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Case Studies: Rio-Antirio Bridge, Greece

2015-06-12T10:51:46Z

Pmoraiti: /* Project Timing */

{{Infobox
|header1 =
|header2 = Rio-Antirion Bridge, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 42 Years (from effective date) unless the concessionaire achieves the predetermined return on equity (11.5%) before then.
|title = Project Overview
|image = [[Image:Rio1.png|300px]]
|caption = Figure 1: Rio-Antirio Bridge, Greece

| header4 =
| label4 = Budget
| data4 = EUR 740M (initial agreement)
EUR 815M (including construction, operating, financial costs and fees)

| header6 = Project Time Line
{{Infobox
| child = yes
| label1= Conceived:
| data1 = 1889
| label2= Call for Tender:
| data2 = 1991
|label3 = Contract Approved:
|data3 = 3 January 1996
|label4 = Ratification by Hellenic Parliament:
|data4 = 24 April 2006
|label5 = Financial close:
|data5 = 17 December 1997
|label6 = Effective Contract Date:
|data6 = 24 December 1997

| header7= Other important dates for the project:
{{Infobox
| child = yes
| label1= Geotechnical Surveys:
| data1 = 1964
|label2 = 1st International Call for Tender (insufficient interest):
|data2 = 1980
|label3 = 2nd International Call for Tender:
|data3 = 1987 (doubts about technical solution);
|label4 = 3rd Call for Tender under new PPP Framework:
|data4 = 1990 (cancelled)

}}

}}

}}

==Introduction==

The Rio-Antirio Bridge (Charilaos Trikoupis Bridge) is named after Prime Minister Charilaos Trikoupis, who, in 1889, first envisaged a bridge connecting the region of Aetoloakarnania (town of Antirion) with the region of Achaia in the Peloponnese over the Patras Gulf. The project was not technically feasible then, and it took the Greek State over 100 years to initiate construction of a fixed link. The bridge was inaugurated on 12 August 2004 and the first to pass was the Olympic Flame of the 2004 Olympics.

[[Image: Rio2.png]] 
'''Figure 2: Rio-Antirio Bridge- connecting to Europe'''

The Rio-Antirio Bridge spans 2,880m over the Gulf of Patras. Its width is 28m, with two vehicle lanes in each direction, an emergency lane and a pedestrian walkway. Its five-span four-pylon cable-stayed portion (2,252m) makes it the world's second longest cable-stayed deck (the longest being the Millau Viaduct in southern France at 2,460m). However, as the latter is also supported by bearings at the pylons as well as cable stays, the Rio–Antirrio bridge deck can be considered the longest cable-stayed "suspended" deck in the world. The bridge also holds the world record for the dimensions of its foundations (90m diameter). However, according to the constructors, the best record is that it was built “without any serious accident, without a single drop of blood”.

This bridge is widely considered an engineering masterpiece. Innovative design and off-shore construction methods had to be implemented to address an adverse construction environment including the length of the strait (approximately 2,500m wide) and deep water (up to 65 m), combined with deep soil strata of weak alluviums, the possibility of strong seismic activity, tectonic movements (30 mm a year) and adverse high wind actions.

The upper soil layers are reinforced with inclusions, which are 2-m diameter hollow steel pipes 25 to 30 meters long driven at a regular spacing of 7 meters. About 200 pipes are driven in at each pier location. Foundations are 90-meter diameter reinforced concrete caissons (called footing) resting on the gravel layer. A cone whose diameter ranges from 38 metres to 26 metres forms the lower part of the pier.
The upper pier shaft bears a reverse pyramid with a height of about 15 metres and a square base 38 metres in length. Each pylon is composed of four reinforced concrete legs, embedded in the pylon head to form a monolithic structure. The stay cables are in inclined arrangements, with their lower anchorage on deck sides and their upper anchorage in the 35 metre high pylon head. They are made of parallel galvanized strands. The thickest cable is formed of seventy 15mm strands.
The deck is continuous and fully suspended for its total length. Four damping devices connect the deck to the top of each pier and limit the pendulum movement of the deck during an earthquake.
On both sides, a large transition pier links together the deck of the cable-stayed bridge with the deck of the approach viaducts.

The Bridge has been awarded nine International Awards by the scientific community, out of which the most distinguished are :

* Outstanding Structure Award 2006 of the International Association for Bridge and Structural Engineer (IABSE);
* Award for Outstanding Concrete Structures 2006 of the International Federation for Structural Concrete (fib);
* Outstanding Civil Engineering Achievement Award 2005 of the American Society of Civil Engineers (ASCE) – the first time it was awarded to a project outside the US.

The Bridge is a Design-Build-Finance-Operate contract effective as of 24 December 1997, with a concession period of 42 years or less depending on whether the concessionaire Gefyra S.A. achieves a return on equity (ROE) of 11.5% earlier. Revenues are exclusively based on tolls. Consequently, any fluctuation in traffic volumes or in the traffic mix has a direct effect.

==The Contracting Authority (Public Party)==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law1418/84 (public works law) and Presidential Decree 609/85 (public works contracting).

The Greek Parliament was responsible for the ratification of the concession contract expressed in Law 2395/96 (ratification by law of the concession contract) and Presidential Decree 387/97 (amendment of the concession contact and the Tripart Agreement).

The project was nationally driven, with strong political towards its realisation, since the bridge was always considered as one that "had" to be built. The Greek State launched a total of 3 tenders to achieve the construction of the project. The central government had a direct involvement.

==The Concessionaire (Private Party)==

The concession for the Rio-Antirio Bridge was awarded in 1997 to “G.E.F.Y.R.A. S.A.” with shareholders as follows:

* VINCI Concessions S.A.A, 53.00%
* Hellenic Technodomiki, 15.48%
* J &P – Avax S.A., 11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Apart from VINCI Concessions, a dominant French construction company and world leader in infrastructure concessions, the rest were large Greek construction companies.

Today, GEFYRA S.A. has the following shareholders:

* VINCI Concessions S.A.A, 57.45%
* AKTOR Concessions S.A., 22.02% (merger of Hellenic Technodomiki into the AKTOR group)
* J &P – AVAX S.A., 12.14%
* Athena S.A., 8.39%

The construction joint venture “KINOPRAXIA GEFYRA” undertook the design and construction of the bridge. Members of KINOPRAXIA GEFYRA were:

* VINCI Construction Grands Projects, 53.00%
* AKTOR A.T.E, 15.48%
* J& P-Avax S.A.,11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Subcontractors were Freyssinet, Advitam and other external engineers and advisors.Freyssinet was responsible for the construction and installation of 368 stay cables (4,500 t of steel) equipped with earthquake protection systems. Advitam developed the specific software for visual monitoring and design, supply and installation of Wind, Earthquake And Structural Health Monitoring (WEASHM) system. Also, Cimolai Costruzioni Metalliche, Cleveland Bridge & Engineering Co Ltd and Pantechniki S.A. were responsible for the steel construction of the deck and approaches to the bridge. Böhler Schweißtechnik Austria GmbH, COMELY (safety barriers) and Dynaopt Géodésie Industrielle were steel construction subcontractors. ALCAN was responsible for the formwork of the piers, while Formule Informatique was the provider of the software for the calculation of cable geometry.

Project finance consisted of:

* Equity: EUR 68.5M
* Greek State and EU subsidy: EUR 376.5M
* EIB Loans: EUR 370M

During the construction phase, the EIB loan was guaranteed by a consortium of commercial banks. BTM (Europe) Ltd was the inter-creditor Bank Agent.

==Users==

The Rio-Antirio Bridge links the Peloponnese with the eastern part of mainland Greece. It is situated on major motorway axes in the vicinity of the Port of Patras, which connects Greece to Italy and from there to the rest of Europe.

In year 2014, the bridge celebrated its 10 years of operation. During this period, more than 41 million passages were recorded. The annual average daily traffic (AADT) in 2005 was 12,000 vehicles, rising to a peak at 14,000 vehicles in 2009, beyond the forecast traffic. Following the crisis, this figure dropped to 8,300 vehicles in 2013, with a further reduction of 5% expected in 2014.

The bridge is open to all users: pedestrians, private vehicles and freight traffic. Private vehicles correspond to 85% of the traffic; trucks and heavy vehicles are 8%, motorcycles 5% and the remaining 2% buses.

According to the concession contract, the Public Partner undertakes not to carry out or to permit during the concession period the construction of any alternative connection within 80 km east and 60 km west of the Rio- Antirion Bridge, as well as not subsidize any existing or future ferry services.The ferry crossing takes about 45 minutes versus 5 minutes over the bridge. In 2013, 82% of private vehicles used the bridge crossing and 18% the ferries, as opposed to a ratio of 93% and 7%, respectively in 2009. The trend is the reverse of that for heavy vehicles: in 2013 55% of the heavy vehicles used the bridge as opposed to 35% in 2009.

==Key Purpose for PPP Model Selection==

The Rio-Antirio Bridge is a challenging structure both in terms of construction and maintenance. As in the past, the Greek State has acquired expertise through concession contracts. The private sector could provide better public services through technology, innovation and improved operational efficiency. Moreover, at that time the spending capacity of Greece was limited, so the only solution was project finance for the construction, shared risks and remuneration through toll revenues.

Furthermore, at the time, the bridge was part of the PATHE motorway included in the TEN-T Priority Project 7: Motorway axis Igoumenitsa/Patra-Athina-Sofia-Budapest. Therefore, additional financing could be made available through the Community Structural Funds, facilitating project feasibility.

==Project Timing==

In the early 1990s the general government budget deficit was very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds, even supported by the EU. At the same time, the fact that the bridge was designed as a part of the PATHE TEN-T axis was catalytic. The long contruction period (7 years) was expected to contribute to the local economy, in the short term, and to the economic development of Greece in the long term.

==Project Locality and Market Geography==

The Rio-Antirio Bridge is part of the western road axis from the Albanian border to Kalamata, and connects the PATHE (Patras- Athens-Thessaloniki) motorway to the Egnatia motorway. By providing safe and comfortable access to the ports of Patras and Igoumenitsa it supports gateways to Italy and the rest of Western Europe.
Other key connecting road arteries are Olympia and Ionia Odos, which will be upgraded to motorway standards (expected to be completed by 2016).

==Procurement & Contractual Structure==

===Tendering===

The first international call for tender was issued in 1980 but received insufficient interest. In 1987 a second international tender was issued. Five consortia responded of which two were disqualified and the remaining three were rejected on technical grounds.

In 1990 the government endorsed a new public works construction legal framework, also supporting PPPs. Law 1418/84 and Presidential Decree 609/85 on public works contracting were the legal basis for the then-to-be concession. Seven groups expressed interest in the new call issued in 1991.

GEFYRA was the preferred of the only two bidders submitting proposals in 1993. The Competition Commission rejected the bid from the consortium Rion Antirion (Greek–Dutch led by Boskalis and Parnon) as inconsistent with the terms of the tender, because they proposed a tunnel, while the tender requirements were for either a high or a floating bridge. The contract was awarded to GEFYRA on the 3rd of January 1996. Following the award, Law 2395/1996 was amended by Presidential Decree 387/1997 corresponding to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 2395/1996, describes the detailed base case for the design, construction, financing, maintenance and operation of the bridge. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorizations in case of departures from the base case.

The end of Concession is officially set at 2039 when the bridge will be handed over to the Greek State, unless the concessionaire achieves earlier the predetermined return on equity (11.5%). Revenues are obtained solely from toll fees. Toll rates cannot exceed a maximum level (as defined by Law2395/1996) and are paid only by motorized vehicles.

===Risk Allocation===

The Concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. According to the concession contract all risks (design, maintenance, exploitation and commercial risk) are to be borne by the private sector. The Government is responsible for any amendments of the initial regulatory system. Finally, force majeure risks are shared.

[[Image: Rio3.png]] 
'''Figure 3: Risk allocation'''

===Performance===

Actual traffic volumes have been 12-17% higher than originally forecasted. Until 2014, accumulated revenues amounted to EUR 415M and profits were EUR 41.5M. Until 2009 the performance of the project was above expectations. From 2010, due to the deep economic crisis, the picture has changed and revenues are below forecasts.

Addressing the crisis, the concession operator has launched a number of products (e.g. day return tolls, various packages etc.). The current toll stands at EUR 13.20, of which 48.13% is set against loan servicing, 28.14% funds maintenance and operations, 19.30% is used to pay various taxes, and 2.65% represents the return on investment.

Since March 2013 the bridge has been integrated into the GRITS interoperability network, in which another four Greek road networks already participate: Attiki Odos, Olympia Odos (Elefsina-Patras NR), Moreas (Korinthos-Tripoli-Kalamata NR), and the Aegean Motorway (Athens-Thessaloniki NR, section from Maliakos-Kleidi). Drivers can travel along these five road networks using the electronic toll lanes with a single transponder.

Special emphasis has been given to monitoring the structural performance of the bridge, ensuring a high level of safety for users during its whole service life (120 years). To this end, a specific Inspection & Maintenance Manual (IMM) has been published and is followed. This manual contains the main results of the structural risk assessment performed to identify the major risks and set the management plan during the bridge’s service life.

Detailed inspection specifications and a schedule are also provided. These include visual inspections and materials monitoring through tests (destructive or non-destructive) performed on the various materials from which the structural elements of the bridge are made.

In addition, the Rio-Antirion Bridge is equipped with an innovative permanent system for continuous and uninterrupted surveillance and health verification in real time, namely the Wind, Earthquake and Structural Health Monitoring (WEASHM). This provides continuous monitoring through sensors on the pylons, deck, cables and expansion joints.

GEFYRA S.A. has been a member of the European Road Safety Charter since 2008. The speed limit on the bridge is 80km/hr and restrictions are applicable in case of high winds or extreme weather conditions. In case of an incident, the Automatic Incident Detection System, installed on the bridge, spots the event within two minutes and within five minutes authorized personnel are on site.

==Project Outcome==
The bridge, a highly technically complex project, as well as expensive, was implemented through a Concession Agreement, which at the time was a considerable challenge. Nevertheless, it has been realised as originally designed and tendered with practically no deviations from the physical, technical and financial specifications. In addition, the bridge achieved the majority of the objectives for which it was constructed, its principal goal to provide a permanent link reducing travel time, while also exceeding expectations in increasing transport demand. The economic viability of the project was also achieved, since traffic revenues are adequate for the concessionaire to operate and maintain the project, repay the loans to EIB and also make a considerable profit. Finally, being one of the first three projects in Greece to be realised through this new method of project delivery, it opened the way for the adoption of PPP and contributed to related capabilities building in the public sector. The following Critical Success Factors can be identified:

* Successful project delivery project within expected deadlines and budget
* No cost overruns
* Financial success of the project as a PPP (bankability and profitability)
* Concrete concession agreement with clear definition of responsibilities and appropriate risk allocation and sharing (particularly with regard to the exceptionally challenging construction
* Cultivation of trust and good faith between the Concessionaire and the State, sound communication and cooperation
* EIB support, the only bank that could provide a long term loan on such a mega project in Greece at that time
* Bridge is the sole permanent link, whose operation will be significantly enhanced with the completion of Olympia Odos and Ionia Odos motorways, thus ensuring the project's viability.
* Competing ferry services are no longer financed.
* Brought to the country international construction-specific expertise, which was formerly lacking.
* Attracts significant traffic from Western Greece to the City of Patras.

