EuroAsia Project

Feasibility study status Executive summary

Presented by: Yakov (Yasha) Hain, Senior Executive VP Electric Corporation Ltd.

November 8, 2012 Doing business with Israel summit EuroAsia Interconnector Project

Feasibility study status Executive summary

Presented by: Yakov (Yasha) Hain, Senior Executive VP Israel Electric Corporation Ltd.

November 8, 2012 Doing business with Israel summit Project description

• Euro‐ Interconnector is a project intended to link the electrical systems of Israel, and (via ) through sub‐marine DC cables and HVDC onshore stations in each country • Total capacity – 2000 MW • Participants: – DEH‐Quantum Energy – Electricity Authority of Cyprus – TSO ‐ Cyprus – Israel Electric Corporation

November 8, 2012 Doing business with Israel summit 3 Project activities ‐ MOU

March 04, 2012. . Israel endorsed its commitment to implementing the EuroAsia Interconnector energy bridge project connecting Greece, Cyprus and Israel signing an agreement with DEH‐Quantum Energy LLC.

March 23, 2012. . The Electricity Authority of Cyprus formalized its participation in the three‐nation operation to lay the EuroAsia Interconnector submarine electricity cable signing a cooperation agreement with PPC ‐ Quantum Energy LLC

November 8, 2012 Doing business with Israel summit 4 Project activities –working groups April 23, 2012. Nicosia. The first Steering Committee Meeting. The Committee took decision on Feasibility study and schedule for its implementation

June 13, 2012. Tel Aviv. Finalization of the Steering Committee and the Working Groups. Chairman of ΔΕΗ ‐ Quantum Mr. Athanasios Ktorides informed the Steering Committee that the Cyprus Government had applied to EU for consideration and approval of the EuroAsia Interconnector as a cross‐border project of common interest.

November 8, 2012 Doing business with Israel summit 5 Project activities –working groups

Network analysis Cable routing and environmental Group coordinator: Dr. David Elmakias, IEC Group coordinator: Mr. Athanasios Group coordinator: Mr. Stavros Stavrinos, TSO Cyprus Stivaros, ΔΕΗ-QUANTUM

Dr. Elias Kyriakides, ΔΕΗ-QUANTUM Dr. Hanoch Ben-Haim, IEC Mr. Pavel Kulbekov, IEC Dr. Tal Katz, IEC Dr. Yair Malakhi, IEC Mr. Tasos Gregoriou, EAC Mrs. Sanda Harel, IEC Technology issues: cable and converter station Mr. Evaggelos Anastasiades, EAC Group coordinator: Dr. Hanoch Ben-Haim, IEC Mr. Ioannis Papageorgiou, EAC

Dr. Elias Kyriakides, ΔΕΗ-QUANTUM Market analysis and regulation Mr. Ilan Akons, IEC Group coordinator: Ms. Dimitra Croba, Mr. Ziv Nir, IEC ΔΕΗ-QUANTUM Mr. Dinos Charalambides, EAC

Dr. Vladimir Podshivalov, IEC Generation

Ms. Tali Shitrit, IEC Mrs. Sanda Harel, IEC Mr. Sylvian Locar, IEC Mr. Pavel Kulbekov, IEC Mr. Andreas Poullikas, EAC Dr. Yair Malakhi, IEC Mr. Constantinos Rouvas, EAC Mr. Andreas Poullikas, EAC Mr. Constantinos Rouvas, EAC

November 8, 2012 Doing business with Israel summit 6 Description of electricity systems Greece Capacity –12,890 MW Production –51.9 TWh* Cyprus Capacity –1,400 MW Production –5.2 TWh Israel Capacity –13,131 MW

* incl. export/import Production –57.3 TWh

November 8, 2012 Doing business with Israel summit 7 Preliminary cable route Greece

Cyprus Crete

Israel

The route consists of three sectors: • Israel –Cyprus section between Hadera site in Israel and Vasilikos site in Cyprus. • Cyprus –Crete section between Vasilikos site in Cyprus and Korakia site in Crete. • Crete –Continental Greece section between Korakia site in Crete and Attica region in Continental Greece.

