EBRD, EIU and CEF lend Cyprus a helping hand with floating natgas storage

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A €374 mln floating storage and regasification unit jointly financed by the European Bank for Reconstruction and Development, the European Investment Bank and the European Union will help Cyprus benefit from cleaner air and reduced energy costs thanks to the introduction of natural gas to the country.

The EBRD said it is providing a €80 mln loan to the Natural Gas Infrastructure Company of Cyprus (ETYFA) for the acquisition of the FSRU and the development of related infrastructure.

The FSRU will be permanently anchored about 1.3 km off the coast of Limassol in Vasilikos Bay and will connect directly to the adjacent Vasilikos power station.

The project will be funded by a €150 mln loan from the EIB, and the government-owned Electricity Authority of Cyprus is pumping in €43 mln in exchange for a minority equity stake, with the majority in the hands of the state Natural Gas Public Company (DEFA) of Cyprus.

The remaining €101 mln will come in the form of a grant under the Connecting Europe Facility, the EU’s infrastructure fund for energy and infrastructure, that is also supporting the EastMed natural gas pipeline and the EuroAsia Interconnector electricity link.

According to the EBRD, the FSRU project is a critical component in the energy strategy of Cyprus, with significant energy security, environmental and economic impacts. Close to 90% of the island’s electricity supply relies on crude oil imports and its energy system is isolated, without interconnections for electricity or gas.

The 1,000MW EuroAsia Interconnector will connect the electricity networks of Israel, Cyprus and Greece in Crete by December 2023, ending the energy isolation of the island and help lower the cost of power supply, generated mostly from renewable resources, as well as solar parks and wind farms.

The ETYFA project is expected to reduce the country’s CO2 emissions by 10% and lead to a substantial reduction in local air emissions (sulphur dioxide, particulate matter and nitrogen oxides). In the longer term, the flexible gas-fired Vasilikos power plant will play a key backup role as Cyprus moves increasingly to wind and solar power as part of an accelerating green transition in the EU.

“The project will be a major step forward in Cyprus’s decarbonisation trajectory. It will reduce both global and local pollution without compromising the island’s long-term transition to a low-carbon energy sector,” said Harry Boyd-Carpenter, EBRD Head of Energy for Europe, the Middle East and Africa.

To date, the EBRD has invested €464 mln in six projects, all in the private sector, including the financing of five solar plants for a total installed capacity of 11.9 MW in the Famagusta and Nicosia districts, cutting CO2 emissions by 15,470 tonnes per year.

It started investing in Cyprus on a temporary basis to support the country’s economic recovery following the collapse of the banking sector in 2013.

In 2014, EBRD injected €107.5 mln to rescue Bank of Cyprus, as part of the depositors’ bail-in of €1 bln, giving it a 5% stake, which is currently categorised as ‘disbursing’.

In 2015, it also pumped €20 mln into Hellenic Bank, as part of the second-biggest lender’s capital raised from private investors, taking a 5.4% stake, which is also categorised as ‘disbursing’.