The only failure factor that could be considered is the high toll rates, which has received considerable opposition, together with those from the ferry services and residents of Rio regarding specific project characteristics, such as the location of the south end of the bridge.

===Economic Impact===

Economic impacts have been studied and publicized as an outcome of two evaluation studies mandated by Gefyra SA to a research team from Patras University. Through a concrete research method based on interregional data, the index of the project came out to be 1.88. Hence, on the basis of the entire investment cost of the bridge, it was estimated that the total influence on the national economy was near to 1.5 billion euro. The project also brought about substantial increase in, land values in the towns of Rio and Nafpaktos. Other positive impacts are related to the fact that the bridge can be utilized as a landmark that can enhance touristic attractiveness, the improvement of accessibility on a regional level (documented by the increase in the ferry and bridge crossings after the completion of the bridge), the increased real estate transactions and, finally, the fact that the bridge has imposed a competition with the ferries, which are applying a more rational fare pricing compared to the time they had a "monopoly". The latter is said to have led to a very significant economic benefit, estimated as 44 million euro from 2001 to 2007.

===Social Impact===

The bridge constitutes a landmark of modern Greece holding world records, documented also by a number of international awards. In addition, it has removed the discontinuity of the network, contributed to internal cohesion and international connectivity and improved significantly accessibility of the isolated regions of Western Greece, while providing jobs and growth prospects in the region, one of the most lagging areas in EU in terms of GDP per capita and employment.
Nevertheless, Western Greece's relative low ranking in economic performance and employment is still pertinent. The bridge is only a facilitator in this process and its value is expected to be multiplied through the synergies following the completion of complementary transport infrastructure projects within the Trans-European Network Transport.

===Environmental Impact===

During 1988, Efpalinos Techniki SA conducted the Environmental Impact Assessment (EIA) Study of the Rion–Antirion project, which was complimented by the University of Patras in 1992. This study determined the major potential negative environmental impacts of the bridge. According to the study, the impacts during construction were noise, air pollution, the location of the worksite and the impacts due to its operation and the potential impact upon marine life of the antifouling product used on the part of the structures permanently under sea level. During operation, the impacts were noise and air pollution from traffic, as well as aesthetic issues due to the integration of the bridge with historical sites (the castles of Rion and Antirion).
Despite the above, the operation of the bridge diminished the pollution and general disruption caused by the car and truck congestion in the ports of Rion and Antirion, which are now free of congestion. Furthermore, the reduction of the number of ferries has significantly decreased the former heavy pollution of the marine environment.
Finally, the environmental friendliness of the operation of the bridge is enhanced by additional measures taken by the operation company. These include the minimization of greenhouse gas emissions by using new technologies for its own operation (lighting, own cars, heating and ventilation, etc), initiating marine environment protection policies and activities in the gulf of Corinth, carrying out awareness and educational campaigns regarding eco-driving, and hedging their greenhouse gas emissions with green energy investments in India.

==References==

* Law 2395/1996 amended by Presidential Decree 387/1997. GEFYRA S.A. concession contract. Government gazette.

* http://www.gefyra.gr

* Interview with Gefyra S.A.

* P. Papanikolas, A. Diakidou, A. Roumboutsos, A. Pantelias, 2014, Rio-Antirio Bridge, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

* KAPAROS, G. Analysing The case of Rion-Antirrion bridge through the lenses of a redefined notion of MUTP success, 12th WCTR, July 11-15, 2010 – Lisbon, Portugal

* “Project Profile: Greece Rion Antirion Bridge”. Report compiled by the Greek OMEGA Team, Research Unit of Infrastructure Technology Policy and Development, Department of Planning and Regional Development, University of Thessaly Greece

*Moraiti, P. (2015), “Rio-Antirio Bridge” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Rio-Antirio Bridge, Greece

2015-06-12T10:51:20Z

Pmoraiti: /* Project Locality and Market Geography */

{{Infobox
|header1 =
|header2 = Rio-Antirion Bridge, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 42 Years (from effective date) unless the concessionaire achieves the predetermined return on equity (11.5%) before then.
|title = Project Overview
|image = [[Image:Rio1.png|300px]]
|caption = Figure 1: Rio-Antirio Bridge, Greece

| header4 =
| label4 = Budget
| data4 = EUR 740M (initial agreement)
EUR 815M (including construction, operating, financial costs and fees)

| header6 = Project Time Line
{{Infobox
| child = yes
| label1= Conceived:
| data1 = 1889
| label2= Call for Tender:
| data2 = 1991
|label3 = Contract Approved:
|data3 = 3 January 1996
|label4 = Ratification by Hellenic Parliament:
|data4 = 24 April 2006
|label5 = Financial close:
|data5 = 17 December 1997
|label6 = Effective Contract Date:
|data6 = 24 December 1997

| header7= Other important dates for the project:
{{Infobox
| child = yes
| label1= Geotechnical Surveys:
| data1 = 1964
|label2 = 1st International Call for Tender (insufficient interest):
|data2 = 1980
|label3 = 2nd International Call for Tender:
|data3 = 1987 (doubts about technical solution);
|label4 = 3rd Call for Tender under new PPP Framework:
|data4 = 1990 (cancelled)

}}

}}

}}

==Introduction==

The Rio-Antirio Bridge (Charilaos Trikoupis Bridge) is named after Prime Minister Charilaos Trikoupis, who, in 1889, first envisaged a bridge connecting the region of Aetoloakarnania (town of Antirion) with the region of Achaia in the Peloponnese over the Patras Gulf. The project was not technically feasible then, and it took the Greek State over 100 years to initiate construction of a fixed link. The bridge was inaugurated on 12 August 2004 and the first to pass was the Olympic Flame of the 2004 Olympics.

[[Image: Rio2.png]] 
'''Figure 2: Rio-Antirio Bridge- connecting to Europe'''

The Rio-Antirio Bridge spans 2,880m over the Gulf of Patras. Its width is 28m, with two vehicle lanes in each direction, an emergency lane and a pedestrian walkway. Its five-span four-pylon cable-stayed portion (2,252m) makes it the world's second longest cable-stayed deck (the longest being the Millau Viaduct in southern France at 2,460m). However, as the latter is also supported by bearings at the pylons as well as cable stays, the Rio–Antirrio bridge deck can be considered the longest cable-stayed "suspended" deck in the world. The bridge also holds the world record for the dimensions of its foundations (90m diameter). However, according to the constructors, the best record is that it was built “without any serious accident, without a single drop of blood”.

This bridge is widely considered an engineering masterpiece. Innovative design and off-shore construction methods had to be implemented to address an adverse construction environment including the length of the strait (approximately 2,500m wide) and deep water (up to 65 m), combined with deep soil strata of weak alluviums, the possibility of strong seismic activity, tectonic movements (30 mm a year) and adverse high wind actions.

The upper soil layers are reinforced with inclusions, which are 2-m diameter hollow steel pipes 25 to 30 meters long driven at a regular spacing of 7 meters. About 200 pipes are driven in at each pier location. Foundations are 90-meter diameter reinforced concrete caissons (called footing) resting on the gravel layer. A cone whose diameter ranges from 38 metres to 26 metres forms the lower part of the pier.
The upper pier shaft bears a reverse pyramid with a height of about 15 metres and a square base 38 metres in length. Each pylon is composed of four reinforced concrete legs, embedded in the pylon head to form a monolithic structure. The stay cables are in inclined arrangements, with their lower anchorage on deck sides and their upper anchorage in the 35 metre high pylon head. They are made of parallel galvanized strands. The thickest cable is formed of seventy 15mm strands.
The deck is continuous and fully suspended for its total length. Four damping devices connect the deck to the top of each pier and limit the pendulum movement of the deck during an earthquake.
On both sides, a large transition pier links together the deck of the cable-stayed bridge with the deck of the approach viaducts.

The Bridge has been awarded nine International Awards by the scientific community, out of which the most distinguished are :

* Outstanding Structure Award 2006 of the International Association for Bridge and Structural Engineer (IABSE);
* Award for Outstanding Concrete Structures 2006 of the International Federation for Structural Concrete (fib);
* Outstanding Civil Engineering Achievement Award 2005 of the American Society of Civil Engineers (ASCE) – the first time it was awarded to a project outside the US.

The Bridge is a Design-Build-Finance-Operate contract effective as of 24 December 1997, with a concession period of 42 years or less depending on whether the concessionaire Gefyra S.A. achieves a return on equity (ROE) of 11.5% earlier. Revenues are exclusively based on tolls. Consequently, any fluctuation in traffic volumes or in the traffic mix has a direct effect.

==The Contracting Authority (Public Party)==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law1418/84 (public works law) and Presidential Decree 609/85 (public works contracting).

The Greek Parliament was responsible for the ratification of the concession contract expressed in Law 2395/96 (ratification by law of the concession contract) and Presidential Decree 387/97 (amendment of the concession contact and the Tripart Agreement).

The project was nationally driven, with strong political towards its realisation, since the bridge was always considered as one that "had" to be built. The Greek State launched a total of 3 tenders to achieve the construction of the project. The central government had a direct involvement.

==The Concessionaire (Private Party)==

The concession for the Rio-Antirio Bridge was awarded in 1997 to “G.E.F.Y.R.A. S.A.” with shareholders as follows:

* VINCI Concessions S.A.A, 53.00%
* Hellenic Technodomiki, 15.48%
* J &P – Avax S.A., 11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Apart from VINCI Concessions, a dominant French construction company and world leader in infrastructure concessions, the rest were large Greek construction companies.

Today, GEFYRA S.A. has the following shareholders:

* VINCI Concessions S.A.A, 57.45%
* AKTOR Concessions S.A., 22.02% (merger of Hellenic Technodomiki into the AKTOR group)
* J &P – AVAX S.A., 12.14%
* Athena S.A., 8.39%

The construction joint venture “KINOPRAXIA GEFYRA” undertook the design and construction of the bridge. Members of KINOPRAXIA GEFYRA were:

* VINCI Construction Grands Projects, 53.00%
* AKTOR A.T.E, 15.48%
* J& P-Avax S.A.,11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Subcontractors were Freyssinet, Advitam and other external engineers and advisors.Freyssinet was responsible for the construction and installation of 368 stay cables (4,500 t of steel) equipped with earthquake protection systems. Advitam developed the specific software for visual monitoring and design, supply and installation of Wind, Earthquake And Structural Health Monitoring (WEASHM) system. Also, Cimolai Costruzioni Metalliche, Cleveland Bridge & Engineering Co Ltd and Pantechniki S.A. were responsible for the steel construction of the deck and approaches to the bridge. Böhler Schweißtechnik Austria GmbH, COMELY (safety barriers) and Dynaopt Géodésie Industrielle were steel construction subcontractors. ALCAN was responsible for the formwork of the piers, while Formule Informatique was the provider of the software for the calculation of cable geometry.

Project finance consisted of:

* Equity: EUR 68.5M
* Greek State and EU subsidy: EUR 376.5M
* EIB Loans: EUR 370M

During the construction phase, the EIB loan was guaranteed by a consortium of commercial banks. BTM (Europe) Ltd was the inter-creditor Bank Agent.

==Users==

The Rio-Antirio Bridge links the Peloponnese with the eastern part of mainland Greece. It is situated on major motorway axes in the vicinity of the Port of Patras, which connects Greece to Italy and from there to the rest of Europe.

In year 2014, the bridge celebrated its 10 years of operation. During this period, more than 41 million passages were recorded. The annual average daily traffic (AADT) in 2005 was 12,000 vehicles, rising to a peak at 14,000 vehicles in 2009, beyond the forecast traffic. Following the crisis, this figure dropped to 8,300 vehicles in 2013, with a further reduction of 5% expected in 2014.

The bridge is open to all users: pedestrians, private vehicles and freight traffic. Private vehicles correspond to 85% of the traffic; trucks and heavy vehicles are 8%, motorcycles 5% and the remaining 2% buses.

According to the concession contract, the Public Partner undertakes not to carry out or to permit during the concession period the construction of any alternative connection within 80 km east and 60 km west of the Rio- Antirion Bridge, as well as not subsidize any existing or future ferry services.The ferry crossing takes about 45 minutes versus 5 minutes over the bridge. In 2013, 82% of private vehicles used the bridge crossing and 18% the ferries, as opposed to a ratio of 93% and 7%, respectively in 2009. The trend is the reverse of that for heavy vehicles: in 2013 55% of the heavy vehicles used the bridge as opposed to 35% in 2009.

==Key Purpose for PPP Model Selection==

The Rio-Antirio Bridge is a challenging structure both in terms of construction and maintenance. As in the past, the Greek State has acquired expertise through concession contracts. The private sector could provide better public services through technology, innovation and improved operational efficiency. Moreover, at that time the spending capacity of Greece was limited, so the only solution was project finance for the construction, shared risks and remuneration through toll revenues.

Furthermore, at the time, the bridge was part of the PATHE motorway included in the TEN-T Priority Project 7: Motorway axis Igoumenitsa/Patra-Athina-Sofia-Budapest. Therefore, additional financing could be made available through the Community Structural Funds, facilitating project feasibility.

==Project Timing==

In the early 1990s the general government budget deficit was very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds, even supported by the EU. At the same time the fact that the bridge was designed as a part of the PATHE TEN-T axis was catalytic. The long contruction period (7 years) was expected to contribute to the local economy, in the short term, and to the economic development of Greece in the long term.

==Project Locality and Market Geography==

The Rio-Antirio Bridge is part of the western road axis from the Albanian border to Kalamata, and connects the PATHE (Patras- Athens-Thessaloniki) motorway to the Egnatia motorway. By providing safe and comfortable access to the ports of Patras and Igoumenitsa it supports gateways to Italy and the rest of Western Europe.
Other key connecting road arteries are Olympia and Ionia Odos, which will be upgraded to motorway standards (expected to be completed by 2016).

==Procurement & Contractual Structure==

===Tendering===

The first international call for tender was issued in 1980 but received insufficient interest. In 1987 a second international tender was issued. Five consortia responded of which two were disqualified and the remaining three were rejected on technical grounds.

In 1990 the government endorsed a new public works construction legal framework, also supporting PPPs. Law 1418/84 and Presidential Decree 609/85 on public works contracting were the legal basis for the then-to-be concession. Seven groups expressed interest in the new call issued in 1991.

GEFYRA was the preferred of the only two bidders submitting proposals in 1993. The Competition Commission rejected the bid from the consortium Rion Antirion (Greek–Dutch led by Boskalis and Parnon) as inconsistent with the terms of the tender, because they proposed a tunnel, while the tender requirements were for either a high or a floating bridge. The contract was awarded to GEFYRA on the 3rd of January 1996. Following the award, Law 2395/1996 was amended by Presidential Decree 387/1997 corresponding to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 2395/1996, describes the detailed base case for the design, construction, financing, maintenance and operation of the bridge. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorizations in case of departures from the base case.

