EBRD supports decarbonisation of energy sector in Cyprus

The population of Cyprus will benefit from cleaner air and reduced energy costs thanks to the introduction of natural gas to the country, with a project jointly financed by the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the European Union (EU).

The EBRD is providing a €80 million loan to the Natural Gas Infrastructure Company of Cyprus (ETYFA) for the acquisition of a floating storage and regasification unit (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 largest power plant in Cyprus.

The EU is extending a €101 million grant for the project under the Connecting Europe Facility. The remaining project costs will be funded by a €150 million loan from the EIB and a €43 million equity contribution from the Electricity Authority of Cyprus (EAC).

ETYFA is jointly owned by the Natural Gas Public Company (DEFA) of Cyprus and EAC, both state-owned entities.

The project is a critical component in the energy strategy of Cyprus, with significant energy security, environmental and economic impacts. Close to 90 per cent of the island’s electricity supply relies on the importation of petroleum products and its energy system is isolated, without interconnections for electricity or gas. The new infrastructure will allow Cyprus to replace expensive and polluting heavy fuel oil with cleaner natural gas.

The project is expected to reduce the country’s CO2 emissions by 10 per cent 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 investment aligns with the priorities of the EBRD’s Energy Sector Strategy 2019-23, approved last year, which emphasises the role of gas in enabling the transition away from carbon-intensive fuels.

Harry Boyd-Carpenter, EBRD Head of Energy for Europe, the Middle East and Africa, said: “This is a milestone project for Cyprus and we are proud to support it. 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.”

Symeon Kassianides, Chairman of DEFA and ETYFA, stated: “After a number of years of hard work we managed to lay the foundations for developing this project of major importance for the energy future of Cyprus. I would like to thank the European authorities and the EBRD for enabling us to come closer to the realisation of a national vision that will allow Cyprus to make the transition to a new energy era.”

The EBRD started investing in Cyprus on a temporary basis in 2015 to support the country’s economic recovery. To date, the Bank has invested over €460 million there, all in the private sector. These projects include the financing of five solar plants for a total installed capacity of 11.9 MW in the Famagusta and Nicosia districts of Cyprus, cutting CO2 emissions by 15,470 tonnes per year.