Ministry of Transport: Commercialization of Limassol Port
on-track and expected to be completed by the end of the first quarter
of 2016
After a successful launch of the tender and an intensive round of due
diligence and consultations with the port operator candidates, this milestone
2015 project remains on track, in line with the original timeline set by the
Ministry of Transport, Communications and Works.
The commercialization of the Port of Limassol is a project that
offers significant benefits to the Cypriot economy, as well as the Cypriot
consumer and taxpayer; a project that represents a unique opportunity for
Cyprus to modernize its main port and transform it into a strategic and
efficient transportation hub in the Mediterranean, a true symbol of Cyprus'
economic growth.
The key objective of the project remains threefold: (i)
the modernization of the Port of Limassol through investments in equipment and
systems, and the adoption of the best international practices, both in terms of
service levels, as well as health & safety standards; (ii) the value
added to the economy, through a combination of a transparent tariff system and
efficient operation resulting in cost improvements and reductions; (iii) the
continued and uninterrupted operation of the Port.
The port’s commercialization has multiple financial benefits as
well: (a) an up-front fee; (b) a steady annual income for the State in the form
of a percentage of the revenue of the operators with a minimum fixed payment,
allowing it to participate fully in any upside the port has; (c) the transfer of
the capex & opex investment responsibility to the operators, (d) tax
revenues from the operating companies, and added employment likely to come as a
result of the increase in port activity. Finally, the State retains ownership of
its strategic port infrastructure as it only grants the operating
activities.
Project progress
During 2015, the overall progress was in line with the objectives set
by the Ministry and the Advisory Team. The commercialization project remains on
track and is subject to a rigorous and transparent process. The plan is to have
the Preferred Bidders before the end of the first quarter of 2016, in line with the process so far.
The pre-qualification process - common for all candidates- was
exhaustive and focused on operating experience, financial robustness and scale
of operations. All parties that pre-qualified are professional operators,
financially sound, and with significant and relevant experience in the port
industry.
The new tariff regime
As part of the process to upgrade port operations, the Cyprus Ports
Authority has introduced a new tariff framework for all commercial services.
This new tariff framework will apply from the date that the operators will take
over the operation of the Port. Based
on transparency and simplicity, the new framework aims to promote both the
operational efficiency, as well as the competitiveness of the Limassol Port,
bringing it closer to competition and the international market practice.
Under the new scheme there are fewer tariff categories, and the
pricing mechanism is simplified as charges are unified under aggregated tariffs.
Contrary to the current system, which has many different tariffs and cost
elements, the new tariff framework is simple and transparent. This is expected
to decrease the cost of doing business at the Port.
The charging structure is re-designed, so as to maximize the value of
the infrastructure, including the port facilities and equipment. This means
better value-for-money and greater operating flexibility.
What is more, it has been ensured that total tariffs under the new
system will not increase, while at the same time the new Operators will have to
apply a balancing mechanism for three years, which will
ensure smooth transition towards the new tariff regime.
Cyprus Port Authority
Finally, the transformation of CPA - from port owner and operator to
a modern landlord and independent regulator, based on the current EU standards,
is also well under process. The restructuring is progressing according to plan
and several meetings have already taken place with the employee representatives
to address their concerns.
Finally a revised regulatory framework, to safeguard the operations
of the port under the concessionaires, has been completed and the CPA will
proceed in the next few weeks with the final administrative requirements to get
this formalized.