November 8, 2012 Doing business with Israel summit 8 Preliminary cable route Maximal Section Length, km depth, m

Israel –Cyprus 330 2300

Cyprus –Crete 880 2700

Crete – Continental 310 1400 Greece

November 8, 2012 Doing business with Israel summit 9 Preliminary cable route The major challenge of this project – depth

November 8, 2012 Doing business with Israel summit 10 Technology issues

Request for Information has been prepared and distributed to the main manufacturers of HVDC equipment Four manufacturers answered the RFI: • Alstom as a HVDC converter manufacturer • ABB as a HVDC converter and submarine cables manufacturer • as a HVDC converter manufacturer • Prysmian as a sub‐marine cables manufacturer Siemens and Prysmian participated in RFI as a consortium. November 8, 2012 Doing business with Israel summit 11 Technology issues ‐ cable

Mass‐Impregnated (MI) Cable XPLE Cable

The technology is available for The technology is available voltages up to 600 kV and a for voltages up to 320 kV and a transmission capacity of up to transmission capacity of up to 2200 MW 1000 MW in one cable

Preliminary conclusion: •The project is technologically feasible based on MI 500kV 500 MW cables.

• Project schedule is determined by the submarine cable availability including R&D stage and manufacturing/installation duration

November 8, 2012 Doing business with Israel summit 12 Technology issues ‐ converter

Line commutated LCC Self‐commutated VSC LCC is the most widely VSC technology allows bi-directional adopted technology with energy flow and true multi-terminal many years of service control. experience but has VSC converters have already limitation for bi- implemented in a few projects, and directional energy flow. planned for on-going projects at +/- 300kV and 350kV. Theoretically there is no limitation to voltage level and +/- 500kV VSC converter is feasible. Preliminary conclusion: feasible

November 8, 2012 Doing business with Israel summit 13 Technology issues ‐ configuration There are three main HVDC basic systems: • Monopolar HVDC systems • Bipolar HVDC systems • Multi ‐terminal HVDC systems

Preliminary conclusion: At this level of information the best alternative is a bipolar configuration with monopolar bypass and sea electrodes. The final choice of the configuration will be optimized according to energy flow and reliability needs.

November 8, 2012 Doing business with Israel summit 14 Network analysis. Study Objectives • DC link impact study on existing transmission system. • HVDC connection to the transmission system • Steady State analysis of existing system with DC cable connection from the thermal limits and voltage constraints perspective • Transmission expansion plan to make possible the connection of up to 1000 and 2000MW • Power flow calculation of DC link –power losses and voltage changes • Contingency Analysis

November 8, 2012 Doing business with Israel summit 15 Network analysis. Israel

Dynamic Analysis • In order to maintain stability after a fault, imported power should not exceed 30% of the local load.

• An HVDC Interconnection with a 1000 MW capacity is not expected to present a problem at any point in time.

• An outage of the HVDC Interconnection with a capacity of 2000 MW during export could: – Risk the integrity of the Israeli power system during 3.7% of the time in the year 2022. – Cause severe disruptions in energy supply during 5.5% of the time in the year 2022. – The risk posed by an outage of a 2000 MW HVDC Interconnection could be reduced by lowering the capacity factor or by redesign of system protections.

November 8, 2012 Doing business with Israel summit 16 Network analysis. Cyprus

• Importing power into the Cyprus system, maximum power loss of 225 MW may be tolerated. It will result in disconnection of 11% of the consumer loads for at least 15‐ 20 minutes. The disconnected consumers will be restored within 15‐20 minutes by starting the five peaking open‐cycle gas turbine units, provided that they are available. • For a sudden loss of power import higher than 225 MW, the resulting shed consumer loads will require a substantially higher restoration time, ranging from 4 to 6 hours, depending on the system conditions, as large steam generating units will have to be committed.

