The termination of the contract for the development of the Larnaca port and marina was widely expected. There had been a loss of trust which led to a complete breakdown in communication between the contractor Kition Ocean Holdings and the government, making termination of the contract inevitable.
The final straw for the government was the company’s refusal to pay the guarantee amount for the operation and management of the port, agreed last month at a meeting at the presidential palace. The government sought the advice of the legal service which advised that there were strong grounds for terminating the contract.
Project Viability Concerns
In an interview published in Phileleftheros last Saturday, the Kition CEO, Oliver Corlette warned that the project was close to collapse and put all the blame on the government for its failure to engage in discussions aimed at saving the project, estimated to cost €1.2 billion. Corlette said Kition wanted changes made so the project, which was “complicated both at construction level and also in scale” would become viable.
It would appear that Kition came to the conclusion that the project, given the requirements of the contract it had signed, would not be viable and wanted to renegotiate the terms of the contract, something the government was not prepared to do. Corlette raised this point, saying that “partners must cooperate closely and work together to face any challenges brought up by a project and adapt to today’s conditions.” The company felt “this flexibility does not exist on the part of the government.”
Government sources indicate that many concessions had been made to Kition over the years in order to keep the project on course, but a line had to be drawn. Speaking about the decision to terminate the contract, Transport Minister Alexis Vafeades acknowledged that mistakes may have been made. “As a matter of duty, we have an obligation to evaluate what had gone wrong, correct anything that needs to be corrected so that we do not face the same problems in the next procedure.”
Over-Ambitious Planning
We suspect the main mistake by the consultants that drafted the plans for the project were over-ambitious, on a scale that would make it extremely difficult for the contractor to recoup the €1.2 billion investment. It was no accident that earlier tenders’ procedures had resulted in failure. Government planners came up with demands that made the project unviable. They should have considered there is already a big port operating in Cyprus. Would trade increase by so much to sustain a second port? There are already two big marinas and a third under construction in Paralimni.
Planners may have committed the usual mistake we make in Cyprus – overestimated the size of the country and the ability of the economy to sustain such a big project. If a new company is to be found to take on the Larnaca port and marina project, plans need to be modified and scaled down. After what has happened with Kition, the government must change its plans and requirements to find a company to undertake the project.
