Row threatens to delay end to energy isolation of Crete, Cyprus

Commission sources told EURACTIV it did not wish to “point fingers” and jeopardise the talks on the project. [Shutterstock]

A long-awaited EU project that could put an end to the energy isolation of Cyprus and the Greek island of Crete is under threat due to a dispute between the parties involved. But the European Commission does not want to “point fingers” at anybody.

The EuroAsia Interconnector is an EU Project of Common Interest (PCI) meant to create an “energy bridge” between Asia and Europe by connecting the Greek, Cypriot and Israeli power grids via the world’s longest submarine power cable.

Greece and Cyprus are expected to put an end to their energy isolation and gradually turn away from coal as a result.

Cyprus, the most energy dependent EU country, is entirely isolated from EU energy links and electricity networks.

Cyprus set to come in from the cold and end energy isolation

Cyprus is due to end its energy isolation after it agreed with fellow EU member Greece to press on with an undersea electricity cable, which will also link the island to Israel in the hope of tapping into significant gas reserves in the eastern Mediterranean.

Similarly, the island of Crete is the largest isolated power system in Greece and currently relies on outdated oil-fired power stations. In late 2019, the island will stop benefiting from derogations to EU legislation on CO2 emissions emitted by those power stations.

The end of Crete’s exception was recently confirmed by EU energy Commissioner Miguel  Arias Cañete.

According to the initial plans for the implementation of the project, Crete was supposed to be able to fully cover its energy needs from 2020.

The Euroasia Interconnector project [european Commission]

The European Commission is currently facilitating talks between interested parties in order to help the project advance as quickly as possible, EURACTIV has learnt.

But it is unclear whether it has been granted an informal extension for the end of the year.

The project, which took the name of the company that will implement it (EuroAsia Interconnector Ltd of Cypriot interests), has three phases: the interconnections between Attica-Crete, Crete-Cyprus and Cyprus-Israel.

However, talks about the implementation of the Crete-Attica connection unexpectedly collapsed.

EURACTIV asked the Commission how the whole process ended up in deadlock but it declined to comment. Commission sources told EURACTIV it did not wish to “point fingers” and jeopardise the ongoing talks.

“The promoter complies with the requirements of the PCI process and to date, the project has been awarded €16 million for studies from the Connecting Europe Facility programme,” an EU spokesperson told EURACTIV.

“The Commission works with the involved parties in order to accelerate the implementation of the project as a PCI, and notably its Attica – Crete section, and to ensure that the technological solution is cost-efficient and affordable to the citizens,” the EU official added

The background

Last summer, the Greek Regulatory Authority for Energy (RAE) asked the Independent Power Transmission Operator S.A. (ADMIE) to proceed to the necessary moves to move forward the Crete-Attica project.

In early October 2017, ADMIE signed a Memorandum of Understanding (MoU) with Euroasia Interconnector Ltd so that the latter could receive EU funding on 12 October.

The MoU explicitly stated that ADMIE would have at least 51% of the share capital of the Special Purpose Vehicle (SPV), which would be set up for the financing and construction of the interconnection, while Euroasia Interconnector Ltd would get 39%.

There was also a provision for the participation of other parties for the remaining 10%.

Moreover, Greece’s regulatory authorities (RAE) and its Cypriot counterpart (CERA) signed on 10 October 2017 a joint cross-border cost allocation (CBCA) deal on the Greece-Cyprus interconnection.

“Despite these actions, Euroasia did not apply for EU funding on 12 October as it had committed,”  an ADMIE official told EURACTIV.com.

Instead, the sources said, Euroasia signed in December 2017, without ADMIE and RAE, another MoU for the same project with Elia Grid International (EGI), a subsidiary of Belgium’s electricity transmission system operator, which offers consultancy and engineering services on the international energy market.

Euroasia also organised awareness-raising events about the project in Athens and Crete without informing ADMIE, while in April 2018 the company launched a tender for the Crete and Attica link, also without informing ADMIE and RAE, the source said.

“At the end of April 2018, Euroasia sent us the text of an agreement, which was in absolute contrast with what was discussed and agreed, contrary to the joint decision of RAE-CERA and the MoU of 6 October 2017,” the official noted.