The end of Concession is officially set at 2039 when the bridge will be handed over to the Greek State, unless the concessionaire achieves earlier the predetermined return on equity (11.5%). Revenues are obtained solely from toll fees. Toll rates cannot exceed a maximum level (as defined by Law2395/1996) and are paid only by motorized vehicles.

===Risk Allocation===

The Concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. According to the concession contract all risks (design, maintenance, exploitation and commercial risk) are to be borne by the private sector. The Government is responsible for any amendments of the initial regulatory system. Finally, force majeure risks are shared.

[[Image: Rio3.png]] 
'''Figure 3: Risk allocation'''

===Performance===

Actual traffic volumes have been 12-17% higher than originally forecasted. Until 2014, accumulated revenues amounted to EUR 415M and profits were EUR 41.5M. Until 2009 the performance of the project was above expectations. From 2010, due to the deep economic crisis, the picture has changed and revenues are below forecasts.

Addressing the crisis, the concession operator has launched a number of products (e.g. day return tolls, various packages etc.). The current toll stands at EUR 13.20, of which 48.13% is set against loan servicing, 28.14% funds maintenance and operations, 19.30% is used to pay various taxes, and 2.65% represents the return on investment.

Since March 2013 the bridge has been integrated into the GRITS interoperability network, in which another four Greek road networks already participate: Attiki Odos, Olympia Odos (Elefsina-Patras NR), Moreas (Korinthos-Tripoli-Kalamata NR), and the Aegean Motorway (Athens-Thessaloniki NR, section from Maliakos-Kleidi). Drivers can travel along these five road networks using the electronic toll lanes with a single transponder.

Special emphasis has been given to monitoring the structural performance of the bridge, ensuring a high level of safety for users during its whole service life (120 years). To this end, a specific Inspection & Maintenance Manual (IMM) has been published and is followed. This manual contains the main results of the structural risk assessment performed to identify the major risks and set the management plan during the bridge’s service life.

Detailed inspection specifications and a schedule are also provided. These include visual inspections and materials monitoring through tests (destructive or non-destructive) performed on the various materials from which the structural elements of the bridge are made.

In addition, the Rio-Antirion Bridge is equipped with an innovative permanent system for continuous and uninterrupted surveillance and health verification in real time, namely the Wind, Earthquake and Structural Health Monitoring (WEASHM). This provides continuous monitoring through sensors on the pylons, deck, cables and expansion joints.

GEFYRA S.A. has been a member of the European Road Safety Charter since 2008. The speed limit on the bridge is 80km/hr and restrictions are applicable in case of high winds or extreme weather conditions. In case of an incident, the Automatic Incident Detection System, installed on the bridge, spots the event within two minutes and within five minutes authorized personnel are on site.

==Project Outcome==
The bridge, a highly technically complex project, as well as expensive, was implemented through a Concession Agreement, which at the time was a considerable challenge. Nevertheless, it has been realised as originally designed and tendered with practically no deviations from the physical, technical and financial specifications. In addition, the bridge achieved the majority of the objectives for which it was constructed, its principal goal to provide a permanent link reducing travel time, while also exceeding expectations in increasing transport demand. The economic viability of the project was also achieved, since traffic revenues are adequate for the concessionaire to operate and maintain the project, repay the loans to EIB and also make a considerable profit. Finally, being one of the first three projects in Greece to be realised through this new method of project delivery, it opened the way for the adoption of PPP and contributed to related capabilities building in the public sector. The following Critical Success Factors can be identified:

* Successful project delivery project within expected deadlines and budget
* No cost overruns
* Financial success of the project as a PPP (bankability and profitability)
* Concrete concession agreement with clear definition of responsibilities and appropriate risk allocation and sharing (particularly with regard to the exceptionally challenging construction
* Cultivation of trust and good faith between the Concessionaire and the State, sound communication and cooperation
* EIB support, the only bank that could provide a long term loan on such a mega project in Greece at that time
* Bridge is the sole permanent link, whose operation will be significantly enhanced with the completion of Olympia Odos and Ionia Odos motorways, thus ensuring the project's viability.
* Competing ferry services are no longer financed.
* Brought to the country international construction-specific expertise, which was formerly lacking.
* Attracts significant traffic from Western Greece to the City of Patras.

The only failure factor that could be considered is the high toll rates, which has received considerable opposition, together with those from the ferry services and residents of Rio regarding specific project characteristics, such as the location of the south end of the bridge.

===Economic Impact===

Economic impacts have been studied and publicized as an outcome of two evaluation studies mandated by Gefyra SA to a research team from Patras University. Through a concrete research method based on interregional data, the index of the project came out to be 1.88. Hence, on the basis of the entire investment cost of the bridge, it was estimated that the total influence on the national economy was near to 1.5 billion euro. The project also brought about substantial increase in, land values in the towns of Rio and Nafpaktos. Other positive impacts are related to the fact that the bridge can be utilized as a landmark that can enhance touristic attractiveness, the improvement of accessibility on a regional level (documented by the increase in the ferry and bridge crossings after the completion of the bridge), the increased real estate transactions and, finally, the fact that the bridge has imposed a competition with the ferries, which are applying a more rational fare pricing compared to the time they had a "monopoly". The latter is said to have led to a very significant economic benefit, estimated as 44 million euro from 2001 to 2007.

===Social Impact===

The bridge constitutes a landmark of modern Greece holding world records, documented also by a number of international awards. In addition, it has removed the discontinuity of the network, contributed to internal cohesion and international connectivity and improved significantly accessibility of the isolated regions of Western Greece, while providing jobs and growth prospects in the region, one of the most lagging areas in EU in terms of GDP per capita and employment.
Nevertheless, Western Greece's relative low ranking in economic performance and employment is still pertinent. The bridge is only a facilitator in this process and its value is expected to be multiplied through the synergies following the completion of complementary transport infrastructure projects within the Trans-European Network Transport.

===Environmental Impact===

During 1988, Efpalinos Techniki SA conducted the Environmental Impact Assessment (EIA) Study of the Rion–Antirion project, which was complimented by the University of Patras in 1992. This study determined the major potential negative environmental impacts of the bridge. According to the study, the impacts during construction were noise, air pollution, the location of the worksite and the impacts due to its operation and the potential impact upon marine life of the antifouling product used on the part of the structures permanently under sea level. During operation, the impacts were noise and air pollution from traffic, as well as aesthetic issues due to the integration of the bridge with historical sites (the castles of Rion and Antirion).
Despite the above, the operation of the bridge diminished the pollution and general disruption caused by the car and truck congestion in the ports of Rion and Antirion, which are now free of congestion. Furthermore, the reduction of the number of ferries has significantly decreased the former heavy pollution of the marine environment.
Finally, the environmental friendliness of the operation of the bridge is enhanced by additional measures taken by the operation company. These include the minimization of greenhouse gas emissions by using new technologies for its own operation (lighting, own cars, heating and ventilation, etc), initiating marine environment protection policies and activities in the gulf of Corinth, carrying out awareness and educational campaigns regarding eco-driving, and hedging their greenhouse gas emissions with green energy investments in India.

==References==

* Law 2395/1996 amended by Presidential Decree 387/1997. GEFYRA S.A. concession contract. Government gazette.

* http://www.gefyra.gr

* Interview with Gefyra S.A.

* P. Papanikolas, A. Diakidou, A. Roumboutsos, A. Pantelias, 2014, Rio-Antirio Bridge, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

* KAPAROS, G. Analysing The case of Rion-Antirrion bridge through the lenses of a redefined notion of MUTP success, 12th WCTR, July 11-15, 2010 – Lisbon, Portugal

* “Project Profile: Greece Rion Antirion Bridge”. Report compiled by the Greek OMEGA Team, Research Unit of Infrastructure Technology Policy and Development, Department of Planning and Regional Development, University of Thessaly Greece

*Moraiti, P. (2015), “Rio-Antirio Bridge” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Rio-Antirio Bridge, Greece

2015-06-12T10:50:33Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Rio-Antirion Bridge, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 42 Years (from effective date) unless the concessionaire achieves the predetermined return on equity (11.5%) before then.
|title = Project Overview
|image = [[Image:Rio1.png|300px]]
|caption = Figure 1: Rio-Antirio Bridge, Greece

| header4 =
| label4 = Budget
| data4 = EUR 740M (initial agreement)
EUR 815M (including construction, operating, financial costs and fees)

| header6 = Project Time Line
{{Infobox
| child = yes
| label1= Conceived:
| data1 = 1889
| label2= Call for Tender:
| data2 = 1991
|label3 = Contract Approved:
|data3 = 3 January 1996
|label4 = Ratification by Hellenic Parliament:
|data4 = 24 April 2006
|label5 = Financial close:
|data5 = 17 December 1997
|label6 = Effective Contract Date:
|data6 = 24 December 1997

| header7= Other important dates for the project:
{{Infobox
| child = yes
| label1= Geotechnical Surveys:
| data1 = 1964
|label2 = 1st International Call for Tender (insufficient interest):
|data2 = 1980
|label3 = 2nd International Call for Tender:
|data3 = 1987 (doubts about technical solution);
|label4 = 3rd Call for Tender under new PPP Framework:
|data4 = 1990 (cancelled)

}}

}}

}}

==Introduction==

The Rio-Antirio Bridge (Charilaos Trikoupis Bridge) is named after Prime Minister Charilaos Trikoupis, who, in 1889, first envisaged a bridge connecting the region of Aetoloakarnania (town of Antirion) with the region of Achaia in the Peloponnese over the Patras Gulf. The project was not technically feasible then, and it took the Greek State over 100 years to initiate construction of a fixed link. The bridge was inaugurated on 12 August 2004 and the first to pass was the Olympic Flame of the 2004 Olympics.

[[Image: Rio2.png]] 
'''Figure 2: Rio-Antirio Bridge- connecting to Europe'''

The Rio-Antirio Bridge spans 2,880m over the Gulf of Patras. Its width is 28m, with two vehicle lanes in each direction, an emergency lane and a pedestrian walkway. Its five-span four-pylon cable-stayed portion (2,252m) makes it the world's second longest cable-stayed deck (the longest being the Millau Viaduct in southern France at 2,460m). However, as the latter is also supported by bearings at the pylons as well as cable stays, the Rio–Antirrio bridge deck can be considered the longest cable-stayed "suspended" deck in the world. The bridge also holds the world record for the dimensions of its foundations (90m diameter). However, according to the constructors, the best record is that it was built “without any serious accident, without a single drop of blood”.

This bridge is widely considered an engineering masterpiece. Innovative design and off-shore construction methods had to be implemented to address an adverse construction environment including the length of the strait (approximately 2,500m wide) and deep water (up to 65 m), combined with deep soil strata of weak alluviums, the possibility of strong seismic activity, tectonic movements (30 mm a year) and adverse high wind actions.

The upper soil layers are reinforced with inclusions, which are 2-m diameter hollow steel pipes 25 to 30 meters long driven at a regular spacing of 7 meters. About 200 pipes are driven in at each pier location. Foundations are 90-meter diameter reinforced concrete caissons (called footing) resting on the gravel layer. A cone whose diameter ranges from 38 metres to 26 metres forms the lower part of the pier.
The upper pier shaft bears a reverse pyramid with a height of about 15 metres and a square base 38 metres in length. Each pylon is composed of four reinforced concrete legs, embedded in the pylon head to form a monolithic structure. The stay cables are in inclined arrangements, with their lower anchorage on deck sides and their upper anchorage in the 35 metre high pylon head. They are made of parallel galvanized strands. The thickest cable is formed of seventy 15mm strands.
The deck is continuous and fully suspended for its total length. Four damping devices connect the deck to the top of each pier and limit the pendulum movement of the deck during an earthquake.
On both sides, a large transition pier links together the deck of the cable-stayed bridge with the deck of the approach viaducts.

The Bridge has been awarded nine International Awards by the scientific community, out of which the most distinguished are :

* Outstanding Structure Award 2006 of the International Association for Bridge and Structural Engineer (IABSE);
* Award for Outstanding Concrete Structures 2006 of the International Federation for Structural Concrete (fib);
* Outstanding Civil Engineering Achievement Award 2005 of the American Society of Civil Engineers (ASCE) – the first time it was awarded to a project outside the US.

The Bridge is a Design-Build-Finance-Operate contract effective as of 24 December 1997, with a concession period of 42 years or less depending on whether the concessionaire Gefyra S.A. achieves a return on equity (ROE) of 11.5% earlier. Revenues are exclusively based on tolls. Consequently, any fluctuation in traffic volumes or in the traffic mix has a direct effect.

==The Contracting Authority (Public Party)==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law1418/84 (public works law) and Presidential Decree 609/85 (public works contracting).

The Greek Parliament was responsible for the ratification of the concession contract expressed in Law 2395/96 (ratification by law of the concession contract) and Presidential Decree 387/97 (amendment of the concession contact and the Tripart Agreement).

The project was nationally driven, with strong political towards its realisation, since the bridge was always considered as one that "had" to be built. The Greek State launched a total of 3 tenders to achieve the construction of the project. The central government had a direct involvement.

==The Concessionaire (Private Party)==

The concession for the Rio-Antirio Bridge was awarded in 1997 to “G.E.F.Y.R.A. S.A.” with shareholders as follows:

* VINCI Concessions S.A.A, 53.00%
* Hellenic Technodomiki, 15.48%
* J &P – Avax S.A., 11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Apart from VINCI Concessions, a dominant French construction company and world leader in infrastructure concessions, the rest were large Greek construction companies.

Today, GEFYRA S.A. has the following shareholders:

* VINCI Concessions S.A.A, 57.45%
* AKTOR Concessions S.A., 22.02% (merger of Hellenic Technodomiki into the AKTOR group)
* J &P – AVAX S.A., 12.14%
* Athena S.A., 8.39%

The construction joint venture “KINOPRAXIA GEFYRA” undertook the design and construction of the bridge. Members of KINOPRAXIA GEFYRA were:

* VINCI Construction Grands Projects, 53.00%
* AKTOR A.T.E, 15.48%
* J& P-Avax S.A.,11.20%
* Athena S.A., 7.74%
* Proodeytiki S.A., 7.74%
* Pantechniki S.A., 4.84%

Subcontractors were Freyssinet, Advitam and other external engineers and advisors.Freyssinet was responsible for the construction and installation of 368 stay cables (4,500 t of steel) equipped with earthquake protection systems. Advitam developed the specific software for visual monitoring and design, supply and installation of Wind, Earthquake And Structural Health Monitoring (WEASHM) system. Also, Cimolai Costruzioni Metalliche, Cleveland Bridge & Engineering Co Ltd and Pantechniki S.A. were responsible for the steel construction of the deck and approaches to the bridge. Böhler Schweißtechnik Austria GmbH, COMELY (safety barriers) and Dynaopt Géodésie Industrielle were steel construction subcontractors. ALCAN was responsible for the formwork of the piers, while Formule Informatique was the provider of the software for the calculation of cable geometry.

