January 2000

Cyprus Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

The following document summarizes the current developments in the plans of the Electricity Authority of Cyprus (E.A.C.) for the enhancement of their alternative network. As mentioned in our report of the first quarter, no other public utility organization is currently involved in the development or usage of an alternative telecommunications network.

1. Historical Background

As has already been mentioned in the previous reports, the Electricity Authority of Cyprus is currently the only Public Utility Organization which has developed and is using an alternative communication network. The said system makes use of the Power Line Carrier network which carries information by using fiber optic communication links mainly through the use of its overhead and secondly its underground network and underground pilot networks. The Cyprus telecommunications Authority has positioned itself sympathetically towards the alternative network of the E.A.C., even though no co-operation in this particular field has been reported. In line with the management’s decision, the authority’s alternative network was to be expanded, focusing on fiber optics technology

The envisioned alternative network comprises 3 phases, as follows :

• Phase 1 : Fiber optics are integrated in transmission lines (overhead and underground) which already form part of E.A.C.’s network ;

• Phase 2 : Fiber optics are to be integrated into all new transmission lines that are constructed. Phase 2 has already been approved by the Authority’s board of directors ;

• Phase 3 : Fiber optics are to be integrated into existing and in new lines in such a way that an internal communication network is created. This network would interconnect the Authority’s head office, the area offices and the power stations so that the communication between each other is made possible. This network would be expandable so that at a later stage, it is able to provide communications services to a much larger clientele.

The underlying objectives of the said network are to :

• Exploit a safe method of communication to be used by the Authority’s Control Center in Nicosia (the capital of Cyprus), in order to transmit signals and to receive data from Power Stations and Substations throughout Cyprus ;

• Utilize the newest and fastest communications technology available ;

• Use this network for telephony, telemetry, e-mail, Internet, and other plausible applications ;

• Create a network which would be efficient enough to be able to compete with other telecommunication networks anticipated to be developed by competitive organizations following the inevitable deregulation and liberalization of the telecommunications market.

2. Current Developments

Up until September 1999, the Authority has fully integrated fiber optic cables in 9 existing high voltage transmission lines, their total length being 140 Km The integration of fiber optics cables in the remaining 3 high voltage transmission lines (of a total length of 82 Kms) has now been completed. This has brought to completion the first phase of the "alternative network program" which aimed at integrating fiber optics in transmission lines (overhead and underground) which already form part of EAC’s network.

Phase 2 is scheduled to be completed within the next 3 years, with a total length of fiber optic cable of 105 km being integrated into new transmission lines. Subsequently, the network would be in a position to face the competition emerging from the anticipated deregulation of the market.

It is worth noting that in line with the Authority’s policy to regularly organize internal training and awareness programs, EAC’s employees visited the SCADA (System Control and Data Acquisition) installations at the three main power stations at Dhekelia, Vasikiko and Moni.

On a different note, the EAC is embarking on amore structured program of co-operation with its Greek counterpart (DEI). In the past, this has been based on mutual exchange visits of a social nature. However, meetings of a consultative nature are now being held with DEI advising EAC on privatization issues. More specifically, a two-day conference was held on September 13-14 in Nicosia with a view to inform and guide the EAC on issues relating to the liberalization of the electricity sector. DEI described their own experiences arising from the harmonization process with EU standards, environmental protection and renewable sources of energy.