The entry of French company Meridiam with a 66% stake in the Great Sea Interconnector is changing the balance surrounding the major electricity interconnection in the Eastern Mediterranean, without, however, eliminating the outstanding issues that still stand between the project and its full restart.

With the ADMIE–Meridiam agreement having created a new shareholding, financing and geopolitical environment, the GSI is entering a period in which two different but interconnected fronts will have to advance in parallel: on the one hand, the Crete–Cyprus segment must be unblocked, and on the other, the extension from Cyprus to Israel must mature in regulatory and financial terms.

The first major test will come at sea. The resumption of surveys for the laying of the Crete–Cyprus cable in international waters south of Kasos and southeast of Crete, which according to government sources is expected from the autumn onward, will show in practice how much the environment has changed following the entry of the French group and to what extent the additional political and investment weight acquired by the project can work against Turkish challenges.

The repetition of the surveys takes on particular significance following the events of the summer of 2024 off Kasos, when the mobilization of Turkish warships in connection with work by the Italian research vessel Ievoli Relume highlighted the project’s geopolitical risk in practice. The work was halted at the time, with the crisis de-escalating following diplomatic contacts between Athens and Ankara.

Meridiam’s presence does not eliminate this risk. It does, however, add a clear French dimension to the project, at a time when Paris is seeking a stronger presence in the Eastern Mediterranean. Whether this new chapter being written in the turbulent history of the GSI will act as a deterrent against possible new Turkish interventions remains to be demonstrated on the ground.

Cyprus and the outstanding issues

Alongside the geopolitical front, the Cyprus chapter also remains open. Nicosia is called upon to settle the financial and regulatory issues that continue to accompany the first segment of the GSI.

The Cypriot side had previously expressed serious reservations regarding the project’s financial viability, creating one of the main sources of uncertainty over its progress. Meridiam’s entry significantly changes the equation, as Nicosia itself described the agreement as a “vote of confidence” in the project and as a development that gives it new momentum.

This does not, however, mean that the outstanding issues arising from the intergovernmental agreement between Greece and Cyprus of September 2024 have been resolved. These include the commencement of the stipulated payments and the resolution of the discrepancy regarding the amount of recoverable expenditure. Of the total €251 million that ADMIE has stated it has spent, the Cyprus Energy Regulatory Authority (CERA) has so far assessed only 32% as recoverable.

Market participants estimate that the entry of a major foreign investor makes it more difficult to maintain prolonged regulatory uncertainty and increases the pressure to clarify in practice whether, and under what terms, the Cypriot side will financially support the project.

The EIB’s critical test

On the financing front, one of the next decisive milestones is the European Investment Bank’s assessment of the project. Its importance is not limited to examining the GSI’s technical and financial data, but is linked primarily to whether the EIB will support the requested financing, amounting to approximately €1 billion.

A positive development could act as a catalyst for the project’s overall financing architecture and facilitate the attraction of additional international capital. In this direction, Meridiam’s entry has already strengthened the GSI’s commercial credibility, adding a major international infrastructure investor to the project.

Under the new circumstances, earlier efforts to broaden the investment consortium are also attracting renewed interest. During the previous period, TAQA and Masdar from the United Arab Emirates, as well as the US Development Finance Corporation (DFC), had been considered as potential participants, although the relevant discussions did not result in binding agreements. A positive EIB assessment, combined with Meridiam’s presence, could create more favorable conditions in the period ahead, depending also on developments concerning the project.

From Cyprus to Israel

At the same time, the second segment of the GSI is beginning to acquire its own distinct road map. ADMIE, in its capacity as Project Promoter of the overall project, submitted to the regulatory authorities of Cyprus and Israel the investment request for the interconnection of the two countries. This is the next step provided for under the European framework and comes after completion of the required cost-benefit studies and the proposal for the cross-border allocation of costs.

The submission of the investment request now shifts the burden to the regulators. The competent authorities in Cyprus and Israel are called upon to assess the request and reach a joint decision on the allocation between the two countries of the costs that will be recovered through the project’s regulated revenues.

According to the studies carried out to date, ADMIE estimates that the Cyprus–Israel interconnection is economically viable under all the scenarios examined. The assessment takes into account the evolution of demand, the development of renewable energy sources, and the needs of the two countries’ electricity systems, while the project’s benefits include enhanced security of supply and the further integration of Eastern Mediterranean electricity markets with the European system.

From the regulators to FID

Provided that Cyprus and Israel reach an agreement on the regulatory and economic model of the interconnection, the next major step is the final investment decision (FID). From that point onward, the process of financing the project and attracting additional investors will begin.

In the past, there had been reports of interest from an Israeli fund in participating in the project, but this did not take concrete form. The months-long geopolitical entanglement surrounding the GSI, combined with the military upheavals in the region, have so far prevented such an investment move from maturing.

The restart of the process for the Cyprus–Israel segment and Meridiam’s entry into the overall consortium now create different conditions. However, before the second segment reaches the stage of seeking investors, critical questions must be answered: what share of the cost will each country assume, how will the regulated revenues be structured, and what will the project’s final financing structure be?

The handover of the promoter role

There is still one institutional issue in the overall puzzle: the transfer of the role of Project Promoter from ADMIE to the Great Sea Interconnector, as part of the new shareholding structure.

ADMIE currently remains the Project Promoter of the overall project and, in this capacity, submitted the investment request for Cyprus–Israel. The completion of the agreement with Meridiam therefore creates another institutional step: the transfer of this specific role to GSI and the required recognition of the change within the European institutional framework.

The development is not merely a formal one. It will determine which entity represents the project vis-à-vis governments, regulatory authorities, financiers and contractors during the next phase of its development.

Two segments, different outstanding issues

Following Meridiam’s entry, therefore, the GSI faces two parallel paths.

For Crete–Cyprus, the focus is on the resumption of maritime surveys, management of the Turkish factor, assessment and possible financing by the EIB, and the resolution of the financial and regulatory outstanding issues with Nicosia.

For Cyprus–Israel, the sequence is different: first comes the joint regulatory decision on cost allocation, followed by the final investment decision and then financing and the formation of the investment consortium.

The technical profile of the second segment has already been determined. The interconnection is designed with a transmission capacity of 1,000 MW and HVDC technology at 500 kV. It will have an undersea length of approximately 324 kilometers and will be laid at depths ranging from 2,200 to 2,400 meters. In Cyprus, it will connect to the Converter Station at Kofinou, while in Israel it will connect to the corresponding station in the Hadera area, and it will allow bidirectional transmission of electricity.