Project finance consisted of:

* Equity: EUR 68.5M
* Greek State and EU subsidy: EUR 376.5M
* EIB Loans: EUR 370M

During the construction phase, the EIB loan was guaranteed by a consortium of commercial banks. BTM (Europe) Ltd was the inter-creditor Bank Agent.

==Users==

The Rio-Antirio Bridge links the Peloponnese with the eastern part of mainland Greece. It is situated on major motorway axes in the vicinity of the Port of Patras, which connects Greece to Italy and from there to the rest of Europe.

In year 2014, the bridge celebrated its 10 years of operation. During this period, more than 41 million passages were recorded. The annual average daily traffic (AADT) in 2005 was 12,000 vehicles, rising to a peak at 14,000 vehicles in 2009, beyond the forecast traffic. Following the crisis, this figure dropped to 8,300 vehicles in 2013, with a further reduction of 5% expected in 2014.

The bridge is open to all users: pedestrians, private vehicles and freight traffic. Private vehicles correspond to 85% of the traffic; trucks and heavy vehicles are 8%, motorcycles 5% and the remaining 2% buses.

According to the concession contract, the Public Partner undertakes not to carry out or to permit during the concession period the construction of any alternative connection within 80 km east and 60 km west of the Rio- Antirion Bridge, as well as not subsidize any existing or future ferry services.The ferry crossing takes about 45 minutes versus 5 minutes over the bridge. In 2013, 82% of private vehicles used the bridge crossing and 18% the ferries, as opposed to a ratio of 93% and 7%, respectively in 2009. The trend is the reverse of that for heavy vehicles: in 2013 55% of the heavy vehicles used the bridge as opposed to 35% in 2009.

==Key Purpose for PPP Model Selection==

The Rio-Antirio Bridge is a challenging structure both in terms of construction and maintenance. As in the past, the Greek State has acquired expertise through concession contracts. The private sector could provide better public services through technology, innovation and improved operational efficiency. Moreover, at that time the spending capacity of Greece was limited, so the only solution was project finance for the construction, shared risks and remuneration through toll revenues.

Furthermore, at the time, the bridge was part of the PATHE motorway included in the TEN-T Priority Project 7: Motorway axis Igoumenitsa/Patra-Athina-Sofia-Budapest. Therefore, additional financing could be made available through the Community Structural Funds, facilitating project feasibility.

==Project Timing==

In the early 1990s the general government budget deficit was very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds, even supported by the EU. At the same time the fact that the bridge was designed as a part of the PATHE TEN-T axis was catalytic. The long contruction period (7 years) was expected to contribute to the local economy, in the short term, and to the economic development of Greece in the long term.

==Project Locality and Market Geography==

The Rio-Antirio Bridge is part of the western road axis from the Albanian border to Kalamata, and connects the PATHE (Patras- Athens-Thessaloniki) motorway to the Egnatia motorway. By providing safe and comfortable access to the ports of Patras and Igoumenitsa it supports gateways to Italy and the rest of Western Europe.
Other key connecting road arteries are Olympia and Ionia Odos, which will be upgraded to motorway standards (expected to be completed by 2016). Population density was 65 inhabitants/sqkm in the Region of Dytiki Ellada at project award, in 2009 and is dropping ever since.

==Procurement & Contractual Structure==

===Tendering===

The first international call for tender was issued in 1980 but received insufficient interest. In 1987 a second international tender was issued. Five consortia responded of which two were disqualified and the remaining three were rejected on technical grounds.

In 1990 the government endorsed a new public works construction legal framework, also supporting PPPs. Law 1418/84 and Presidential Decree 609/85 on public works contracting were the legal basis for the then-to-be concession. Seven groups expressed interest in the new call issued in 1991.

GEFYRA was the preferred of the only two bidders submitting proposals in 1993. The Competition Commission rejected the bid from the consortium Rion Antirion (Greek–Dutch led by Boskalis and Parnon) as inconsistent with the terms of the tender, because they proposed a tunnel, while the tender requirements were for either a high or a floating bridge. The contract was awarded to GEFYRA on the 3rd of January 1996. Following the award, Law 2395/1996 was amended by Presidential Decree 387/1997 corresponding to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 2395/1996, describes the detailed base case for the design, construction, financing, maintenance and operation of the bridge. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorizations in case of departures from the base case.

The end of Concession is officially set at 2039 when the bridge will be handed over to the Greek State, unless the concessionaire achieves earlier the predetermined return on equity (11.5%). Revenues are obtained solely from toll fees. Toll rates cannot exceed a maximum level (as defined by Law2395/1996) and are paid only by motorized vehicles.

===Risk Allocation===

The Concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. According to the concession contract all risks (design, maintenance, exploitation and commercial risk) are to be borne by the private sector. The Government is responsible for any amendments of the initial regulatory system. Finally, force majeure risks are shared.

[[Image: Rio3.png]] 
'''Figure 3: Risk allocation'''

===Performance===

Actual traffic volumes have been 12-17% higher than originally forecasted. Until 2014, accumulated revenues amounted to EUR 415M and profits were EUR 41.5M. Until 2009 the performance of the project was above expectations. From 2010, due to the deep economic crisis, the picture has changed and revenues are below forecasts.

Addressing the crisis, the concession operator has launched a number of products (e.g. day return tolls, various packages etc.). The current toll stands at EUR 13.20, of which 48.13% is set against loan servicing, 28.14% funds maintenance and operations, 19.30% is used to pay various taxes, and 2.65% represents the return on investment.

Since March 2013 the bridge has been integrated into the GRITS interoperability network, in which another four Greek road networks already participate: Attiki Odos, Olympia Odos (Elefsina-Patras NR), Moreas (Korinthos-Tripoli-Kalamata NR), and the Aegean Motorway (Athens-Thessaloniki NR, section from Maliakos-Kleidi). Drivers can travel along these five road networks using the electronic toll lanes with a single transponder.

Special emphasis has been given to monitoring the structural performance of the bridge, ensuring a high level of safety for users during its whole service life (120 years). To this end, a specific Inspection & Maintenance Manual (IMM) has been published and is followed. This manual contains the main results of the structural risk assessment performed to identify the major risks and set the management plan during the bridge’s service life.

Detailed inspection specifications and a schedule are also provided. These include visual inspections and materials monitoring through tests (destructive or non-destructive) performed on the various materials from which the structural elements of the bridge are made.

In addition, the Rio-Antirion Bridge is equipped with an innovative permanent system for continuous and uninterrupted surveillance and health verification in real time, namely the Wind, Earthquake and Structural Health Monitoring (WEASHM). This provides continuous monitoring through sensors on the pylons, deck, cables and expansion joints.

GEFYRA S.A. has been a member of the European Road Safety Charter since 2008. The speed limit on the bridge is 80km/hr and restrictions are applicable in case of high winds or extreme weather conditions. In case of an incident, the Automatic Incident Detection System, installed on the bridge, spots the event within two minutes and within five minutes authorized personnel are on site.

==Project Outcome==
The bridge, a highly technically complex project, as well as expensive, was implemented through a Concession Agreement, which at the time was a considerable challenge. Nevertheless, it has been realised as originally designed and tendered with practically no deviations from the physical, technical and financial specifications. In addition, the bridge achieved the majority of the objectives for which it was constructed, its principal goal to provide a permanent link reducing travel time, while also exceeding expectations in increasing transport demand. The economic viability of the project was also achieved, since traffic revenues are adequate for the concessionaire to operate and maintain the project, repay the loans to EIB and also make a considerable profit. Finally, being one of the first three projects in Greece to be realised through this new method of project delivery, it opened the way for the adoption of PPP and contributed to related capabilities building in the public sector. The following Critical Success Factors can be identified:

* Successful project delivery project within expected deadlines and budget
* No cost overruns
* Financial success of the project as a PPP (bankability and profitability)
* Concrete concession agreement with clear definition of responsibilities and appropriate risk allocation and sharing (particularly with regard to the exceptionally challenging construction
* Cultivation of trust and good faith between the Concessionaire and the State, sound communication and cooperation
* EIB support, the only bank that could provide a long term loan on such a mega project in Greece at that time
* Bridge is the sole permanent link, whose operation will be significantly enhanced with the completion of Olympia Odos and Ionia Odos motorways, thus ensuring the project's viability.
* Competing ferry services are no longer financed.
* Brought to the country international construction-specific expertise, which was formerly lacking.
* Attracts significant traffic from Western Greece to the City of Patras.

The only failure factor that could be considered is the high toll rates, which has received considerable opposition, together with those from the ferry services and residents of Rio regarding specific project characteristics, such as the location of the south end of the bridge.

===Economic Impact===

Economic impacts have been studied and publicized as an outcome of two evaluation studies mandated by Gefyra SA to a research team from Patras University. Through a concrete research method based on interregional data, the index of the project came out to be 1.88. Hence, on the basis of the entire investment cost of the bridge, it was estimated that the total influence on the national economy was near to 1.5 billion euro. The project also brought about substantial increase in, land values in the towns of Rio and Nafpaktos. Other positive impacts are related to the fact that the bridge can be utilized as a landmark that can enhance touristic attractiveness, the improvement of accessibility on a regional level (documented by the increase in the ferry and bridge crossings after the completion of the bridge), the increased real estate transactions and, finally, the fact that the bridge has imposed a competition with the ferries, which are applying a more rational fare pricing compared to the time they had a "monopoly". The latter is said to have led to a very significant economic benefit, estimated as 44 million euro from 2001 to 2007.

===Social Impact===

The bridge constitutes a landmark of modern Greece holding world records, documented also by a number of international awards. In addition, it has removed the discontinuity of the network, contributed to internal cohesion and international connectivity and improved significantly accessibility of the isolated regions of Western Greece, while providing jobs and growth prospects in the region, one of the most lagging areas in EU in terms of GDP per capita and employment.
Nevertheless, Western Greece's relative low ranking in economic performance and employment is still pertinent. The bridge is only a facilitator in this process and its value is expected to be multiplied through the synergies following the completion of complementary transport infrastructure projects within the Trans-European Network Transport.

===Environmental Impact===

During 1988, Efpalinos Techniki SA conducted the Environmental Impact Assessment (EIA) Study of the Rion–Antirion project, which was complimented by the University of Patras in 1992. This study determined the major potential negative environmental impacts of the bridge. According to the study, the impacts during construction were noise, air pollution, the location of the worksite and the impacts due to its operation and the potential impact upon marine life of the antifouling product used on the part of the structures permanently under sea level. During operation, the impacts were noise and air pollution from traffic, as well as aesthetic issues due to the integration of the bridge with historical sites (the castles of Rion and Antirion).
Despite the above, the operation of the bridge diminished the pollution and general disruption caused by the car and truck congestion in the ports of Rion and Antirion, which are now free of congestion. Furthermore, the reduction of the number of ferries has significantly decreased the former heavy pollution of the marine environment.
Finally, the environmental friendliness of the operation of the bridge is enhanced by additional measures taken by the operation company. These include the minimization of greenhouse gas emissions by using new technologies for its own operation (lighting, own cars, heating and ventilation, etc), initiating marine environment protection policies and activities in the gulf of Corinth, carrying out awareness and educational campaigns regarding eco-driving, and hedging their greenhouse gas emissions with green energy investments in India.

==References==

* Law 2395/1996 amended by Presidential Decree 387/1997. GEFYRA S.A. concession contract. Government gazette.

* http://www.gefyra.gr

* Interview with Gefyra S.A.

* P. Papanikolas, A. Diakidou, A. Roumboutsos, A. Pantelias, 2014, Rio-Antirio Bridge, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

* KAPAROS, G. Analysing The case of Rion-Antirrion bridge through the lenses of a redefined notion of MUTP success, 12th WCTR, July 11-15, 2010 – Lisbon, Portugal

* “Project Profile: Greece Rion Antirion Bridge”. Report compiled by the Greek OMEGA Team, Research Unit of Infrastructure Technology Policy and Development, Department of Planning and Regional Development, University of Thessaly Greece

*Moraiti, P. (2015), “Rio-Antirio Bridge” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Piraeus Container Terminal

2015-06-12T10:49:24Z

Pmoraiti: /* References */

{{Infobox
|header1 = Piraeus Container Terminal, Greece
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 30 years, with an automatic extension option of 5 years conditional on completion of the Pier III investment programme
|header4 =
|label4 = Budget:
|data4 = EUR 153,6M (620 M including equipment costs)
|title = Project Overview
|image = [[Image:Piraeus1.png|300px]]
|caption = Photo from http://www.pct.com.gr/
Figure 1. Piraeus Container Terminal
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = 1998;
| label2= Piraeus flotation:
| data2 = 2003;
| label3= Revising PPP concept:
| data3 = 2004;
| label4= Aborted tender:
| data4 = 2005;
| label5= Tender:
| data5 = 2007;
| label6= Contract Award:
| data6 = November 2008;
| label7= Legal ratification:
| data7 = March 2009;
| label8= Re-negotiations:
| data8 = 2009;
| label9= End of strike action:
| data9 = November 2009;
| label10= End of co-management of terminal by port authority and concessionaire:
| data10 = March 2010;
| label11= Final date of construction/equipment delivery:
| data11 = 2015
}}
}}
==Introduction==
Piraeus is the largest port in Greece, located only a few miles from the capital Athens. It handles around three quarters of the country’s container trade, and is the main hub for domestic shipping services to the Greek islands.

It is also the only port in Greece with large amounts of transshipment traffic, which in 2007 – the year in which the PPP was tendered - accounted for 37% of its throughput. At the beginning of the decade Piraeus had been one of the largest container transshipment hubs for the East Mediterranean, but by the time of the tender it was facing growing competition from newer ports such as Suez Canal East (Egypt) and Ambarli (Turkey).

[[Image:Piraeus2.png]]

'''Figure 2: Importance of Transshipment Traffic (‘000 TEU)'''
'''''Source: Pallis & Psaraftis (2012)'''''

The project included the concession of Piraeus port Pier II to a private operator on condition that part of the cash flow was used to fund investment in Pier III (not yet existing). The capacity of Pier II was also to be increased from 1.7m TEU to 2.7m TEU p.a., mainly through equipment upgrades and an increase in the container stacking density.

At the time the Piraeus concession was tendered, the port had two container terminals. Pier I, the original container terminal, was quite small with equipment coming up for renewal. Pier II was larger and more modern, and had greater scope for expansion, with the site of the proposed Pier III lying immediately adjacent. Pier I continues to be operated by the port authority, and actively competes with the concessioned terminal at Pier II.

