The European Investment Bank (EIB), the European Union's long-term financing institution, is providing EUR 100 million(1) to the Electricity Authority of Cyprus (EAC) for the extension of the Vassilikos power plant, east of Limassol.

While two units of 120 MW of the fuel oil power plant are currently under construction, the extension will be designed in detail in 2000, and construction will take place in the period 2001-2004. A further extension is foreseen subsequently.

The investment will be implemented and operated by EAC, responsible for the generation, transmission and distribution of electricity throughout Cyprus. EAC is a non-profit-making governmental corporation, well known to the Bank from previous lending operations totalling EUR 45 million for electricity distribution, as well as production at Dhekelia, near Larnaka.

This is the second EIB loan in Cyprus under the EUR 3.5 billion pre-accession facility which expires in January 2000.

The European Investment Bank (EIB), the European Union's long-term financing institution, was created in 1958 by the Treaty of Rome, establishing the European Economic Community. Its Statute forms an integral part of the EEC Treaty. Owned by the Member States, the EIB's mission is to contribute in a practical way, by financing capital investment projects, towards the balanced development of the Union.

While its activities are concentrated in the European Union, the EIB also helps to implement the financial aspects of the EU's cooperation policy towards third countries. Outside the European Union, the EIB implements the financial components of agreements concluded under European aid and cooperation policies. In this context, it supports capital investment designed to enable the economies of Cyprus and the applicant Central and Eastern European Countries to become more closely aligned with those of the Union. In the Mediterranean region, the EIB operates in the context and support of the Euro-Mediterranean Partnership, adopted in Barcelona in 1995, and which complements the EU Member States' own bilateral co-operation policies. Under the present Euro-Mediterranean Partnership Agreement, the EIB is committed to lend up to EUR 2 310 million during the period 1997-1999 for investment projects in 12 Mediterranean countries. In addition, EIB is able to offer interest subsidies for environmental projects and Risk Capital in the form of equity or quasi-equity, both funded from the EU Budget.

With an average lending of some EUR 1 billion per year the EIB is a major player in EU partner countries of the Mediterranean region. The Bank has been active in the area since the mid-1970s in support of the EU's external development co-operation policies. This support has taken the form of five successive Financial Protocols and the "Horizontal Facility" of the EU's "Redirected Mediterranean Policy".

EIB finance in Cyprus is provided under the "Euro-Mediterranean lending Mandate" and the "pre-accession facility". Since the beginning of EIB operations In Cyprus, including this loan, a total of some EUR 400 million has so far been advanced by the EIB to support projects in water supply and waste water treatment, industry, energy and transport infrastructure.

(1) The conversion rates used by the EIB: EUR 1 = 0.647500 GBP, 0.578900 CYP.