NEGOTIATIONS for the building and operation of the island’s new airport at Larnaca and the upgrading of the one at Paphos have run into trouble after preferred bidder Alterra Consortium failed to renew its £1 million guarantee when it expired on July 5.
The consortium has until July 22 to renew its guarantee or the government will call a halt to the negotiations, a senior official at the Communications and Works Ministry said yesterday. The second preferred bidder Hermes consortium has already renewed its guarantee.
The ministry official denied reports yesterday that Alterra had withdrawn from the talks, although he admitted there were some problems. He said these were more an issue of internal problems within the company, rather than disagreements with the government on the negotiations.
At the beginning of this month, the government sent a letter to Alterra outlining its final stance and giving the company 15 days to respond. It is believed there are two critical issues at stake, but the remainder could be resolved.
“We have not had a new round of talks since early June,” said the official, admitting that all the delays were a further setback to the start of the actual work on construction of the airport. Negotiations with Alterra were due to be completed by the end of March and construction to commence this year.
However, if Alterra does pull out, the government will have to start from scratch if it moves on to the Hermes consortium.
“If we have to start again we will try to find a way to expedite the procedure,” said the official. “The aim was to begin construction in 2004 or early in 2005.”
It will take three and a half years to construct the new Larnaca airport, and the £200 million Build-Operate-Transfer (BOT) project is already almost a year behind schedule. The negotiations began in January with Alterra and should have been completed by April, giving the new operator time to focus on the existing operations and making sure the airports were functional for summer. The government had hoped that by July 1, negotiations with Alterra would have panned out into a contract.
Alterra, a consortium with British interests, was named as the preferred bidder for the 25-year BOT contract last November. Its bid included an offer to return to the Cyprus government 48.96 per cent annual gross turnover in royalties under contract, compared to the 33 per cent offered by the Hermes group, which includes among others, Aer Rianta, Charilaos Apostolides and Cyprus Trading Corporation Ltd.
The new airport saga has been gong on since 1987, after successive governments failed to get one plan or another off the ground. Initially, it was aiming only for contracts that involved the drawing up of plans, with the government paying for and running the new airport. However, each proposed project was shelved due to lack of funding for such a massive undertaking. “It would have been financially impossible,” said the official.
It was in only in March 2001 that serious consideration was given to privatisation of the airports, after which an invitation to tender was issued while parallel moves were made to draft legislation to provide for the BOT system of operation. The legislation was delayed until September that year and bidding didn’t start until February 2002 with the final choice made last November.