{| class="wikitable"
|+Table 1: Piraeus Container Terminals at the Time of Tender
!
!Pier 1
!Pier II
!Pier III (proposed)
|-
|Quay length (m)
|680a
|2,307
|600e
|-
|Water depth (m)
|12a
|12-18
|14-18
|-
|Storage capacity (TEU)
|4,090
|30,500
|n.a
|-
|Estimated annual capacity
|0.8m TEUc
|1.7m TEUd
|1.0m TEU
|-
| colspan="4" style="font-size:10px;"|Notes:

(a) subsequently increased to 820m (b) subsequently increased to 18m for 500m of quay

(c) subsequently increased to 1.1m TEU p.a. (d) with scope for further expansion to 2.7m TEU (e) tender requirement
|}
'''''Source: Piraeus Port Authority'''''

The PPP for Piraeus container terminal was closely linked to a similar project at Greece’s second largest port Thessaloniki, which handles less than one fifth of the container traffic of Piraeus. Most of this is for the local market in Northern Greece, but there is also a significant amount of transit traffic for Hungary and Romania. In contrast Piraeus handles very little transit traffic.
The other Greek ports with facilities for handling containers – Astakos, Heraklion and Patras – have fairly small container throughputs. Most of the container traffic for the Greek islands is discharged in Piraeus, and either stripped there or transferred to trucks for onward transport to the islands in ferries.

Shortly after the concessioning of Piers II & III, it was decided to expand Pier I (operated by the port authority), increasing its capacity from 0.8m TEU to 1.1m TEU. The extension, which was expected to cost EUR 160-170M, increased the maximum water depth as well as the quay length, making Pier I a serious competitor to the PPP concession at Pier II. In spite of concerns about the port authority’s ability to raise finance, the Pier I expansion was able to secure a EUR 80M loan from EIB.

Since the concession agreement was signed Piraeus Port Authority (OLP) has invested significant amounts of money in expanding its own terminal, and is marketing it quite aggressively. By 2011 OLP had increased its own share of Piraeus container traffic to 36%, largely by attracting back to Pier I MSC, the previous main user of Pier II.

==The Contracting Authority (Public Party)==
Although the contracting authority is Piraeus Port Authority, the history of port reform in Greece has resulted in central Government playing a leading role in the procurement process.

Options for PPPs at Piraeus and Thessaloniki were studied intensively in 1998 by their respective port authorities, and various schemes were identified for sub-dividing them into terminals to create conventional landlord port structures. However fears about job losses led to these schemes being abandoned in favour of the corporatisation of each port authority in 1999. This was supposed to devolve responsibility for their management to autonomous local entities, but in practice produced few changes apart from separating their financial transactions from those of the State.

New laws in 2001 created ‘master concession contracts’ between the two port authorities and the Greek State. These gave each port authority more control over the way it used its facilities in exchange for a yearly concession fee of 1% of the port’s gross turnover for the first three years (excluding extraordinary income and earnings from interest), and 2% thereafter.
This was followed by the flotation of 25.5% of the shares in each port authority. The Thessaloniki flotation (August 2001) raised EUR 15M and the Piraeus flotation (July 2003) EUR 55M. The money raised went straight to the Greek Treasury, leaving both ports struggling to fund future investments directly from cash flow and borrowings.

Interest in PPPs was re-ignited by the 2004 Greek elections, which replaced the previous left-leaning Government with a more conservative one keen to embrace private finance. This time the lead was taken by central Government, specifically the Ministry of Merchant Marine. This was partly because the container terminal project was above the EUR 200M limit foreseen by 3389/2005 Greek Legislation on PPPs. So although Piraeus Port Authority is the public sector counter-party in the PPP, it played a relatively small role in the procurement process, which was driven largely by central Government.

Piraeus Port Authority acts as the landlord and regulator, and provides a range of common services. It is responsible for the dredging and maintenance of the access channel to the port, navigation aids and navigation safety, and the provision of marine services (pilotage and towage), whilst Cosco Pacific (the concessionaire) is responsible for the construction and maintenance of terminal infrastructure, the provision of mechanical equipment (some of it transferred across from Piraeus Port Authority) and the provision of cargo handling services.

==The Concessionaire (Private Party)==

Piraeus Container Terminal S.A. (http://www.pct.com.gr/) is an SPV owned 100% by Cosco Pacific. This is a large State-owned Chinese terminal operator with an AAA credit rating. Cosco Pacific is a sister company of Cosco Container Lines (CCL), the world’s fourth largest container shipping line, and CCL is the largest single customer of Piraeus Container Terminal S.A, which is operated as a common user facility.

At the time of the tender Cosco Pacific was a stakeholder in container terminals in 18 other ports, mainly in China but also in Singapore, Antwerp and Port Said (Egypt), where the Suez Canal East container terminal was one of Piraeus’s main competitors for transshipment traffic.

==Users==

Users of the terminal are container shipping lines, importers/exporters and freight forwarders generating container traffic.

==Key Purpose for PPP Model Selection==

At Piraeus the main reasons for embarking on the container terminal PPP included securing additional funding for a new container terminal (Pier III), attracting additional transshipment traffic, and improving terminal productivity, which was low by European standards. Piraeus Port Authority (OLP), for example, estimated its operating costs in 2005 to be as much as 40% higher than those of efficient competing ports.

The desire to expand container capacity by building a new Pier III was supported by the unions, but port management was reluctant to commit public funds to the project because it felt that most of Pier III’s future throughput would be transshipment traffic, which could easily move to another port.

A PPP also seemed to offer a way around problems the port was having with the EU Competition Directorate about the preferential treatment given to its largest customer (MSC) in order to retain its existing transshipment traffic.

Several other reasons for the PPP were put forward in a speech by the Minister of Merchant Marine on 6 June 2007. This affirmed the need for a concession that would: Limit the financial risks; Pass the market risks to the terminal operator; Shorten the time for completing the Pier III investment programme; Lower administrative and operational costs; Provide the port authority with a net annual income of at least EUR 60M.; Create jobs by expanding the port and port-related activities; and Triple the port authority’s capitalisation at the stock market, helping the Government to sell a further stake in the port authority via an IPO immediately after the announcement of the tender results.

==Project Timing==

Serious discussions began in 2004 along with the second wave of infrastructure PPPs, leading to an aborted tender in 2005, before a new round of competitive bidding in 2007 resulted in the award of a container terminal concession to Cosco Pacific in 2009. Immediately after, the award was followed by re-negotiations and legal suits from the labour unions.

==Project Locality and Market Geography==

The port is located in an urban environment, densely built with limited land development potential. Simultaneously, its operation as a transshipment port gives it an international character. Local traffic (around one third of the current total) has some impact on the urban road network. Plans for rail access to the terminal may slightly increase its future catchment area.

The port of Piraeus is also one of the largest container transhippment hubs of the Eastern Mediterranean and included in TEN-T:
* Core Network node
* Seaport node of the Orient / East-Med TEN-T Core Network Corridor
* Important for Motorways of the Sea [Priority Project (PP) 21]
* Adjacent to PP7 [Motorway axis Igoumenitsa/Patra-Athina –Sofia-Budapest] and PP22[Railway axis Athina–Sofia–Budapest–Wien–Praha–Nürnberg/Dresden].

==Procurement & Contractual Structure==

===Tendering===

Before proceeding to the tender stage, the Ministry of Merchant Marine had already approached several terminal operating companies, including Cosco Pacific, HPH, DP World, APM Terminals, MSC, and Ζim, and held discussions with other governments (China, Korea) that had expressed interest in investing in port facilities at Piraeus and Thessaloniki. This gave the Government a reasonable feel for the level of private sector interest in the two container terminal concessions, but also delayed the process by opening up opportunities for a negotiated rather than a competitively tendered concession.

As the port’s domestic container traffic was relatively small and the PPP was exposed to competition from the container terminal operated by the port authority (Pier I), the throughput guarantees to be provided by the concessionaire effectively limited competition for the concession to shipping lines with access to “captive” transshipment traffic or large independent operators with the ability to attract transshipment traffic from several different lines.

Although Piraeus and Thessaloniki came under the same Ministry, and developed their PPPs at roughly the same time, the processes were largely independent of each other. Concerns were raised, however, when the two tenders attracted the same bidders - Cosco Pacific and HPH at both ports, plus DP World at Thessaloniki – leading to fears that both terminals could end up in the same hands, even though competition between them is fairly small and occurs mainly in Northern Greece.

Although the Government eventually committed itself to open competitive tendering, in line with best international practice, there were fears that the port might end up with the “wrong” partner – the Government had spent several years negotiating with Cosco Pacific on a non-competitive basis, whilst HPH – the clear winner at Thessaloniki and a close second at Piraeus – was already proving to be a tough negotiator; its willingness to walk away from the Thessaloniki concession put additional pressure on the Greek Government to conclude an early agreement with Cosco Pacific.

One of the main award criteria for the concession was the percentage of gross revenue offered: Cosco Pacific offered 21% for the first 8 years and 24.5% thereafter, with the second bidder offering 19.0%.

===Contract Structure===

The contractual regime was based on a fairly standard form of concession agreement, but involved more investment in new facilities than would normally be found in a concession for the management of an existing terminal. It can therefore be regarded as lying midway between a brownfield operating concession and a greenfield BOT contract. As in many port PPPs, a hybrid form of contract was adopted which does not fit easily into any of the standard classifications used for other modes of transport.

Most of the envisaged investment – including the construction of Pier III - takes place in the first six years of the 30-year concession. After that, the remaining investment will be mainly for asset replacement and equipment upgrades, and will take place on an incremental basis as and when needed.

At the time of the tender, the estimated cost of upgrading Pier II and building the new terminal at Pier III was just under EUR 500M. Around half of the costs not covered by the terminal’s operating cash flow are expected to be covered by equity contributions, the other half by debt. Like most of the other large international terminal operators, Cosco Pacific is likely to use corporate debt – bonds or senior loans secured by parent company assets – rather than project-specific non-recourse financing.

The concession fee structure comprises: A lump sum fee of EUR 50 M, of which EUR 2.9M was for the transfer of the terminal’s spares inventory; A percentage of gross revenue increasing from 21.0% in Years 1-8 to 24.5% from Year 9 onwards, to be paid in monthly instalments. This is subject to minimum payments based on throughput guarantees; An annual lease payment linked to the length of quay available (EUR 1,800 per metre); An annual lease payment linked to the container yard area (EUR 4.00 per m2). Both of the lease payments increase over time at an annual rate which is 2% higher than the Greek Consumer Price Index.

Prior to concessioning, Piraeus container terminal accounted for almost 75% of the port authority’s revenues and 50% of its earnings before interest, tax and amortisation (EBITDA). The OLP Accounts show that concession fees in 2011 accounted for approximately EUR 30M out of a total operating revenue of EUR 105M. The Annual Report for Piraeus Container Terminal SA for 2011 (which is probably more accurate), shows the concession fees as amounting to EUR 26.6M.

===Risk Allocation===

The Piraeus container PPP faces a high level of market risk because of its dependence on transshipment traffic. However there is only limited competition for domestic traffic, mainly from Thessaloniki for the Northern Greece market; even during the severe industrial unrest in 2008 Thessaloniki was able to capture only around 100,000 TEU p.a. from Piraeus, equivalent to around 15% of its domestic traffic.

Market risks are shared to some extent through the “percentage of gross revenues” component of the concession fee. However the majority of the market risk is held by the terminal operator, due to the existence of challenging throughput guarantees and fixed annual lease payments.

Financial risks are also held largely by the operator, due to the existence of a fixed construction programme and limited scope for reductions in operating costs after the operator’s freedom to alter conditions of employment was curtailed in response to union demands.

Strong opposition by the port unions, industrial action and the recession are other key risks facing the PPP. The risk of loss of business due to industrial action is held largely by the operator, although there is provision for the concession agreement to be extended (to up to 42 years, when OLP’s own master concession agreement expires) if terminal operations are disrupted by the actions of OLP.

With regard to force majeure, in accordance with the contract, the Concessionaire will bear the financial consequences of a force majeure event to the extent that the Concessionaire has procured for adequate insurance with respect to risk inherent thererin. The State shall compensate the Concessionaire for any financial consequences of any force majeure event in excess to those be borne by the Concessionaire.

The most serious social risk has been the loss of business due to industrial action. This appears to be held largely by the operator, although there is provision for the concession agreement to be extended (to up to 42 years, when OLP’s own master concession agreement expires) if terminal operations are disrupted by the actions (or lack of action) of OLP.

[[Image:Piraeus3.png]]

'''Figure 3: Container Throughputs at Piraeus and Thessaloniki (‘000 TEU)'''
'''''Source: CI Online'''''

[[Image:Piraeus4.png]]

'''Figure 4: Risk allocation'''

===Performance===

The contract contains no operational performance requirements and there are no penalties for non-performance except (possibly) for failure to maintain the assets in good condition and complete the required investment programme in line with the agreed timetable.

The prolonged industrial action associated with the PPP process led to a sharp drop in traffic between 2007 and 2008 when MSC – which controlled 90% of the port’s transshipment traffic – transferred most of it to other ports. This was compounded by the early effects on the global financial crisis, and MSC’s acquisition of financial stakes in competing transshipment hubs at Marport (Turkey) and Gioia Tauro (Italy).

Since then, there has been significant recovery in traffic volumes, helped by the decision of Cosco Pacific’s sister company Cosco Container Line to relocate some of its transshipment business to Piraeus, and the return of MSC to Pier 1. Actual traffic in Pier II greatly exceeded forecasts, rising sharply from 1,2 million TEUs in 2011 to 2.2 million TEUs in 2012 and reaching 2,6 million TEUs in 2013, with capacity utilization of over 80%.

==Project Outcomes==
Despite initial controversy surrounding the project, the investment now ranks as one of the most successful Greek PPPs. .Since its commencement, the Port of Piraeus has reported remarkable growth in container throughput, and is fast becoming one of the major trashipment hubs in the Mediterranean, giving a much needed boost to Greece's crippled economy at times of crisis. The concessionaire's strong capacity to meet financial commitments, its direct links to a booming target market, such as Asia, and its ambitious vision for the port will contribute significantly to the viability of the project. The following Critical Success Factors can be identified:
* The dominant position of Piraeus in the Greek and Mediterranean container market.
* The strong financial position of the concessionaire, which has the resources to absorb several years of losses if necessary;
* Links between the terminal operating company and the major Cosco shipping line, which will increase its ability to meet the throughput guarantees.
* The ratification law granted Cosco Pacific various income tax exemptions in terms of VAT and depreciation obligations, whcih are more favourable compared to the standard obligations of a Greek corporation, including OLP’s.Also, accumulated losses could be offset against the taxable profits of later periods without any time constraint.
* Incentive of OLP and consesionnaire equally sharing profits if an IRR of 16% is exceeded.
* Cosco's capability for long-term planning ( further plans to expand—moves that the company expects will boost volumes to more than six million containers by 2016). It should be noted that it ordered 12 ERTG cranes (above its contractual obligations), allowing for an additional increase of 1.1 million TEUs in the capacity of piers II and III (4.7 million TEUs in 2015 instead of the 3.7 million TEUs originally planned).
* Chinese cultural attitudes, which seek to avoid the loss of face associated with failure. The political support provided by the Chinese Government may also be a significant success factor, either facilitating the renegotiation of the contract at some later stage, or providing Cosco Pacific with incentives to continue operating the terminal primarily for political reasons.
* Now in competition with Cosco, the port authority operating Pier I terminal has increased productivity and improved operations and services, reporting a 27.5 % increase in container throughput from 2011 to 2012. Previously inefficient and with outdated infrastructure, the port struggled to secure financing (even from the EIB).

