Cyprus expects to begin the process of paying pound 25 million towards the Great Sea Interconnector (GSI) electricity link in the coming weeks, following the expected issuance of a NAVTEX by the Greek Government before the end of October, Energy Minister Michalis Damianos said.
The payment will come from the state budget, with Cyprus committed to contributing pound 25 million annually for five years, up to a maximum of pound 125 million, depending on the progress of the project. The payment relating to 2025 has been deferred because no work advanced that year, Damianos told the House Finance Committee during a presentation of his ministry’s 2027 budget.
The GSI is intended to connect the electricity grids of Cyprus and Greece, helping end Cyprus’s energy isolation. However, its progress has been complicated by geopolitical tensions and questions over costs and financial commitments. The Cyprus Energy Regulatory Authority (CERA) has so far recognised pound 82 million of the pound 302 million claimed in expenses by project implementer ADMIE, the minister said.
The project is linked to pound 650 million in European funding. A study by the European Investment Bank is also under way, while additional financing, if required, said the Minister, could be sought from EU funds, investors or the EIB. The possibility of state participation in the project’s share capital will be considered after the study is completed.
Damianos said the legal implications of a possible failure to complete the project because of geopolitical risks were complex and would require advice from the relevant legal experts. He said consumers would begin paying their share of the project through electricity bills only after its completion and the start of electricity transfers to Cyprus, with repayment spread over 30 years.
‘If electricity does not come to Cyprus, we will not pay,’ he said.
The minister described the interconnector as important for both electricity adequacy and geopolitical reasons, while acknowledging the risks to its implementation. He expected Turkey to react as it had in 2020 and 2025, adding that Cyprus did not have the equipment to protect vessels operating in its exclusive economic zone. Greece, the French Government and French interests linked to the project had a role in addressing the issue, he said, adding that Nicosia was being kept fully informed by Athens. If it proceeds, the project is expected to be completed by the end of 2031.
Damianos also described completion of the liquefied natural gas (LNG) terminal at Vasilikos as essential, saying the government aimed to secure natural gas before 2030, when Electricity Authority of Cyprus generating units are expected to be retired. Gas-fired generation could lower electricity production costs, reduce emissions and strengthen competition, he said.
Eight bidders are involved in the process to complete the terminal, with the government targeting an award before the end of 2027. The Minister said that if natural gas cannot be secured, Cyprus will have to continue using heavy fuel oil, a significantly more expensive alternative, he said.
The government, he added, is also advancing energy storage plans, including 120 megawatts of storage capacity being promoted by the Transmission System Operator, expected to be connected to the grid in January, and a further 80 MW planned by the Electricity Authority by the end of 2028. A pound 20 million scheme to subsidise industrial batteries is also being promoted.
On offshore gas, Damianos said the Aphrodite field consortium had requested changes to the financial terms in its favour, a proposal currently under technical and economic examination. Gas from Aphrodite and the Kronos field is planned for export to Egypt. Longer-term options for bringing gas from smaller offshore fields to the Cypriot market are also being examined, although this is not currently feasible, he said.
The Energy Ministry’s 2027 budget stands at pound 83.8 million, down from pound 145.4 million in 2026, mainly because Recovery and Resilience Facility funding included in the current year’s development spending will not be available in 2027.