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CYPRUS: Deadline looms for EUR 400 mln Larnaca port and marina development

12 September, 2018

Larnaca authorities and local businesses are bracing themselves as negotiations over a €400 mln investment for the development of the town’s port and marina hangs in the balance.


Despite concern over whether the deal will actually take place, there is optimism that that efforts by the local authorities and the government will pay off.

The deal between the government and an Israeli consortium appears to be taking shape as information surrounding the final tender documents speak of a proposal that does away with a major stumbling block – a cap on cargo.

Israeli consortium - composed of Ampa Ltd and Israel Shipyards Ltd - is the only bidder whose offer remains on the table after the initial expression of interest and final selection process.

The consortium has not withdrawn their proposal from the table, making them the only interested party and the state’s only interlocutor for the project.

Five companies had initially shown interest and after a screening process, three were selected and given the final tender documents.

However, things started to look dim for the future of the project when a Chinese company withdrew its interest after a change in Chinese legislation prohibits China-based firms making investments in the real estate sector.

As the project also involves the construction of luxury homes, the Chinese company was obliged to withdraw from the bid. The other contestant withdrew without ever giving any explanations as to why, said a source.

Only the Israeli consortium was left, but their interest, however, had started to wane after a clause was added, foreseeing that the project promoter must compensate Limassol port for any loss of traffic it may suffer due to the Larnaca port upgrade.

Specifically, a ceiling of 900 tonnes of cargo for the Larnaca port was included in the tender document, which if exceeded the company managing the port would have to pay a penalty to Limassol. The Israelis had vigorously protested the clause, thus endangering the whole deal.

It is believed that this clause may now be removed to help seal the deal.

Local authorities, businesses and other stakeholders are looking forward to seeing the project take off as Larnaca will benefit significantly from the €400 mln development.

The venture will upgrade Larnaca to the standard other towns have reached over recent years.

Director of the Larnaca Chamber of Commerce and Industry, George Psaras said that according to the initial tender call, Larnaca will develop into mainly a tourist port but will also have a commercial side.

Plans also foresee the construction of luxury homes along the Larnaca marina which will more than double in size as a significant amount of state land is to be added.

According to the Larnaca Chamber, the government is to concede 148 donums of land (approximately 198,000 square metres) to be utilized in the construction of housing units.

The consortium will develop the port and the marina and manage them on a long-term lease -- similar to the Larnaca airport deal which is essentially a BOT agreement.

 

October Deadline

The government has delivered the final tender documents to the Israeli consortium and it is now up to the Israeli investors to submit their final offer and have until 5 October to do so.

Psaras said information gathered from sources close to the procedure, indicate that the cargo ceiling clause will either not be included or be put in such a way so as not be a deal breaker.

“We know that the government has taken the issue seriously and has made efforts to eradicate any obstacle, so the deal can go forward,” said Psara.

He said a no deal would spell disaster for Larnaca.

“Unfortunately, there is no Plan B for Larnaca. The project is not only of vital importance for Larnaca but is also important for the whole of the island”.

Psaras said a new-look marina would revive the commercial heart of Larnaca as high-income tourists will be attracted to the town centre.

Petrolina CEO Dinos Lefkaritis said that the deal is of vital importance for the town and he hoped the government alters or entirely removes the compensation clause for Limassol port.

“In any case, the Larnaca port is currently seeing a traffic of 2 million tonnes of cargo, so the clause for a cap of 900 tonnes of cargo does not seem fair to say the least”.

The Cyprus Tourism Organisation, which currently manages Larnaca marina, is also optimistic that the deal will go through.

A senior CTO official said that president Nicos Anastasiades himself has intervened as to prepare a document which will be accepted by the Israeli consortium.

He said: “The government acknowledges that the project is of vital importance for the city of Larnaca and have done their best to prevent the deal from collapsing.”

“If the deal falls through and the momentum is lost, then I fear Larnaca will never see the development it deserves, and it will be left as the poor relative of the island’s other cities,” the CTO official added.

Despite optimism, the project is still up in the air as the government has yet to disclose details of the final tender documents and it is not yet known whether a ceiling on cargo is included.

Larnaca Mayor Andreas Vyras although optimistic, expressed his uncertainty.

“We know that a proposal was made by the government in the direction of overcoming the obstacle created with the ceiling clause. However, until we see the final document we are concerned.”

Larnaca’s mayor, while campaigning for the development of the town’s port and marina, has on many occasions urged the government to make concessions regarding the ceiling on cargo.

“If the opportunity is missed, the government will have to answer to the people of Larnaca,” said Vyras.

He said that the project is a vital component of Larnaca’s development plan along with the Metropolis mall, 12 hotels which are to be built and another four municipality projects which are in the pipeline.