The main barriers to implementation appear to have been union opposition, and lack of understanding of the PPP process on the part of the politicians. Implementation was also complicated by the timing of the PPP, which coincided with the start of the current global recession.

The port’s corporatisation in 1999 and its partial flotation in 2003 had very little effect on its competitiveness, as it did not result in any significant changes to the management structure, or create a group of activist shareholders determined to modernise the port. Instead it increased the commitment of the management to continue in business as a terminal operator in order to generate more dividends and increase the share price.
The creation of Piraeus container terminal PPP has been a highly politicised process, led by the national government. The managing body of the port was given limited freedom to develop port-specific guidelines designed to achieve its original objectives. As a result, insufficient attention was paid to changes, which would have improved productivity and driven down costs, thereby allowing the port to become more competitive in the East Mediterranean transhipment market.
The prolonged industrial action associated with the PPP process led to a sharp drop in traffic and the loss of the major client, MSC, to other ports.
Strong opposition by the port unions, industrial action and the election of a new government in October of 2009 forced the renegotiation of the contract in its first year of operation. As part of this process the unions won a major concession by requiring the port authority – which was still operating the terminal on behalf of Cosco Pacific during the transition period - to offer the same salary and working conditions to newly hired personnel as those already enjoyed by existing staff. This reversed a previous decision that allowed greater flexibility in employment conditions, and undermined one of the original objectives of the PPP, which was to reduce terminal operating costs.
However, there has been more flexibility in respect of manning levels, with a move towards smaller gang sizes since Cosco Pacific took over. Pier II is now reported to employ four dockers per gang compared with 6-9 men per gang at Pier I. This is likely to strengthen the position of the PPP when it comes to competing against the port authority for new business.
It remains to be seen whether the incentive for sharing profits if maximum IRR of 16% is exceeded, will be proven successful or not.
Also, the provisions not included in the contract, but only in the law that ratified the concession, regarding various tax exemptions for Cosco Pacific (while OLP was not subject to these) raises the question of unfair competition.
Finally, OLP is both landlord and competitor under worse conditions, raising acceptability issues.

===Economic Impact===
The project is believed to have largely contributed to rendering the port of Piraeus into one of the world’s fastest growing container ports, despite its modest size compared to other major ports. Only in 2012, Piraeus went up from number 77 to number 46 in the rankings of the top 100 global container ports, with its container throughput growing from 1.7 million TEUs in 2011 to 3.2 million TEU in 2013. Primarily because of Cosco’s involvement, the port is attracting the shipping routes from/to the Asian market, whose global share is also rising rapidly. Cosco itself is a major shipping company operating along this route and, hence, a key customer for the Piraeus port terminal. The above translate to additional revenues for the Greek state, as well as to strengthening the country’s strategic position and ability to attract other investors. Cosco is continuing to expand the port’s capacity above the contractual obligations, following its vision to turn Piraeus into the main container hub in the Mediterranean, and gateway for Chinese exports to Europe, which could only boost further the Greek economy.

According to estimates of the National Bank of Greece (2013), the value added from the projected increase in container handling in Greek ports, 90% of which is attracted by the port of Piraeus (to 4.7 million TEUs in 2015 from 3 million TEUs in 2013) is estimated to rise by around €0.8 billion, or 0.4 per cent of GDP by 2015. The long-term benefit could be much larger (€5.1 billion or 2.5 per cent of GDP by 2018), as the multiplier effect from the formation of a cargo-related cluster (mostly from suppliers) is potentially large.

===Social Impact===
Although the project has significant economic impact to the national economy, container port growth generates limited local economic value and employment.In addition, significant concerns have been raised with regard to the local labour standards.Finally, the controversy generated around Cosco's involvement and the entire PPP process has created an environment of mistrust and cultivated a general public opinion that the port is privatised.

===Environmental Impact===
The project has considerable negative environmental impacts, particularly given its location in a highly dense urban area:
* Air quality due to vessels and equipment emissions contributing also to climate change
* Water quality and marine environment degradation due to vessel activity
* Heavy consumption of energy from machinery and equipment
* Noise
The container terminal of Piraeus is bordering the Perama and Keratsini municipalities, which are exposed to the adversities of the ship exhaust emissions generated within the terminal.

==References==

*S. Farrell, 2013, Piraeus Container Terminal In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
*Psaraftis H.N & Pallis A.A Concession of the Piraeus container terminal: turbulent times and the quest for competitiveness, *Maritime Policy & Management, Vol 39, No.1, January 2012
*Piraeus Port Authority Annual Financial Report 2011
*Container Terminal Piraeus SA Annual Report 2011
*Moraiti, P. (2015), “Piraeus Container Terminal” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Larnaca and Paphos International Airports

2015-06-12T10:48:21Z

Pmoraiti: /* References */

{{Infobox
|header1 = Larnaca and Paphos (Cyprus) International Airports
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 25 Years
|header4 =
|label4 = Budget:
|data4 = EUR 640M (Development of the new Larnaca and Paphos Airports)
|title = Project Overview
|image1 = [[Image:larnaca1.jpg|300px]]
|caption1 = Figure 1: Larnaca Airport
|image2 = [[Image:paphos1.jpg|300px]]
|caption2 = Figure 2: Paphos Airport
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = 1988;
| label2= Tender:
| data2 = 2001;
| label3= Contract Award:
| data3 = May 8, 2005;
| label4= Financial Close:
| data4 = May 12, 2006;
| label5= Paphos Airport inauguration Ceremony:
| data5 = Nov. 8, 2008;
| label6= Operation of the new Paphos Airport:
| data6 = Nov. 17, 2008;
| label7= Larnaka Airport Inauguration Ceremony:
| data7 = 7 Nov. 2009;
| label8= Operation of the new Larnaka Airport:
| data8 = Nov. 17, 2009.
}}
}}

==Introduction==

The ‘‘Best Transport Project in Europe’’ in the competition for ‘‘PPP Awards 2013’’ was awarded to the Concession Agreement for the development and operation of the international airports of Larnaca and Paphos by ‘‘World Finance’’ (visit http://www.worldfinance.com/awards/ppp-awards-2013). This reflects the success of the project on various levels assessed in the competition: using best practices, innovation, bringing socio-economic benefits to the end users, and becoming a template in various aspects. In fact, the new modern airports, through the PPP contract, offer significant changes and innovative solutions in respect of passenger handling (e.g. boarding bridges), especially when these solutions are compared with the old airports.

Larnaca Airport is the largest commercial airport of Cyprus and is located in the southern part of the island, 4 km southwest from the city of Larnaca. Paphos Airport is the second largest airport of Cyprus, located in the southwestern part of the island, 6.5 km southeast from the city of Paphos.

Hermes Airports Ltd (the Concessionaire) completed the construction of the new facilities at Larnaca and Paphos in accordance with the agreed timetable at a total cost of EUR 642,7 M. According to the specifications of the International Air Transport Association (IATA), the size of the Larnaca and Paphos terminals provides levels of service B and C, respectively. Both airports can be reached by car, taxi and the public transport system.

Larnaca Airport opened in November 2009 and the first phase is capable of handling 7,5M passengers annually. The new 100.000 m2 terminal includes 16 boarding bridges, 67 check-in counters, 5 baggage carousels, VIP and business lounges, duty-free shops as well as comfortable and functional areas offering a wide range of shops and cafeterias. The new terminal was built some 500–700 m west of the old terminal, adjacent to the new control tower and it is supported by an extension in the runway, new facilities for aircraft and 2.450 car parking spaces. The runway has a total length of 3.000 m. The old terminal building is planned to be partially demolished and refurbished as a cargo centre, and is currently used as a private terminal for visiting heads of state, VIPs, and private aircraft operators. In 2012, Larnaca Airport served 5.166.224 passengers. There is the possibility of further expansion and construction of a second parallel runway when necessary and further development of the terminal in order to be able to accommodate 9M passengers per year.

The new Paphos Airport has been operational since November 2008 and the new 18.000 m2 terminal can serve 2,7M passengers annually. The new airport provides 28 check-in counters, 3 baggage carousels and 800 parking places, shops etc. The total investment for Paphos Airport reached EUR126M. The runway has a total length of 2.700 m. In 2012 Paphos Airport served 2.242.797 passengers.

The concessionaire investigated many options including the development of an entertainment, culture, tourist, leisure and commercial centre, coupled with an airport hotel, casino etc. In addition, there were proposals for the development of a huge exhibition/ transshipment center serving the promotion of Chinese products in the region of south-eastern Europe, Middle East and North Africa. To date there has been no final decision on this.

==The Contracting Authority (Public Party)==

Central government is responsible for all levels of the development, design, tendering, negotiation procedure and regulation of the contract. These procurement activities were conducted under the jurisdiction of the Ministry of Communications and Works (Public Works Department, Department of Civil Aviation) and the Ministry of Finance. However, the local authorities were, also supportive of the project.

The procurement process for this project was based on the UK Treasury Taskforce (TTF) (1999) A Step-by-Step Guide to the PFI Procurement Process. London: HM Treasury, the EU regulations on the procurement process for such a project, and the Cyprus procurement law. The decision to use EU laws for the procurement process was due to the fact that, at the time, Cyprus was in the process of joining the EU and because it was considered that familiarity with the process would attract international companies (Solomou, 2003).

==The Concessionaire (Private Party)==

Hermes Airports Ltd, a French and Cypriot-led consortium was established. The majority of companies that created the Hermes Airports consortium are business developers mainly in the construction field (Bouygues Batiment International, Egis Projects, Iacovou Brothers, Hellenic Mining, Charilaos Apostolides) with a total share control of 64,6%. In addition the foreign companies Bouygues Batiment International and Egis Projects have extensive experience in PPPs. The consortium of project sponsors included:
*Bouygues Batiment International (French construction group- 22%);
*Egis Projects (French infrastructure group- 20%);
*Cyprus Trading Corporation (a local retail group, 11.34%);
*Hellenic Mining (11.33%, a local business developer),
*Vantage Airport Group (11%);
*Aer Rianta International (Irish airport operator, 11%);
*Iacovou Brothers (a local contractor- 5,665%);
*Charilaos Apostolides (a local contractor- 5,665%);
*Aéroport Nice Côte d' Azur Chambre de Commerce et d'Industrie (French airport operator- 2%).

Key subcontractors for construction and maintenance included:
*Main contractor: Bouygues Batiment International and subcontractors: Iacovou Brothers Ltd and Charilaos Apostolides Ltd;
*Ground handling subcontractors (aircraft servicing, luggage handling etc): Swissport and LGS;
*Retail/ Food & beverage subcontractors: Cyprus Trading Corporation (CTC) and Aer Rianta International;
*Cleaning subcontractor: Hellenic Mining.

In order to raise funding Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. Hermes Airports Ltd. then borrowed €569.7M as follows: Term Loan €449.2M; Mezzanine Loan, €60.25 M; Shareholders’ Loan Stock, €60.25M. The Term and Mezzanine Loans came from 16 international banks (Koutsoulis, 2013) .

Other subcontractors included:

Construction and Maintenance:
Main contractor: Bouygues Batiment International

Subcontractors:
* Iacovou Brothers Ltd
*Charilaos Apostolides Ltd

Ground handling (airplane servicing, luggage handling etc) subcontractors:
* Swissport
* LGS

Retail/ Food & beverage subcontractors:
* Cyprus Trading Corporation (CTC)
* Aer Rianta International

Cleaning subcontractor:
* Hellenic Mining

As a SPV (Special Purpose Vehicle), the Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. See above the list of sponsors & respective shares. The Hermes Airports Ltd borrowed €569.7 million as follows:
*Term Loan: € 449.2 mil.
*Mezzanine Loan: € 60.25 mil.
*Shareholders’ Loan Stock: € 60.25 mil.

Term and Mezzanine Loans came from 16 international banks.

==Users==

Cyprus, being an island, is isolated from Continental Europe. Larnaca and Paphos International Airports are Cyprus’ main international passenger gateways. No year- round ferry/ sea port connections with neighboring countries exist.

Larnaca Airport handles on average over 5 million passengers per year, approximately 50.000 passenger flights and over 30.000 tons of cargo. Paphos Airport, principally used by tourists, handles approximately 2 million passengers per year, over 12.000 passenger flights and some 400 tons of cargo. It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter percentage is 25% and 49% for Larnaca and Paphos, respectively (year 2011). The UK market share is 37,26% of total passenger traffic to Cyprus, followed by Greece with 15,71%, Russia with 9,45% and Germany with 5,34% (Government of Cyprus, Civil Aviation Department).

==Key Purpose for PPP Model Selection==

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It comprises the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). Base on the timetable set in a European level priority will be given to the Core Network (European financial support). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network.

Currently, the development of the transport infrastructure of Cyprus through PPP projects is considered to be unattractive, particularly for road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors for TEN-T projects because the cost of the investment is usually equivalent to that of a similar project in a central, inter-connected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the infrastructure project. This is taken into consideration when authorities investigate the possibility of developing projects in Cyprus through a Public- Private Partnership (PPP).

Value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer are the main political motivations for PPPs as a contract choice, both officially/formally and unofficially/informally in Cyprus. The decrease of governmental debt is considered to be the main reason, and the secondary one the acceleration of works.

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It is composed by the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network. It is obvious that priority will be given to the Core Network (European financial support).

==Project Timing==

After the Turkish invasion of 1974, Lefkosia (Nicosia) Airport, the only international airport in Cyprus those days, ceased its operation and the airport premises came under United Nations administration. Under these circumstances, the Republic of Cyprus decided in late 1974 to convert an abandoned RAF airport and landing strip into the new international airport of Cyprus, Larnaca Airport. Larnaca International Airport opened on 8 February 1975, with only limited infrastructure facilities and a prefabricated set of buildings comprising separate halls for departures and arrivals. Cyprus since the early 1980s was becoming a major tourism center. The Cyprus Government steadily improved the facilities of the Larnaca Airport, but the passenger terminal was unable to cope with demand. The growing tourism industry of the island led to the decision to develop a second airport in Cyprus. Paphos International Airport opened for operations in November 1983 to serve primarily the tourism industry of the region of Paphos.

The rise of tourism in Cyprus unfortunately was not matched by simultaneous development of airport infrastructure. The two airports of Cyprus were substandard and they could not match demand (especially at Larnaca Airport). Often problems arising during peak hours created a negative image for the passengers, mainly tourists. It was deemed necessary to further develop the airports. The development of the two airports was expected to assist significantly the tourist industry of Cyprus and support the viability of the economy.

The further development of Larnaca and Paphos International Airports was decided in the late 1980s. The new elected government (left wing, 1988-1993) was preparing the project having in mind the development and operation of the two airports through traditional methods. The right-central wing government (1993-2003) followed the steps of the former government. By the late 1990s, when the master plan and construction drawings were ready, the financial issue of developing the two airports arose. In those days desalination plants were being developed in Cyprus as PPP’s, introducing this as a sustainable method for project development. The right-central wing government decided to follow the PPP path. Cyprus in the early 2000s was struggling to access the European Union and decrease governmental debt. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The new central-left government (2003-2008) followed the steps of the previous government and concluded the negotiations with the preferred bidder (2005). In 2004, Cyprus entered the European Union and the new government set as a new goal access to the eurozone.

