the implementing entity’s expenses from consumers in the event of external risks interrupting the project.
Sources say the agreement extended the duration of IPTO’s privileged return on capital from 12 to 17 years, with a rate of 8.3% compared to the typical 4.6% granted for regulated energy projects in Cyprus.
The agreement awaits formal approval from the Cypriot Council of Ministers and CERA’s higher authority in the coming days.
The Cyprus-Crete interconnection is part of the broader EuroAsia Interconnector project, aimed at linking the electricity grids of Israel, Cyprus, and Greece.
