EIB in € 55 mln loans for Nicosia water supply, anti-flooding project in Larnaca

Jonathan Taylor, Vice President of the European Investment Bank (EIB) and Finance Minister Harris Georgiades, as well as Agriculture and Natural Resources Minister Nicos Kouyialis signed a pair loan agreements worth 55 mln euros for projects that will improve Nicosia’s drinking water supply and extends anti-flooding infrastructure.

The EIB signed a EUR 40 mln finance contract to improve drinking water supplies to the greater Nicosia region, along with an additional EUR 15 mln of financing for anti-flooding infrastructure investments in Larnaca.

“The European Investment Bank is strongly engaged in Cyprus and I can assure you that we are determined to continue to be so in the future. The EU bank remains firmly committed to supporting the Cypriot economy and we have clearly shown this by our actions during the crisis and again today with financing for two key infrastructure projects,” said Jonathan Taylor.

The water pipeline will bring water from the desalination plant to the greater Nicosia region.

It will help to improve the security of supply, and quality of, drinking water for the greater Nicosia region, while also representing an important component of climate change adaptation. The western Mesaoria region suffers from extended droughts and overexploitation of groundwater sources, so this project can help limit further reduction of these resources, while at the same time increasing the reliability of the drinking water supply system. The project will also contribute to the government’s compliance with EU legislation, particularly the Drinking Water Directive and Water Framework Directive.

The second loan, for an amount of EUR 15 mln, is going to the Larnaca Sewerage Board (LSB) for the construction of two anti-flooding rain water pumping stations. In recent years the town has suffered from frequent flooding, damaging crucial infrastructure and threatening people’s homes and businesses. The construction of the anti-flooding scheme aims to prevent similar events from happening again and thereby puts Larnaca on a more climate-resilient path for its future. Building resilience to climate change impacts is one of the key pillars of the EIB’s climate strategy, which EIB shareholders adopted last year just before the Paris climate conference.

The EIB and LSB have an existing EUR 75 mln operation to cover the Phase B II network expansion and wastewater treatment plant capacity increase. This loan will now rise to EUR 90 mln, in order to cover the cost of the two pump stations.

“The EU bank’s continued engagement in Cyprus is really a sign of confidence in the country’s economy and at the same time shows that there are excellent and viable investment projects coming out of Cyprus. We remain active and committed to supporting economic growth and the creation of new jobs,” Taylor added.

Vasilikos

In the last five years, the EIB has invested some EUR 1.3 bln in new, priority investments in Cyprus, including public sector projects in areas such as transport, energy, education, waste treatment and water supply.

It has also provided considerable support to the private sector through its cooperation with ten local banks to provide long-term and affordable financing to SMEs and MidCaps, which are the backbone of Cyprus’s economy, representing over 95% of local companies and 80% of employment. In 2015, the EIB maintained its high level of activity, providing a total of EUR 215 mln to the Cypriot economy, representing 1.5% of annual GDP, the highest percentage of all EIB shareholders.

The EIB as the European Union’s long term lending institution has been active in Cyprus for exactly 35 years, even before Cyprus joined the EU, said Taylor. “During these years we have supported more than 50 projects through loans of more than EUR 2.7 bln.”

“A question on everybody’s mind is why so far Cyprus has not benefited from the European Fund for Strategic Investment and what more could be done to ensure that Cyprus could obtain the maximum benefit possible.”

“Let me start by expressing once again our commitment in supporting the right investments in the country which could benefit from EFSI.

“At the same time, I would also like to make a point that one of the reasons why we have not yet signed an EFSI deal in Cyprus is that, with the support of the government, we have been very successful in supporting viable small and medium sized businesses, through the EIB’s Scheme for SMEs and MidCaps; an instrument, which is not EFSI.

“Since 2014, EIB signed 350 million euro with ten local banks and through our local partners, some 150 enterprises have received more than 150 mln euros for their investments. Viable enterprises which promote eligible investments are benefiting from interest rate of as low as 2.60% and tenors which reach 12 years, while before the implementation of this Scheme interest rates were well above these rates.

“We are happy to hear that the government considers this a successful instrument which has helped to reduce interest rates and increase loan tenors for the whole banking sector.

“So when we are looking into financing under EFSI in Cyprus, we should not forget that the EIB has an entire toolbox of financial instrument that are already working very well in Cyprus.

“What more could be done for Cyprus to benefit from EFSI? EIB is actively looking for mature projects that are eligible for financing under EFSI. Any viable enterprise with mature investments, eligible for EIB financing, could contact us and we would be happy to hear from them and discuss EIB financing, under EFSI or otherwise.