==Project Locality and Market Geography==

Currently air transport is the only mode of passenger transport to/from Cyprus because there are no ferry services (passenger ships) that connect Cyprus with the Continental Europe or other neighboring Countries. Cyprus as a tourist and insular country is highly dependent on air transport. There is a wide network of air-routes connecting Cyprus with Europe, Africa and Asia. Air transport policy objectives in Cyprus include the growing of air transport in a controlled way, the development of sufficient airport capacity, and the adoption appropriate air traffic management measures. The liberalisation of air transport, in combination with the development of the new airports, is expected to create the potential for Cyprus to become a regional transit hub between Europe and the Middle East.

The Larnaca and Paphos Airports support almost exclusively the passenger transport needs of Cyprus with the rest of the world. The two airports attract passengers from all over Cyprus. Transit movements are relatively low and the two airports cannot be considered as hubs for the area. The two airports are located in the outer urban areas of the cities of Larnaca and Paphos respectively

==Procurement & Contractual Structure==

The further development of Larnaca and Paphos Airports was decided in 1988, under a single contract. A Master Plan was prepared for the construction of new terminals in the two airports, extension of the runaways and taxiways, and other airport facilities. In May 1991, after a tendering process, the French consulting firm SOFREAVIA prepared the master plan for the airports. In those days it was expected that the two airports would have been traditionally procured and constructed. In February 1993, the French consortium AEROPORTS DE PARIS/SOFREAVIA prepared detailed designs and tender documents for the new airports. The designs for Larnaca and Paphos Airports were completed in September 1999 (Solomou, 2003).

In the late 1990s, there was a discussion of what procurement method should be used for the development of the airports. The government decided that the best method was the BOT (Build, Operate, Transfer) approach because it was believed that this would result in the easiest development of the airports without the “slow-moving” processes a State project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government in those days since the primary goal was accession to the European Union.

After the selection of a team of consultants in October 2000 there was a check on the viability of the project, and discussions on project requirements and how to make the project more attractive to international companies.

===Tendering===

In March 2001 there was an advertisement for Expressions of Interest. Sixteen consortia expressed their interest in the project and received the necessary documentation. From those sixteen only ten returned the completed documents. These bidders were evaluated and five of them were short-listed in July 2001, and invited to submit detailed proposals in October 2001. The short-list of tenderers was based on answers to the Pre-Qualification Questionnaire (PQQ) and on the criteria for the pre-qualification evaluation. From these five consortia only the following three accepted the Invitation to Tender (ITT) and submitted proposals for the project: Alterra Consortium; Hermes Airports and Cyprus Airports Group (Solomou, 2003).

The Master Plan was made available to all bidders in order to prepare their proposals. The bidders were expected to follow the basic idea of the Master Plan, but could propose small, ‘unimportant’ changes in order to make an efficient design for the airports which would help achieve the best operation of the airports and meet the standards of the output specification. The concession contract was for a period of 25 years.

After the pre-qualification stage, a detailed bid document ITT, with all the needed information for the preparation of their proposals was sent to the short-listed bidders.
The selection criteria were based on the following broad categories:
- Technical and Operational (e.g. design, innovation and technical, capacity, performance, capital spend).
- Business Plan (e.g. marketing strategy, pricing policies, organizational structure).
- Legal (e.g. assessment of amendments to draft Contract).
- Financial (i) (e.g. financial robustness, deliverability)
- Financial (ii) (e.g. bid price).

Negotiations took place with the selected preferred bidder and according to the tender rules if the two parties did not reach an agreement, negotiations with the second selected bidder were to follow. In 2003 Alterra Consortium was announced as the preferred bidder. The negotiations failed and the Cyprus Government started negotiations with the second best bidder, Hermes Airports. This had legal implications since Cyprus Airports Group could legally challenge the decision, adding further delays to a much needed project.
The negotiations with Hermes Airports were successfully completed and on 12 May 2006 the private consortium signed the BOT contract for the management and development of Larnaca and Paphos Airports. Until completion of the new terminals, the consortium took over the management of the existing facilities where minor improvements were made prior to the construction of the new facilities.

===Contract Structure===

An output specification was created that includes the way the airport is going to be operated. The Concessionaire is responsible for the Soft Facility Management (SFM) and Hard Facility Management (HFM). In the contract there is a specification of the requirements: how to manage and operate the terminals, the runway and taxiways, and car parking for staff, passengers and visitors. The Concessionaire is also responsible for the maintenance and upkeep of the airport in general, as well as for the delivery of some of the core services. It is responsible for the check-in facilities and the loading of the baggage as well as the services provided in the waiting area.
The Cyprus Government before the PPP tender procedure prepared the Master Plan and the detailed designs for the two airports. Moreover, the government is responsible for the delivery of other core services (e.g. security, air traffic control, and fire brigade services).

Based on the contract clauses the aeronautical fees are regulated. Other fees and revenues (retail, car parking etc) are not regulated.

Termination clauses are included in the contract and are divided into three categories (concessionaire default, contracting authority default and force majeure). In each case there are guarantees that the Concessionaire is compensated as follows (Government of Cyprus, 2005):

Concessionaire default- compensation based on 95% of the Concession Agreement revised debt termination amount;

Force majeure- compensation based on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs and equity.

Contracting Authority default- compensation on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs, equity and equity return.

A Liaison Committee exists, formed by three representatives of the Contracting Authority and three representatives of the Concessionaire. This committee is responsible for the day-by-day review of the Contract. The Committee also provides a forum for strategic discussions on variations in market conditions as well as the efficient operation of the two airports. The Liaison Committee can be the forum for contract renegotiation.

The private sector collects all of the revenues. The Concessionaire pays the Cyprus Government an annual fee of €3,5M as well as 33% of the annual gross revenues of the two airports. In addition, the Cyprus Government participates in a profit-sharing arrangement if the actual equity IRR exceeds 12% in real terms.

===Risk Allocation===

The risks are allocated in a balanced way between the concessionaire and the contracting authority (government). The allocation is based on the principal that the risk is allocated to whom can best deal with it (Solomou, 2003).

Design and construction risks are allocated to the private sector. If there is a problem the concessionaire will face certain penalties. The government has developed some tools to measure performance. These risks however are thought to be the most easily regulated and measured. Maintenance risks are allocated to the private sector. If problems arise the concessionaire will face certain penalties.

Operating risks are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental operations, due to government approved suppliers).
The demand risk will be shared by both parties but the risk is greater for the private sector. The concessionaire has to pay the government a “rent” for the exploitation of the government’s assets. The “rent” is divided into two parts. The first is a fixed payment and the second a percentage (33%) of the operating revenues. This percentage shows the sharing of the demand risk between the private and the public sector. If there is a significant reduction in revenues the government receives less income.

The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in the case of a decision to expand the infrastructure of the two airports.

The regulatory risks are shared between both parties. There are certain clauses that will protect the operator from negative regulatory changes enforced by the government. If, for example, tourism taxation is raised then fewer visitors will come to Cyprus, so the airports’ revenues will be reduced. In such a situation, the government should take this risk. On the other, hand if the regulation affects all Cyprus citizens, for example inflation, the concessionaire will have to bear this risk.

The force majeure risk will be shared by both parties (war, disaster, hijacking etc) but the risk is greater for the public sector, as the concessionaire is compensated by the Contracting Authority.

[[Image:Larnaca2.png|300px]]

'''Figure 3: Risk allocation'''

Another possible risk that is allocated to the public sector is the possibility of having a third airport in Cyprus, either by building a new one or in the case that a comprehensive settlement is reached in respect of the Cyprus issue, when the existing airport in the occupied area may recognized as an international airport again. The bidders prepared their proposals on the assumption that there are only two airports in Cyprus. If there is in the future a new airport in Cyprus, there will be a reduction in demand for Larnaca and Paphos Airports so the contract has certain clauses to protect the concessionaire from such risks.

===Performance===

The contract defines a performance measurement system that incentivizes the Concessionaire to perform the designated airport services to the performance standards specified in the contract, and specifies the deductions to be made when performance does not attain the relevant standards. The concession contract establishes procedures for the measurement of performance of the designated airport services. If the Concessionaire fails to achieve the performance standards, then deficiency points apply. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level (10 points) penalties apply (a percentage of the gross revenue less the concession fee). If the Concessionaire achieves or exceeds 95% performance in all the concessionaire- controlled standards, then an amount equal to 1% of the gross revenue less the concession fee for that performance review period shall be deducted from the next concession fee payment made to the Government (Government of Cyprus, 2005).

Nevertheless, the contract does not include deficiency points or penalties for non-concessionaire controlled performance standards (baggage handling and airline counter check-in process). The Concessionaire shall employ independent third parties to carry out customer satisfaction surveys of passengers and customers. No deficiency points or penalties are linked to the survey results.

The Contracting Authority may audit any aspect of the Concessionaire’s performance. If the Concessionaire achieves less than 60% for all of the concessionaire-controlled standards, the Contracting Authority may issue a Warning Notice which may lead even to termination of the contract. The performance standards may be reviewed by the Liaison Committee in good faith.

Two categories of performance indicators exist, as follows:
*Concessionaire-controlled performance indicators: Check-In Counters; Security Check Equipment; Luggage Trolleys; Immigration/ Customs; Baggage Reclaim; Flight Information Display; Lifts/ Escalators/ Moving Walkways; Cleanliness;
*Third party-controlled standards (non concessionaire-controlled performance indicators): Check-In for Scheduled Flights; Check-In for Charter Flights; Baggage Delivery of first bag to reach carousel; Baggage Delivery of last bag to reach carousel.

The contract includes deficiency points and penalties for the concessionaire- controlled performance standards/ indicators. Each indicator has five deficiency levels which lead to 1-5 deficiency points, respectively. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level, a penalty applies. The following performance indicators are mentioned in the contract:
*Check- In Counters for processing passengers
Concessionaire controlled performance indicator- Check- In Counters for processing passengers are fully functional 90% of the time.
*Security Check Equipment functionality
Concessionaire controlled performance indicator-
Security Check Equipment fully functional 90% of the time.
*Luggage Trolleys availability
Concessionaire controlled performance indicator-
Luggage Trolleys available 85% of the time in Peak Week for passengers in the check in hall and the arrival hall/ baggage reclaim area.
-Immigration/ Customs booths functionality
Concessionaire controlled performance indicator-
90% of Immigration/ Customs booths for processing passengers are fully functional.
*Baggage reclaim equipment functionality
Concessionaire controlled performance indicator-
Baggages reclaim equipment 90% of the time fully functional.
*Flight Information Display equipment functionality
Concessionaire controlled performance indicator-
Flight Information Display equipment 90% of the time fully functional.
*Lifts/ Escalators/ Moving Walkways equipment functionality
Concessionaire controlled performance indicator-
Lifts/ Escalators/ Moving Walkways equipment 90% of the time fully functional.
*Cleanliness of the project area
Concessionaire controlled performance indicator-
90% of the time cleanliness maintained according to the specifications determined by the Concessionaire.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 12 minutes of joining the Check- In queue for Scheduled Flights.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 20 minutes of joining the Check- In queue for Charter Flights.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of first bag to reach carousel Target Maximum/ Optimal: 20/15 minutes respectively after on-block time.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of last bag to reach carousel Target Maximum/ Optimal: 35/30 minutes respectively after on-block time.

The Department of Civil Aviation expects that the passenger traffic in the coming years will increase annually by 2 -3%. The development depends on competition for tourism, the international economy and other external factors such as political stability in the region. The passenger forecasts for a 2-3% annual increase have not been confirmed (at least not for every year).

It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter rate is 25% and 49% for Larnaca and Paphos respectively (year 2011). The UK market shares 37,26% of total passenger traffic to Cyprus, followed by the markets of Greece with 15,71%, Russia with 9,45% and Germany with 5,34%.

Three forecast scenarios exist in the contract (low case growth, base case growth and high case growth). None of these scenarios have been confirmed by the actual passenger traffic: Larnaca & Paphos Airports actual traffic in 2012 was 7,5M passengers versus 8,5M, 9,0M and 9,5M passengers in the 2012 Low, Base and High case scenarios, respectively.

Larnaca Airport
*Passengers
2007: 5.387.724

2008: 5.482.567

2009: 5.258.716

2010: 5.475.905

2011: 5.507.552

2012: 5.166.224

2013: 4.863.577

*Air Traffic (airplanes)
2007: 47.755

2008: 50.483

2009: 46.416

2010: 49.022

2011: 50.329

Paphos Airport
*Passengers
2007: 1.819.182

2008: 1.764.660

2009: 1.640.562

2010: 1.646.937

2011: 1.778.898

2012: 2.242.797

2013: 2.175.114

==Project Outcomes==
The key scope of the project was to deliver a modern, safe and secure National Airport for Cyprus and support tourism.Traffic has not been the anticipated. Reasons are considered to be:
* internal (there have been discussions with respect to the high rates required by Hermes Airports ltd (concessioner). At the end of 2014, the concessioner has initiated a campaign to attract new airlines. Emphasis is placed on low-cost carriers, which are used to serve the Tourism industry. Paphos is to be the cultural capital of Europe in 2017 and a rise in visitors is expected in the range of 15-25%.
*2013 was a difficult year for Cyprus with great political and economic stability. This had an impact on tourism and business travel.

The following critical success factors could be considered:
* The two new airports improved dramatically the quality of services provided. Although the two airports do not face significant competition, it is crucial for the tourist industry of Cyprus to provide long lasting- sustainable high quality services.
* Air transport as a whole should provide high health and safety standards. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation. The airline operators are significant partners too.
*Air transport as a whole should provide high security standards. Terrorism and other relevant issues have a global effect. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation.
*An investment programme will increase the revenues benefiting the Concessionaire and the Cyprus Government (Contracting Authority). The diversity of the revenues will increase the viability of the project and it may allow the decrease of other fees (e.g. aeronautical fees). The Cyprus Government should support the Concessionaire to explore possible investment choices. The fact that the contract concludes in 2031 should not be a negative factor. Other incentives should be identified.
*Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.
*Cooperation between the Concessionaire and the Contracting Authority should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should stand alone too. The liaison committee is expected to support continuous cooperation.

For an insular country the existence of a high quality , safe and secure airport(s) is of paramount importance. It is also very important for business and tourism development. The old airport was insufficient and not capable to handle with safety and security air traffic.
This is especially important following the developments in the wider geographical area.The concessionaire - to date - has not used the full potential of the airport services. Additional revenues are still rather low. The upside is that there is space for improvements on revenue.

The airports have also received (right from the start) high acceptability. The upgrading of the existing airport facilities was long required.