ADMIE has secured more than €500 million in loans from Greek and Chinese banks as well as the European Investment Bank (EIB).

“We provided tangible proof of our financial credibility. On the other hand, Euroasia Interconnector has not provided any financial capacity during the discussions. It was evident considering that they proposed the initial capital of the special purpose company that will implement the interconnection between Crete and Attica to be €24,000 while the project is estimated at €1 billion,” the ADMIE official said.

“Since October 2017, we have been waiting for Euroasia Interconnector Ltd to ‘show us the money’, but we haven’t seen it so far. The participation of the company in the SPV with 39% is not possible without credible proof of funds,” the ADMIE official said, adding that there is official correspondence that proves that Euroasia Interconnector Ltd proposed the amount of €24,000 as the initial capital of the SPV.

“As the Operator of the Greek Electricity Transmission System, ADMIE is duty bound to interconnect Crete with the mainland system as soon as possible. For this reason, we proceed following the instructions of the Greek Regulator,” the official emphasised.

However, Euroasia stressed that it never suggested this alleged amount for the construction of the Crete-Attica link.

“On the contrary, EuroAsia Interconnector both, in the investment request and financing dossier submitted to the national regulators, which has been approved in October 2017 (CBCA Decision), recommended the equity of the Crete-Attica SPV to be at 31% of capex (€350m of €1.13bn) and has officially accepted within the EU facilitation process and submitted in writing that it accepts the initial capital of the Crete Attica SPV to be at least €200 mln,” Masis der Parthogh, media and communications director of Euroasia, told EURACTIV.com.

“Any reference to the €24,000 is simply misleading information which has been selectively leaked to the press and does not correspond to any element of the SPV or the project promoter,” he added.

When the two sides officially reached a deadlock, the European Commission intervened as a mediator to unblock the project.

In one of the meetings the EU executive organised, the EU Agency for the Cooperation of Energy Regulators (ACER), DG Energy, RAE and CERA confirmed that the basis of the discussion would be the initial MoU signed between ADMIE and Euroasia, meaning that ADMIE would be responsible for 51% of the project.

ADMIE said Euroasia did not respond to this call. ACER then officially stated that the project was delayed in relation to the timing Euroasia promised. This move paved the way for Greece’s RAE to decide how the project will be implemented and which body will take it over two months.

Contacted by EURACTIV, ACER confirmed that the project has been delayed.

“According to the Agency’s latest PCI monitoring report, the PCI Crete-Attica is delayed compared to the date of commissioning indicated by the promoter in their 2017 monitoring report,” said David Merino, ACER’s press and communications officer.

Euroasia replied that ACER had indicated in its annual monitoring report that the project will be commissioned in 2022, while EuroAsia Interconnector planned to commission the project at the end of 2020.

“The EuroAsia Interconnector has already presented the current status of the project to ACER and the European Commission, which is within the timeframe of implementation and less than the allowed two-year delay. The progress of a project of this magnitude is continuously assessed and its planning is progressively elaborated,” the company said.

“The assessed delay is, in any case, within the 2-year delay allowed according to the regulation and in any case does not constitute the legal basis for taking any measures, as RAE has done unilaterally, by taking a unilateral decision ignoring the opinions and indications of ACER, Cyprus Energy Regulator CERA and the European Commission, that such decision is out of the context of the TEN-E Regulation,” the company added.

Asked why Euroasia intended to change the terms of the initial MoU, Masis der Parthogh told EURACTIV that the company never asked to change the MoU or any of its terms.

“There are two key elements of the single-page MoU: the first is the definition of the shareholders’ percentage in the foreseen and mutually agreed SPV, which will have been established for the financing and construction of the Crete-Attica link; and, the second was the transfer of ownership after commissioning to the local transmission system operator (TSO). Both terms have been accepted by the EuroAsia Interconnector.”

“EuroAsia Interconnector’s responsibility, as the official Project Promoter of PCI 3.10 since 2013, is to secure the project’s interoperability as a unified system creating the electricity corridor Israel-Cyprus-Crete-Attica, in the most efficient manner to the benefit of the European consumers […] The Crete-Attica link is an integral part of the PCI 3.10 Israel-Cyprus-Crete-Attica link and shall be developed as part of the entire PCI,” he concluded.

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