Filenews 3 April 2024 - by Chrysanthos Manoli
The consultations of ADMIE, the new operator of the electricity interconnection between Cyprus and Crete, with the regulatory authorities of Cyprus (CERA) and Greece (RAAEV), regarding the next steps for the promotion of the project, are at a critical juncture.
New reports in Greece indicate that a sticking point between ADMIE and regulators is the delay in approving the transfer of the project to IPTO, replacing EuroAsia Interconnector.
However, Phileleftheros' information indicates that the issue of the transfer may be pending, but it is not the most serious that regulators and IPTO itself have to deal with.
Our information indicates that the request of the new promoter, which is very difficult to meet at this stage, is related to the starting point of the recovery of the operator's costs for the construction of the cable and other related costs.
According to the information we have, ADMIE is asking for the recovery of the cost of the cable to start now, through a special fee that electricity consumers in Cyprus (63%) and Greece (37%) will be asked to pay, since the construction of the cable is in progress and requires tens of millions within the year.
After setting
As Phileleftheros had previously written, the Cyprus Energy Regulatory Authority considers that the burden on consumers for ADMIE to start recovering part of the costs for the project must begin when the electrical interconnection enters an advanced phase of completion. This phase is considered to coincide with the beginning of the laying of the cable in the sea area between Cyprus and Crete. This is likely to happen in 2-3 years (the completion of the project is estimated for 2030) and ADMIE does not even want to hear that until then it will not have revenue from consumers in the two countries.
However, other issues are still pending: the revised cost of the interconnection will have to be finalized through a new study, in case it has changed from the cost estimated by the regulators last summer (€1.94 billion). The promoter will also have to submit to the regulatory authorities a new (updated) cost-benefit study, on the basis of which the final investment decision will be taken by the Republic of Cyprus whether or not to participate in the project, but also, if appropriate, the ratio of sharing the costs of interconnection to consumers in Cyprus and Greece (cross-border cost allocation) will be modified. At present, the allocation affects 63% Cypriot consumers and 37% consumers in Greece.
There is also a pending request by ADMIE to change again CERA's decision on the duration of the recovery of the cost of constructing the interconnection. It was originally planned for 25 years, but last October CERA increased it to 35. The new body calls for the timetable to be reset at 25 years.
The above factors should be clarified in the near future so that the issue of the starting point of the payment of the fee by consumers can be discussed, so that the revenue stream to IPTO can begin. The process of approving a new CBCA (Cross-Border Cost Allocation) agreement will take time, something that is of great concern to the Greek Transmission Operator.
Yesterday's publication in the Financial Postman referred to a letter from Nexans to the two operators, in which it generally exercises in order to close as soon as possible the issue of the transfer of the project from EuroAsia to IPTO and to proceed smoothly with the implementation of its agreement with the Greek Operator for the construction of the cable (it is in progress), at a total cost of €1.4 billion.
The information of "F" says that the reasons that had caused about a six-month delay have been overcome and the transfer will be completed soon. But as explained above, formalizing the transfer does not solve the real problems between the parties involved in the project.
Rain millions since the 30th of the month
According to Phileleftheros' information, ADMIE is burning for the completion of the agreements/processes with the regulatory authorities and the Republic of Cyprus (its participation in the share capital of the implementing entity) but mainly for the start of the recovery of revenues from electricity consumers, as from April 30 its obligations towards Nexans (which manufactures the cable) and Siemens will be running which will construct the voltage converter stations in Kofinou and Korakia, Crete.
According to the same information, IPTO's commitments require the payment of €55 million. €21 million to Nexans on 30 April 2024 and €21 million on the same day at Siemens, for the voltage converter station, although it is not clear whether a final agreement has been signed. A further €27 million will have to be paid out on 31 May to Nexans and three more equal instalments will have to follow at the end of June, July and August!
Nexans warns of suspension of operations
Yesterday, the Financial Postman revealed that Nexans, which signed an agreement with ADMIE for the construction of the Cyprus-Crete connection cable, for an amount of €1.4 billion. It sent a letter to the operators of Cyprus and Greece and to the energy ministers of the two countries in order to press for the completion of the transfer of the interconnection project to ADMIE.
However, through the letter it becomes clear that what "burns" the company is the initiation of payments from ADMIE to itself for the cable. Nexans seems to link the payments from IPTO with the finalization by the Regulators of the methodology of revenue and fee flow to IPTO, i.e. it links them to the recognition of recoverable revenues for the benefit of IPTO, through a fee that consumers in Cyprus and Greece will pay from now on. We are informed that Nexans warns to suspend the construction of the cable, a development that it characterizes as inevitable under the current circumstances!
However, as mentioned above, the Cypriot authorities have made it clear to the respective authorities of Greece that the new implementing body should submit an updated cost-benefit study in order to update the final cost of the interconnection, recoverable costs and the final revenue sharing from consumers of the two countries (CBCA), which currently forecasts expenditure of 63% from Cyprus and 37% from Greece. Even when the above pending issues are cleared, it should be decided jointly by the operators (CERA – RAAEY) when the revenue stream to IPTO from consumer charges will begin. The charge per kilowatt hour is unofficially estimated to be around 1 cent, over a period of about 25-30 years, although it will all depend on the final cost of the interconnection. It was previously said by the Cypriot side that charging consumers cannot begin unless the project enters a substantial implementation phase, which was linked to the start of the cable laying.