November 8, 2012 Doing business with Israel summit 17 Network analysis. Cyprus

• The maximum power that can be imported is between 850‐900 MW, but if one of the two DC cables is tripped during such an operation, at least 27% of the system load will be shed and the corresponding restoration time will be of the order of several hours, which is unacceptable. • Higher import is not feasible, due to the constraint imposed by the minimum stable loading levels of the generating units.

November 8, 2012 Doing business with Israel summit 18 Market analysis. Greece

• Greece is an “electrical peninsula”. Greek Wholesale Market has a weak correlation with the major European markets and exhibits higher level of wholesale prices • All the northern neighbors of Greece have lower prices and are net importers to the Greek market • –another “electrical Note: we do not examine here the feasibility peninsula” is the only stable net importer from Greece. of Crete-Greece interconnection , which is clearly proved already November 8, 2012 Doing business with Israel summit 19 Market analysis. Greece

• Electricity production costs in Israel in the medium perspective are going to be lower than the Greek ones • This situation dictates the Greek market as a primary target for EuroAsia Interconnector project • The Italian market is considered as a secondary target, (+) characterized by high level of prices and (+) much larger trading activity, but (‐) access to the market is limited due to the lack of transmission capacity Dominant power flow through EuroAsia Interconnector South (Cyprus, Israel) to North (Greece)

November 8, 2012 Doing business with Israel summit 20 Market analysis Main scenarios • Development plans of Cyprus, Greece and Israel based mainly on gas fired CCGT units and use of sources • We are expecting a stable gap of 7‐8 $/MMBTU between Greek and Israeli NG prices in favor of Israel. • It’s equivalent to 35‐40 €/MWh difference in marginal costs (operational variable costs) for modern units • The price of Cypriot natural gas is less certain. • We consider three scenarios which are dictated by three Cypriot gas prices possibilities

November 8, 2012 Doing business with Israel summit 21 Market analysis. Scenario A “No‐change” • Fuel prices in Cyprus are similar to the current level

• The marginal costs are the highest in Cyprus • Cypriot export to other countries in such conditions is uneconomical, so Cyprus is

going to be electricity net importer from the

cable.

• Both Greek and Israeli electricity is competitive for Cypriot market, but Israeli electricity, due to their lower costs, has a priority

• Greek export to Cyprus is hardly possible as a stable business pattern • Relatively small Cypriot market can't fully use the Cable capacity • The remaining part of electricity is sold at the Greek market

November 8, 2012 Doing business with Israel summit 22 Market analysis. Scenario B “Gas parity scenario” • Fuel prices in Cyprus are similar to those in Israel. • The marginal costs (operational variable costs) is highest in Greece. Greek export to other countries in such conditions is uneconomical, • Greece is energy net importer from the cable. • Both Cypriot and Israeli electricity is competitive for Greek market, nobody has a priority. • Israeli export to Cyprus or Cypriot to Israel is hardly possible as a stable business pattern.

November 8, 2012 Doing business with Israel summit 23 Market analysis. Scenario C “Cypriot energy hub scenario” • Fuel prices in Cyprus are much lower than in Israel. • The marginal costs (operational variable costs) will be lowest in Cyprus • Cypriot export to both other countries –Greec e and Israel ‐ is economical, so Cyprus will be energy net exporter to the cable. • Both Greek and Israeli electricity are going to consume Cypriot electricity • This scenario dictates a need for construction of CCGT plants in Cyprus which will produce electricity mainly for export.

November 8, 2012 Doing business with Israel summit 24 Summary • Finalising of Feasibility Study report – 02/2013 • Project implementation: – 2018, first stage Israel‐Cyprus and Greece‐ Crete; – 2020, second stage Cyprus‐Crete.

November 8, 2012 Doing business with Israel summit 25 Thank you

November 8, 2012 Doing business with Israel summit