INSURERS of the island’s largest power plant in Vasilikos have agreed to cover the damages to the station, allowing essential restoration work there to get underway.
The plant sustained heavy damage in the July 11 blast from Mari naval base, effectively knocking it off the grid and leading to rolling power cuts as the system struggled to cope with the load.
Discussions between the Electricity Authority of Cyprus (EAC) and the insurers and re-insurers (16 companies in all) had been ongoing for months.
The power plant (excluding combined cycle unit no 5) is insured with Cyprus-based Atlantic Insurance for up to €700 million.
Under the terms of the contract between Atlantic and the Electricity of Cyprus, the insurers (and re-insurers) are obligated to “reinstate the facility as new”.
A ballpark figure cited for the total cost of repairs is €300 million, although EAC general manager Stelios Stylianou said this is yet to be determined as inspectors are still reviewing the damage to power units 1, 2 and 3 as well as to some ancillary infrastructure.
According to Stylianou, insurance companies have withdrawn reservations they had about covering the cost of repairs.
“They wanted to make sure there was no way we could have known about the [munitions] containers at the neighbouring naval base or the associated hazards, because under the contract we are obliged to disclose all information about the plant.
“Having been satisfied we knew nothing, they have given us the green light and already a few million euros have been paid for essential repairs of unit no 5 at the station.”
Payment installments would continue every one or two months, he said.
Units 4 and 5 at Vasilikos are combined-cycle, able to burn either conventional fuel or natural gas. Each unit has a maximum capacity of 220MW, and therefore key to the plant’s recovery.
The remaining three units, which run on heavy fuel oil, are more damaged and according to current estimates they will not be ready anytime before summer 2013.
Under a plan which the EAC submitted to the Cyprus Energy Regulatory Authority (CERA), the utility expects unit 5 to become fully operational by July 2012, adding 220MW to the strained electricity grid.
Also in July of that year, one of the gas turbines of unit 4 will come back online, with a capacity of 75MW. Sometime in the summer of 2012 the unit’s second gas turbine will become operational, supplying another 75MW, and by the end of the year the steam turbine as well with an additional 75MW.
Shortly after July 11, the EAC installed mobile generators at the site of Vassilikos burning gas oil, which is more expensive than heavy fuel oil. These generators supply some 165MW of power. The utility is also being fed electricity from the grid in the north.
The extra operating costs have already caused electric bills to go up by almost seven per cent.
The EAC’s electricity bills are revised on a six-month basis and the utility will be submitting a report to CERA in February.
But the increased electricity rates would likely continue to apply throughout 2012 due to the EAC not operating at normal efficiency levels, said Stylianou.
Energy-production costs are currently at 18 cents per kilowatt-hour.
Total production capacity now stands at a little over 900MW, creating a 280MW shortage during peak demand.
Stylianou said the grid would marginally cover energy demands during the winter, but it should be able to cope “barring unforeseen malfunctions”.
Meanwhile Israeli website Globes reported yesterday that Cyprus and Israel are considering creating a link between the countries’ respective electricity grids.
Israel’s Minister of National Infrastructures Uzi Landau was reported as saying:
“We are in contact with the Cypriot government regarding an electricity cable connecting our grid with their grid so that in the end Cyprus will have a power station backing us up if needed.”
He added, “At the same time, we will back up the Cypriot infrastructure.”
