Cyprus’s Energy Transformation & Investment Opportunity

Introduction

The Great Sea Interconnector (GSI), formerly known as the EuroAsia Interconnector, stands as one of the most ambitious energy infrastructure ventures in the Eastern Mediterranean. Designed to link the electricity grids of Cyprus, Greece (via Crete), and Israel by way of a high‑voltage direct current (HVDC) submarine cable spanning around 1,208 km, it is poised to end Cyprus’s status as the only EU member state without interconnection to the continental grid. With total estimated costs ranging from €1.9 billion for the Cyprus–Greece leg to €2.4 billion for the full Greece–Cyprus–Israel route, the project uses state‑of‑the‑art ±500 kV VSC‑HVDC technology, providing up to 2,000 MW capacity in Stage 2.

Latest Status and Timelines

As of mid‑2025 the project is facing significant delays and governance challenges. The European Commission, which initially committed €657 million (via the Connecting Europe Facility) and €100 million (via Cyprus’s Recovery & Resilience Plan), has stepped in to press Cyprus and Greece to finalise cost‑recovery arrangements ([turn0search1]citeturn0search1turn0search0turn0search17). On 23 July 2025 an emergency videoconference convened regulators from Cyprus and Greece (CERA and RAAEY), IPTO (Greece’s transmission operator), and government officials to address Cyprus’s refusal to release an initial €25 million payment, arguing the project remains “inactive” in the absence of physical progress and contractual certainty ([turn0search10]citeturn0search10turn0search17). Cyprus has additionally delayed approval of usage tariffs, while Turkey’s objections to the maritime route have halted seabed surveys since mid‑2024—Turkish warships intervened during research operations, halting survey vessels and triggering Greek government suspension of payments to Nexans in March 2025.

Progress has seen intermittent milestones: the undersea cable linking mainland Greece and Crete was completed in May 2025—an important but separate step in the broader regional grid expansion strategy ([turn0news22]citeturn0news22). Meanwhile cost‑benefit studies reaffirm the project’s social and economic value for Cyprus and Israel, citing net benefits of hundreds of millions annually, improved integration of renewables and CO₂ emission reductions of over a million tonnes per year.

Regulatory progress in Cyprus is picking up: after a series of discussions culminating on 1 August 2025, CERA approved the start of revenue collection via system usage charges set to begin in September 2025, contingent upon legal transfer of project ownership to the newly established implementing entity GSI—which is expected to be finalised by end‑August 2025.

Technical Design and Stage Phasing

The GSI employs dual‑pole ±500 kV VSC‑HVDC cables manufactured by Nexans, who won a record‑breaking €1.43 billion contract in July 2023 to deliver the Greece–Cyprus section. These cables will run at depths exceeding 3,000 metres, making it the world’s deepest and longest submarine link when complete. Stage 1 (Cyprus–Greece via Crete) delivers 1,000 MW capacity, with Stage 2 (adding the Cyprus–Israel branch) doubling output to 2,000 MW. Pole 1 is expected online by around 2028 and Pole 2 by 2029.

Strategic Rationale and Investment Appeal

Cyprus currently generates roughly 1.4 GW from conventional fuel stations and about 1 GW from renewables, but domestic consumption hovers around 0.5 GW; licensed renewable capacity is expected to reach nearly 2.8 GW—creating surplus export potential ([turn0news21]citeturn0news21). By connecting to the European grid, Cyprus and Israel can diversify supply sources, improve wholesale price stability, reduce reliance on imported fuel and support decarbonisation. The Interconnector aligns with EU Green Deal targets and Energy Union goals to integrate isolated systems efficiently.

The trilateral Energy Triangle beyond infrastructure: under the 2013 MoU between Cyprus, Greece and Israel, the interconnector cements political-diplomatic alignment in energy, technology and trade corridors, now articulated within the India-Middle‑East‑Europe Corridor (IMEC), which links energy and infrastructure corridors across three continents ([turn0search29]citeturn0search29turn0news21).

