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Breakthrough close on France-Spain undersea electricity link -sources

By Belén Carreño, Benjamin Mallet and Kate Abnett

MADRID/PARIS/STOCKHOLM (Reuters) - France and Spain are poised to announce a breakthrough this week in a long-running impasse over hefty costs of what would be their first undersea electricity link, a minister and sources in both countries told Reuters.

Spanish Energy Minister Teresa Ribera told Reuters earlier she expected a final agreement this week, without specifying further details on the project to double the interconnection capacity, which both countries last year agreed to speed up amid Europe's energy crisis.

However, since the initial announcement of the project in 2017, the estimated cost of the 400 km-long (250 mile-long) cable link from Spain’s northern coast to France’s western coast through the Bay of Biscay has nearly doubled around to 3.2 billion euros ($3.42 billion), according to a Spanish source with knowledge of the matter.

That was due to unforeseen seabed instability on the French side that required costly re-routing, and rising costs of raw materials.

The project was designed to double existing transmission capacity between the countries and would allow Spain to feed its bountiful renewable energy into a wider European grid, which makes it growingly important after Russia's invasion of Ukraine unleashed an energy crisis in Europe last year.

Two sources familiar with the matter said France's Energy Regulatory Commission and the Spanish competition watchdog CNMC should give the go-ahead on Thursday or Friday to the project, whose budget has been increased. They did not specify the terms of the deal.

The French regulator had no immediate comment. Spain's CNMC said only the negotiations were still ongoing.

Spain is a growing producer of renewable energy that it exports to France and it wants its neighbour to pay most of the extra costs. That had led to disagreement amid wider tensions between them about pipeline connections and protectionism.

Two sources with knowledge of the negotiations said the likely cost-sharing deal was part of a political discussion of contentious issues, including France's campaign for nuclear hydrogen to be considered a renewable source, which Spain opposes.

One of them said that when the project was first conceived, France had an electricity surplus and was exporting to Spain, so Spain had agreed to pay part of the costs on the French side, but now the tables have turned.

Spanish sources said the go-ahead would likely mean that France, whose nuclear power industry has been beset by problems, finally agreed to pay more.

The interconnection, that had been slated to be built by the power grid operators RTE of France and Spain's REE by 2025 and is now likely to suffer delays, would allow the two countries to double their electricity exchange capacity to 5,000 megawatts, enough to provide power for 5 million homes.

($1 = 0.9369 euros)

(Reporting by Belén Carreño in Madrid, Benjamin Mallet in Paris and Kate Abnett in Stockholm; Additional reporting América Hernández and Forrest Crellin in Paris; Writing by Andrei Khalip and Aislinn Laing; Editing by Marguerita Choy)