Deal signed for EuroAsia Interconnector, but costs spiral (Update 2)

By Andria Kades and Iole Damaskinos

EuroAsia Interconnector signed a record-breaking subsea cable deal with Nexans on Wednesday, however the positive development was overshadowed by Energy Minister George Papanastasiou confirming rumours that the project’s costs had jumped 23 per cent.

The project is now slated to cost €1.97 billion, up from the initial €1.57bn, due to the increase in the cost of raw materials, Papanastasiou said.

In an interview with the Cyprus News Agency, he explained the government is now weighing three difference scenarios on how to tackle the higher costs that are impacting the EuroAsia Interconnector.

Sourcing €1.97bn is no easy feat for a private entity and thus the government is considering various possibilities due to it being a strategic project, Papanastasiou stressed.

“The first option is not to make a move. This would mean leaving the implementing body to find the additional funds,” he said.

The second option is for the government to guarantee a loan of sorts to the implementing body.

The third possibility, according to Papanastasiou would be for the state to have capital shares in the company and therefore have a degree of control over the project “which is very important and strategic for Cyprus”.

“Due to its high cost, the project is currently being evaluated because it will need additional funding,” the minister added, amid reports the company had asked the state for €600 million in guarantees.

Asked to weigh in, Finance Minister Makis Keravnos told reporters after a cabinet session he had not been asked for any kind of state guarantee. “This is a major investment and needs to be discussed in-depth from all sides.”

The electricity interconnection connecting Cyprus, Israel and Greece is considered a critical project for Cyprus’ energy plans, as it aims to end the country’s energy isolation.

It has been designated as a Project of Common Interest (PCI) by the EU and as such, has received €657 million in funding, with an additional €100 million in funding from the Recovery and Resilience Fund.

Rumours began circulating last week, with Papanastasiou refraining from commenting.

Where the Nexans deal in concerned, an announcement detailed it was a €1.43bn contract for the construction and installation of the high voltage direct current (HVDC) Cable Systems linking Cyprus and Greece, implementing a crucial milestone in the construction course of the strategic project, aiming to connect the national electricity grids of Israel, Cyprus and Greece.

According to the company, the interconnector will deliver up to 2,000 MW of energy at stage two to Europe and will be the largest submarine electricity interconnector in history, supplying over three million homes with electricity.

“The Nexans submarine cable contract, valued at €1.43bn, sets multiple world records including the longest and deepest HVDC cables ever laid, each with a length of 900 km that will be supplied and installed by Nexans Aurora and Nexans Skagerrak submarine cable laying vessels, and run across the Mediterranean seabed at depths down to 3,000 metres,” EuroAsia said.

Paris-based Nexans is considered as a leader in the design and manufacturing of cable systems and services.

“The project is a mutually beneficial one, connecting two EU countries and effectively linking Cyprus with Europe’s network. This is an important development, because the EU wants all member states to be connected,” Papanastasiou said.

As a critical part of EuroAsia Interconnector to interconnect the electricity grids of Greece, Israel and Cyprus, the 525kV HVDC cable will be the longest and deepest interconnector in the world with a bi-pole length of 2×900 km, and will run across the Mediterranean sea floor at depths of over 3,000 metres, EuroAsia added, noting that the subsea HVDC Mass Impregnated cables will be manufactured in Nexans’ facilities in Halden (Norway) and Futtsu (Japan) and will be installed by the state-of-the-art cable laying vessels Nexans Aurora and Nexans Skagerrak.

At Stage One, the EuroAsia Interconnector will exchange 1,000 MW between Israel, Cyprus and Greece with Europe, with the capability of increasing at Stage Two to 2,000 MW, the equivalent to 3 million households’ electricity consumption. This will end the energy isolation of all Cyprus and Israel, creating security supply and an energy highway between Europe and Asia. Pole One is expected to be completed in 2028 and Pole Two in 2029.

“We are proud that after 12 years of hard work the world’s longest and deepest subsea HVDC electricity interconnector built by Nexans will put Cyprus on the world energy map, while also ending the energy isolation of Cyprus, the last non-interconnected EU member state, and Israel,” said Nasos Ktorides, CEO of EuroAsia Interconnector.

On his part, Christopher Guérin, CEO of Nexans, said “this record-breaking project demonstrates our capacity to innovate and push the limits of electrical transmission and distribution to meet an ever growing global need. This is a crucial step on the path to a carbon-free economy.”

IPTO, Transmission System Operator of Greece, has been providing technical and operational capacity to the project ensuring the successful implementation.

EuroAsia Interconnector is a leading European Project of Common Interest (PCl) and was included in all fiveuUnion lists of PCls since 2013. lt is labelled as an EU “electricity highway”, interconnecting Europe with Asia.