Additionally, Abu Dhabi’s TAQA and ADNOC have signalled interest in supporting both the interconnector and east Mediterranean upstream gas development in Cyprus’s EEZ, adding a sovereign investor angle to the financing mix.

Investment Vehicles and Stakeholder Landscape

Institutional capital (infrastructure funds, EIB-style financing, sovereign wealth) has roles both in equity or long-term debt across the interconnection SPV, particularly via Greece’s IPTO. Renewable energy developers in Cyprus and Israel stand to benefit through export-PPA frameworks anchored to the interconnector. Contractors and component suppliers—including Nexans, Siemens Energy, TERNA, and Prysmian—also carry future upside in execution and related interconnectors (e.g. Egypt–Greece or Egypt–Cyprus via EuroAfrica Interconnector). Meanwhile Cyprus continues to promote its jurisdiction as a tax-efficient base for SPVs, AIFs, UCITS and holding structures supporting energy investments across the region.

Risks, Mitigation, and Policy Dynamics

Major risks persist. Turkey continues to contest sections of the route, disrupting maritime surveys and creating geopolitical uncertainty. The project remains suspended until maritime survey access is restored. Cyprus has publicly called for a re‑evaluation of the project in light of these geopolitical conditions, warning that Athens is underestimating the impact of Turkish disruption. The EU has expressed strong displeasure at Turkey’s stance, reaffirming Cyprus’s international legal rights and condemning threats of obstruction .

Meanwhile financial governance remains stalled: cost‑allocation under TEN‑E rules assigns 63 percent of total costs to Cyprus and 37 percent to Greece, challenging Cyprus financially, especially given delays, lack of asset readiness and missing consumer guarantees ([turn0search15]citeturn0search15turn0search10). Regulatory approvals for consumer tariffs and financing agreements have been delayed, threatening Nexans’s ability to proceed—Nexans warned it may suspend contracts without firm guarantees by August 2025.

On the upside, regulatory clarity is emerging now that CERA has approved revenue collection starting September 2025, assuming the ownership transfer completes in late August. This would unlock revenue certainty, cost-recovery and pave the way to restore progress on construction financing.

Economic and Environmental Returns

Cost-benefit analysis from Med‑TSO and affiliated institutions shows annual welfare gains for Cyprus and Israel in the range of €580 million to over €1 billion, with annual CO₂ reductions of up to 1.16 million tonnes in Stage 1 alone—equivalent to 20–110 percent of Cyprus’s 2015 emissions. The project enables grid resilience and facilitates higher shares of variable renewables without compromising system stability.

Strategic Implications for Cyprus and Region

Once operational, Cyprus can evolve into a critical energy gateway between the EU and Eastern Mediterranean, aligning effectively with IMEC objectives, enhancing geopolitical relevance and attracting further investment across energy, digital, maritime and logistics domains. Israel gains redundancy and access to European grid balancing mechanisms, while Greece—and Crete in particular—emerges as a pivot in regional energy transit.

Key Takeaways for Investors

Cyprus is finally moving towards activating cost recovery mechanisms by late 2025, unlocking the potential to stabilise financing; the ownership transfer to GSI is crucial for credibility and momentum. Despite delays, the undersea cable for Greece–Crete is complete, offering proof of technical progress while raising confidence in full project delivery by 2028–29. Turkey’s continued naval disruptions pose a critical geopolitical risk that investors must monitor, as does the regulatory alignment between Cyprus and Greece under TEN‑E. Sovereign interest from Abu Dhabi investors signals major upstream and infrastructure capital may become available if political and regulatory roadblocks clear. The environmental and social returns remain compelling, particularly given the scale of emission abatement and the integration of large-scale solar and wind capacity into a broader export market.

In summary, the Great Sea Interconnector remains a high‑strategic and financially significant project despite mounting delays and geopolitical complexity. For investors, energy developers, and policymakers, the coming months—especially Cyprus’s September‑2025 revenue launch and resolution of maritime access—will be decisive indicators of whether the project transforms from promise to reality or stalls indefinitely.

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