Filenews 12 April 2022 - by Vassos Vassiliou
Negotiations are at an advanced stage between the Government and Hermes Airports, which manages Larnaka and Paphos airports, for an extension of the current contract between the two sides, which expires in 2031.
According to information from "F", an extension of the contract is being discussed for a period of five and a half years, which will result in an extension until November 2036, which means that the tourist season of the last year of the revised contract will be covered.
The Director General of the Ministry of Transport, Stavros Michael, when asked about this by "F", confirmed that negotiations are underway between the two sides, while clarifying that no agreement has yet been reached, which may arise in the near future and provided that the means will be found in the positions of the two sides.
Mr. Michael also made it clear that even if an agreement emerges, it will be forwarded to the institutions involved in Cyprus, the Superintendent of Critical Aid, the Commission for the Protection of Competition, but also to the European Commission.
The director-general of the transport ministry asked by "F" to answer whether the contract will be extended for five and a half years, said the company Hermes Airports asked that the contract be extended for a longer period than the government side thinks it could be extended. Both the length of time for the extension of the contract and other aspects are under consideration by both sides, Mr Michael added.
When asked by "F" whether the second phase of the implementation of projects at Larnaka and Paphos airports falls within the framework of the discussion, Mr. Michael said that this aspect is indeed included in the package of issues under discussion.
On the issue of the second phase projects, which includes an extension of the channels and other important projects beyond €100 million, disagreements arose between the Government and Hermes Airports Ltd which led to arbitration, in which the Committee of Experts rejected a request by the company to postpone indefinitely its contractual obligation to construct the projects in question.
As mentioned by Mr. Michael who was asked about this, the company does not refuse to implement the necessary projects.
The procedure for the Expedited Settlement of Disputes was initiated by Hermes Airports Ltd under the Concession Agreement for the Development of Larnaka and Paphos Airports and with it it was directed against the Republic of Cyprus.
The Committee of Experts, after a hearing, had decided that Hermes Airports Ltd had no right to postpone its contractual obligations in relation to the Second Phase of Airport Development.
Hermes Airports Ltd had requested the indefinite postponement of its obligation to construct Phase B of the Airports around July 2017.
The Government, through the Ministry of Transport, rejected this request, expressing the position that it was not in line with the provisions of the Concession Agreement. In January 2021, Hermes Airports Ltd initiated the above expedited dispute resolution procedure.
The Committee of Experts rejected all the allegations made by Hermes Airports Ltd and its claims.
The company took over since 2006
Hermes Airports Ltd took over the management and control of Larnaka and Paphos International Airports on 12 May 2006, under a 25-year construction-exploitation-exile (financing) concession agreement with the Republic of Cyprus.
Hermes began construction of the terminal buildings after the signing of the agreement, using the method of Design and Construction of the airports. The new building of Pafos International Airport was given for use in November 2008 while the new building of Larnaka International Airport was delivered to the public a year later, in November 2009. The company considers that the two airports offer world-class and state-of-the-art facilities with emphasis on excellent service to passengers and customers, as mentioned on its website.
Before the pandemic, the two airports served a total of more than 11 million passengers annually. The company invested more than €650 million. Both airports are considered to be equivalent to those of the EU.
Extension but with... conditions
Both the Ministry of Transport and the company itself consider premature any reference to an agreement between the two sides for the extension of the contract, not only because of the outstanding issues that exist (even if they seem to be bridged) but also because any agreement is considered a decisive step but must be passed by other bodies.
However, as "F" is informed, the extension of the contract is permissible and acceptable but there may be a question about its extension in time. As we have been told, the extension for 1-2 years is within the framework that one would expect for a long-term contract such as that of airports dating back to 2006. One of the issues that would justify the extension of the contract is the amortization of the investments that will be made in the context of the second phase, although on this issue the position is expressed that the extension of the implementation process of the second phase does not fall on the part of the Republic of Cyprus.
