12.05.2024
In two weeks the government will hold a meeting. Officials will have to make a decision regarding a dispute with the joint venture holding the concession to redevelop and operate the Larnaca port and marina. The project cost is estimated at 1.2 billion euros. There is a high probability that the contract will be terminated.
Contract with Kition Ocean Holdings was signed in 2020. But for 4 years the company has performed virtually no work in the harbor or port. During this time, the company increased mooring fees for boat owners and boat rental businesses. According to the agreement, the port was to be completed by 2025. Kition has extended delivery deadlines several times due to the Covid situation. The government is concerned about the lack of progress.
The company’s latest claim was due to the port’s operations and maintenance (O&M) warranty, which had expired. However, Kition refused to extend the warranty. On April 15, the president personally met with the company’s management to discuss this issue. At the end of the meeting, the firm was fined 4.2 million euros. It should be noted that the government initially imposed fines of 10 million euros.
Transport Minister Alexis Vafeades said at the time that it had been decided that the company had until April 23 to pay 4.2 million euros. Also, both parties had to file a claim in arbitration court to determine the amount of the guarantee.
However, after April 23, the guarantee was not extended. Due to the failure to comply, Vafeades contacted the Attorney General’s Office for legal advice to see what action the government could take next.
Failure to comply meant terminating the contract and starting a new tender process from scratch. The mayor of Larnaca, Andreas Viras, expressed the following opinion: “What do we want? So that the government, one way or another, clarifies the situation.”
Vairas added: “Of course we are concerned. Judging by public statements on this matter, it appears that matters have reached a critical stage.”
According to the Minister of Transport, the contract stipulates that the concessionaire must provide three letters of guarantee. For example, these guarantees will cover construction as well as operation and maintenance. If, for example, the concessionaire fails to fulfill its obligations, the government can cash in the corresponding guarantee – which is similar to an insurance policy. The guarantees belong to the bank. Guarantees have a deadline after which their validity period is renewed. The problem is that Kition has not extended the service and maintenance warranty.
“These guarantees are an essential term of the contract,” Vafeadis said . “If the agreement is not renewed, it will mean to us that a basic component of the agreement is missing.”
Officially, Kition stated that the project has no prospects under the current circumstances. They want to renegotiate some aspects of the agreement. It is understood they were citing the unfavorable situation due to Covid , the war in Ukraine and the ongoing conflict in the Gaza Strip.
Kition would like to be allowed to begin the more profitable aspect of the project – building villas and apartments – before moving forward with work on the port and marina. The government refused to discuss this. It is understood that Kition has only carried out minor infrastructure work to date – some maintenance work on the old pier (a listed building) as well as the creation of a car park. No significant work has yet begun on either the pier or the port.
For its part, the government says it will not, and cannot, discuss any changes to the agreement until the guarantee is extended. Only after the extension will the government be ready to reconsider some aspects of the contract.
According to the minister, it was Kition who proposed at the end of January to reduce the operation and maintenance guarantee to 4.2 million euros. According to the minister, the concessionaire is now “in default” in terms of compliance with the contract.
“We received a legal opinion from the Attorney General earlier this week (that is, last week),” Vafeadis confirmed. “We are currently studying the legal opinion and its implications. We are also in contact with the Attorney General’s office.”
When asked directly whether the radical option of terminating the contract was being considered, the minister answered in the affirmative. “But we haven’t decided anything yet,” he added. “Even if the contract is terminated, we intend to continue the project. This won’t be the end of him. A new tender will be held.”
Vafeadis would not comment on whether they had set any deadline for taking action. “We are taking things step by step,” he said. But a decision, based on legal advice from the Attorney General, “could” be made in two weeks.
According to information from other sources, Kition either decided that the project was not viable and wanted to renegotiate the terms of further work, or the concessionaire was facing financial difficulties.
Kition is a subsidiary of Roundtown SA, a public limited company. Its shares are listed on the Frankfurt Stock Exchange. Roundtown owns 80 percent of Kition . At the close of trading on Friday, May 10, Roundtown shares reached €2.07. The company’s market capitalization is €2.26 billion. Over the past three years, the company’s shares have fallen in price. For example, at the beginning of 2020, shares were traded at a price of 8 euros.
In a March 27, 2024 press release regarding Roundtown’s fiscal 2023 results, the company said it had “strong liquidity and stable operations.” The same press release states that the company has “new bank debt of approximately €1 billion.” It also states that due to “the current macroeconomic situation, the company will not pay dividends for 2023.”
At the end of 2023, its assets (by value) consisted of: 40% office space, 33% residential real estate, 21% hotels, and the rest logistics/trade.
According to the Wikipedia article, the majority of Roundtown’s property portfolio is located in the cities of Berlin, Frankfurt, Munich, Cologne, Hamburg, Amsterdam, London and other major European cities. The company owns hotels such as Hiltons in Berlin and London, Sheraton in Rome and Marriot in Paris.
Given the current situation, the Minister fully understands the concerns of Larnaca residents that the project may be frozen. Due to years of delays and absences, plans to expand and privatize Larnaca Marina have been derailed.
Back in 2010, the government struck a deal with the Zenon consortium . The cost of the project to transform the existing port and marina was 700 million euros. The consortium failed to raise the necessary funds, although the government extended the deadline up to 20 times until 2015.
