The assignment of Limassol port services to private investors will bring substantial economic benefits and will contribute to the achievement of important objectives such as the modernization of facilities, the increase in the port's value, its uninterrupted operation and the reduction of existing charges.

In an extensive announcement released today, the ministry of transport indicates that the commercialization of the Limassol port will be completed by the end of the first quarter of 2016 and the project is expected to be implemented according to the initial timetable.

In its statement the Ministry of Transport highlights significant benefits for the economy and notes that new tariffs to be imposed by the private investor will be simplified and reduced, compared to current rates.

It is specified that the ministry has established maximum tariffs which are included in the contract to be signed bewtween the investor and the State.

The ministry also notes that after the successful launch of the tendering process and a round of intensive consultations with prospective operators, the major project of Cyprus as he described it, is being implemented according to the initial schedule.

Major benefits

It is added that the commercialization of the Limassol Port is a project with significant benefits, both for the economy and for consumers and taxpayers, and that it provides a unique opportunity for the country to modernize its primary port and turn it into a strategic and efficient transit hub in the Mediterranean and a model of development process on the island.

Main objectives

The Ministry points out that the main objectives of commercialization are three: 1) modernization of infrastructures and systems of the Limassol port as well as the adoption of best international practices both in services and in conditions of health and safety for workers, 2 ) to increase the value of the port in the economy through a combination of a transparent tariff system and efficient operation which brings improvement and cost reduction, and 3) the continuous and undisturbed operation of the port.

The financial benefits of commercialization are also cited: a) the remuneration paid in advance b) a stable annual income for the state in the form of a share in the manager’s revenue with a minimum fixed amount, which will enable the state to fully participate to any increase in revenues c) the transfer of each capital and operating cost to the operator, d) revenues from the taxation of operators, but also benefits from additional jobs resulting from the increase in the overall economic activity of the port of Limassol.

As noted in the announcement, the state is still the owner of the port’s strategic infrastructure as it concedes only operating activities.

According to the announcement, the commercialization remains on track for implementation and within the original timetable, while it is subject to a rigorous and transparent process:

Preferred bidders are going to be chosen before the end of the first four months of 2016 according to the process so far, as noted.

The selection process focused on operation experience, financial strength and scale of operations.

It is added that "all companies that were pre-approved, are professional port managers, financially robust with considerable experience on similar projects in the ports sector".


Tariffs

As regards the new tariff system, it is noted that in the context of upgrading the operations process at the port of Limassol, a new framework of charges for commercial purposes is put in force by the ports’ authority, which will be implemented from the date on which the new operators will take over.

The new tariff framework is based on simplification and transparency, aiming to enhance operational efficiency and competitiveness of the Port, bringing it closer to competition and international market practices, as stated in the announcement.

It is added that under the new system there will be fewer tariff categories while the pricing mechanism is simplified since charges are consolidated in a centralized tariff.

Unlike what applies today where multiple tariffs and costs apply, the new tariffs framework is simple and transparent. This is expected to reduce costs of doing business at the port, as noted.

At the same time, billing structures are redesigned to maximize the value of the infrastructure, including facilities and port equipment. This means greater value and greater operational flexibility.

Moreover, it is ensured that tariffs are not increased with the new system, while at the same time the new manager is obliged to implement a three-year balancing mechanism that will ensure smooth transition to the new regime.

In the context of commercialization the smooth conversion of Cyprus Ports Authority from an owner and manager of ports into a modern lessor and an independent regulator in standards of corresponding bodies in the rest of the European Union, is also recorded.

The restructuring is progressing according to plan and related issues are dealt with, after several meetings with employee representatives.

Finally, a revised regulatory framework has been completed, which safeguards the port’s operations under concession, and the Cyprus Ports Authority will proceed with the final administrative requirements in the coming weeks, so that this is formalized.