The following critical failure factors could be considered:
* The viability of the entire project depends on the growth of the airlines passenger traffic. The actual passenger traffic so far did not match the forecast scenarios included in the contract.
*Basically, the growth of revenues is interconnected with the passenger traffic. Both these factors are significant for the viability of the whole project. Nevertheless, the Concessionaire seeks out other forms of revenues and the Cyprus Government assists the Hermes Airport towards this direction
*Aeronautical fees are regulated by the Concession Contract. It is important to be maintain in reasonable levels. It is important for the viability of Cyprus economy and especially for tourism industry to offer competitive tourist packages. The aeronautical fees play significant role on the later. On the other if the tourism industry fails to attract tourists in Cyprus, the airports would have significant loses. In this case the chicken and egg situation exists. This show the importance of cooperation of all the tourism industry stakeholders and Hermes Airports should be a main stakeholder.
*In 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013 the Cypriot Government reached to an agreement with its lenders. The status of Cyprus economy and the sustain recession that is expected are factors that could create increase uncertainty for the project.

The rates applied by the concessionaire seem to be limiting the full potential of the airports. In 2014, new campaigns were launched to attract airlines. The mix of shareholders in the concessionaire may also be playing a pivotal role in the business development.

===Economic Impact===
It is difficult to assess the full economic impact as the operation of the new airports coincide with the economic crisis and the developments in the wider area. Definitely, access to the island-country has been significantly improved.

===Social Impact===
Apart from offering new employment opportunities, the new airport has sustained the tourism industry and therefore jobs in that sector.
It also improves the mobility of the inhabitants.

===Environmental Impact===
The construction of the new airports comes with design to protect the environment from noise and emissions (appropriate runways etc.).

==References==

*C. Christodoulou, C. Efstathiades, 2013, Larnaca and Paphos International Airports In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
*Solomou C. (2003). BOT and Economic Efficiency: The case of Larnaca Airport. Thesis for the degree of Master of Science in Built Environment for the University of London. University College London, Bartlett School of Graduate Studies.
*Government of Cyprus. 2005. Concession Agreement for the Development and Operation of International Airports at Larnaca and Pafos. Ministry of Communications and Works. Lefkosia: Government of Cyprus
*Government of Cyprus. 2012. Transport Statistics 2011, Statistical Service. Lefkosia: Government of Cyprus
*Government of Cyprus. 2009. Public Works Department: One Hundred thirty years of history and service, 1878-2008. Lefkosia: Government of Cyprus.
*Antonis Koutsoulis, Head of the Unit for regulating the Larnaca and Paphos Airport BOT Contract. 2013. Personal Interview. Lefkosia
*Government of Cyprus, Ministry of Communications and Works, Public Works Department Website: www.mcw.gov.cy/pwd
*Government of Cyprus, Ministry of Communications and Works, Civil Aviation Department Website: www.mcw.gov.cy/dca
*Hermes Airports, Larnaca and Paphos International Airports Official Website: www.hermesairports.com
*World Finance Website: http://www.worldfinance.com/awards/ppp-awards-2013
*Roumboutsos, A. (2015), “Larnaca Port and Paphos International Airports” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Moreas Motorway, Greece

2015-06-12T10:47:21Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==Project Outcomes==
The project has achieved the key construction goal, which was to reduce travel time between Corinth or Athens and Kalamata (and in general the south of the Peloponnese). Travel time has been reduced from 6-7 hrs (from Athens) to 2hrs15.The motorway supports tourism and mobility in the Peloponnese in a region that suffered severely from under development of infrastructure.The project managed to continue construction during the economic crisis, while the other four (4) motorway concessions that were assigned in 2007/2008 stopped works in 2010 and were involved in lengthy re-negotiations for four years. The economic crisis has had, however, a severe impact on traffic and has impacted the success of the project.

The following critical success factors can be considered:

Transport success criteria
* The motorway was very needed to allow the connection of the south of the Peloponnese with the rest of the country
* The new road is safe and allows for comfortable driving in total contrast to the previous connection.

Contract success criteria
* Forecasts are updated twice a year and the state supports the difference
* The major shareholder of the concession (70%) is also the main concessionaire in the Attika tollway and, through that, project “collateral” was managed.
* The concessionaire followed a staged development giving the most important parts of the motorway providing very soon an adequate level of operation
* There are many toll stations with low tolls throughout the motorway. This allows for the motorway to be used as a better alternative for commuting between adjacent agglomerations - thus serving local transport.

Critical failure factors include:
*economic crisis, which greatly influenced traffic demand
*archeological sites
*lack of common traffic monitoring system

None of the above could be avoided by the State or the concessionaire. The contract specifically states that the concessionaire monitors traffic and toll collection and the State has direct access to this information. This has not been effected, resulting in the lack of a common assessment of the actual traffic.

Toll prices increased in 2014 and had a negative impact on revenues and traffic. As of Jan 2015, toll prices have been reduced.Finally, the project has high acceptability.

===Economic Impact===
*Reducing travel time has allowed /improved the access to tourism locations in the south of Peloponnese: Kalamata, Mani, Monemvasia, Mistra, Sparta, Pylos etc.
*There are announcements on the considerable increase in tourists.

===Social Impact===
The motorway has significantly supported mobility and safety in the region.

===Environmental Impact===
The reduction in travel time has significant impact on the environment.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015), “Moreas Motorway” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Istrian Y Toll Motorway

2015-06-12T10:46:51Z

Pmoraiti: /* References */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

State financial contribution has averaged EUR 17M p.a. since 2000, and is expected to remain at this level until the end of the contract period. Therefore, the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

Concessionaire's total revenues are currently around 38million euro, expected to rise to 60 million euro at the end of the concession period.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts to small towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015), “Ystrian Y Toll Motorway” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Attica Tollway, The Athens Ring Road

2015-06-12T10:46:28Z

Pmoraiti: /* References */

{{Infobox
|header1 = Attica Tollway (Athens Ring Road), Greece
|header2 =
|label2 = Project Type:
|data2 = Greenfield
|header3 =
|label3 = Contract duration:
|data3 = maximum of 25 years or earlier if the maximum Return on Equity has been reached.
|header4 =
|label4 = Budget:
|data4 = EUR 1300M (This budget includes Project Development Costs)
|title = Project Overview
|image = [[Image:attica1.png|300px]]
|caption = Photo Courtesy of Attica Tollway Figure 1: Overview of Attica Tollway (detail)
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Conception:
| data1 = 1963;
| label2= Tender:
| data2 = 1992;
| label3= Contract Award:
| data3 = March 1996;
| label4= Date of contract ratification:
| data4 = 23/5/1996 Law 2445/1996;
| label5= Financial Close:
| data5 = 6 of March 2000;
| label6= Open to traffic (1st section):
| data6 = March 2001 to serve the new Athens International Airport;
| label7= Open to traffic (2nd section) and Project Completion:
| data7 = August 2004 in time for the Athens Olympic Games;
| label8= Works Completion Certificate (WCC) issued:
| data8 = 2 Dec. 2004
}}
}}

== Introduction ==

Attica Tollway is a pioneering project constructed on a concession basis and constitutes one of the biggest co-financed road projects in Europe. It belongs to the first generation of co-financed projects awarded in Greece during the '90s and essentially paved the way and laid the foundations for the execution of future successful concession contracts, in Greece and in other European countries.
Attica Tollway in Greece forms part of the Trans European Network, as planned by the European Commission. It extends along 70 km and connects the 30 municipalities of the Attica basin. It actually constitutes the backbone of the entire transport network of the metropolitan area of Athens and it meets the transportation needs of millions of people on an annual basis. It constitutes a unique piece of infrastructure, even in European terms, since it is essentially a closed toll motorway, within a metropolitan capital, where the problem of traffic congestion is acute.

Attica Tollway is an urban motorway, with three traffic lanes in each direction and an emergency lane. In the centre, it has a special traffic island, reserved for the operation of the suburban railway that has been constructed and is operated by another entity.

Attica Tollway is part of the PATHE road axis (Patra - Athens - Thessaloniki - Evzoni) and connects the Athens - Lamia National Road with the Athens - Κorinthοs National Road, by-passing the centre of Athens. Being a closed motorway, it has controlled access points and consists of three sections:
* The Elefsina – Stavros – Spata A/P motorway (ESSM), extending along approximately 52 km;
* The Imittos Western Peripheral Motorway (IWPM), extending along approximately 13 km; and
* The Egaleo Western Peripheral Motorway (EWPM), extending along approximately 5 km.

Works include:
* Other main lines: 31,33 km.
* Network Utility / side roads: 150 km.
* Interchanges: 32
* Road bridges (Overpasses): 104
* Road bridges (underpasses): 38
* Rail Bridges: 37
* Footbridges: 15
* Tunnels (Cut & Cover): 63
* Total length of tunnels and Cut & Cover: 15,64 km.
* Anti-flood works: 66.7 km.
* Total area of support facilities premises: 122,000 sq.m.

[[File:attica2.png]] 
'''Figure 2: Attica Tollway sections''' 
'''''Photo from [http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm]'''''

The idea of building the Attica Tollway dates back to 1963, when Wilbur Smith came from the United States to undertake the first ever regional traffic planning study for the city of Athens and its metropolitan area. Sprawling development to the north of Athens over the years, the decision in the late 1970’s to build the new airport in its present location at Mesogeia and the decision to build a city connector road along the foothills of the Mountain of Imittos in the early 1990’s departed from the concept of a “ring” road, and transformed the Attica Tollway into an urban tollway that serves the heart of the city.

In addition, the Attica Tollway during its construction and operation introduced a number of innovations to the Greek construction and motorway operation sector. More specifically, construction within urbanized area under adverse geotechnical conditions called upon employing vibration recorders to restrict peak particle velocity below 6mm/sec in open-cast mining excavations; the ΝΑΤΜ (Drill & Blast) method, the tunnel construction method using Roadheader machinery was also applied to reduce vibrations (the peak particle velocity was limited to 0.7 mm/sec) and to avoid using explosives in areas of historical interest (monuments, churches etc.) for tunnel construction; the Incremental Launching System has also been used for constructing the superstructure of bridges; road pavement was constructed using the latest construction methods and mechanical equipment, reliable materials and specialized laboratory measurements and tests to ensure durability over time. A deep level sewer installation, employing a trenchless technology method (pipe-jacking) was used for the first time to drive sections over 200 m in length under the city. (Sofianos et al, 2004). In operations, the Attica Tollway was the first to introduce in Greece an electronic toll collection system.

Finally, the project was constructed in parallel with flood protection works (contract value of EUR 791M), as the Attica Tollway passes through the three large hydrographic basins of Attica (Thriasio Pedio, Athens basin and Mesogeia) and interrupts the surface runoff coming from the Parnitha, Penteli and Imittos mountains to the sea. The morphology of the aforementioned areas, now featuring minimum natural receptors, the exponential expansion of the land use and the various types of human interventions had rendered the construction of substantial extensive flood protection works within the scope of the Attica Tollway implementation imperative. The flood protection works constructed were dimensioned to be adequate for the existing and future land use.

== The Contracting Authority (Public Party) ==

The Attica Tollway project was planned on a central government level, by the Ministry of Development, Competitiveness, Infrastructure and Transport Networks (previously called Ministry of Environment, Physical Planning and Public Works). Ε.Υ.D.Ε. / L.S.E.P is the special agency of the Ministry which undertakes the supervision of the motorway’s operation and maintenance.

A breakdown of key objectives, as stated by the Government, consists of the following:
* to develop the ring road for the Metropolitan area of Athens and integrate a full road network for fast and safe transport in the entire Attica region;
* to provide the connection to Athens International Airport;
* to decrease traffic congestion in the main arteries of Athens;
* to provide the crucial segment of PATHE TEN-T (priority axis 7) by connecting the two main National Roads of Greece (National Road of Patras – Athens and National Road of Athens – Thessaloniki);
* to contribute to an integrated regional/urban plan for Attica;
* to provide direct connection between the western and the eastern areas of Attica

Other secondary objectives quoted by the Government include:
* to access a future spur (presently served by a 4 to 6 lane arterial street) that will connect to the passenger and cargo harbor of Rafina, which offers quicker connections to central and northern Aegean islands than the main port of Piraeus.
* to support significantly the flood prevention system for the entire region of Attiki by substantial interventions in the three main hydrographical basins of Attiki, i.e. the Thriasio Plain, the Athens Basin and Mesogeia.

Central government was directly involved in all stages of the development, design, tendering and negotiation procedure, and is also overseeing operation and maintenance.The concession contract was approved by parliament as Law 2445/96 and amended by Presidential Decree 75/99.

== The Concessionaire (Private Party) ==

Attiki Odos S.A was formed as a joint venture of almost all large Greek construction companies [AKTOR, AVAX, ALTE, ATTI-KAT, HELLENIC TECHNODOMIKI, ETETH, SARANTOPOULOS, PANTECHNIKI, TEV, TEG, EGIS PROJECTS.]. ATTIKI ODOS S.A. is the SPV, the consortium Attiki odos is the construction consortium and Attikes Diadromes S.A. is the operator. All companies were involved in all three formulations with slightly varying shares.

A subsequent consolidation in the Greek construction industry has led, through bankruptcies, mergers and acquisitions, to the formation of a few large construction groups. Attiki Odos consortium was a catalyst for this consolidation.

The Concession Company's shareholders' current (31.12.2013) structure consists of:
- AKTOR CONCESSIONS S.A. (member ELLAKTOR S.A. Group) 59.25%,
- J.&P. AVAX S.A. 21.00%,
- ETETH S.A. (member J.&P. AVAX S.A.Group) 9.82%,
- PIREAUS -ATE BANK S.A. 9.88% and
- Transroute International. 0.04%.

"ATTIKI ODOS S.A.", is the Concession Company (Concessionaire) of the project, which has undertaken the design, construction, financing, operation and maintenance of the motorway, through the execution of a Concession Contract with the Greek State.
he Concessionaire has established Contracts back to back with the Concession Agreement with “ATTIKI ODOS CONSTRUCTION JOINT VENTURE” for the project construction and with “ATTIKES DIADROMES S.A.” (also known as Attica Tollway Operations Authority) for the operation and maintenance of the project.

A total of 138 contracts and agreements were let to 65 different contracting parties. The contracts included:
- 23 Principal Engineering Contracts;
- 78 Lending and Guarantee Agreements;
- eight Special Fees & Payments Contracts;
- seven Other Special Agreements;
- 22 Other Contracts.

The construction was financed (tl 1.346.309.241 euros) as follows:
*Equity: 157.577.077 euros
*Loans: 666.246.607 euros (the majority were EIB loans)
*Greek State: 420.569.293 euros
*Income from interest: 11.985.546 euros
*Income from operation (during construction): 89.930.718 euros

== Users ==

The motorway is open to all users private vehicles and freight traffic.Attica Tollway serves, however, mainly passenger cars and the main purpose of travel of its users is commuting. It provides links to the Athens International Airport and to the two main National Roads (NR Athens –Thessaloniki and NR Athens-Corinth-Patras). In addition, many large logistics centers have emerged or relocated to the western part of the Tollway, since this location combines large open spaces and quick access to ports, railway and National Roads.

For the first time in Greece, tolls were imposed in urban axis and this practice was foreseen at the beginning as controversial. The high level of provided service by Attica Tollway succeeded to diminish any reluctance of paying tolls.

The forecasted AADT was estimated to level off at approx. 245.000 vehicles after 10 years of operation with a gradual increase from 160.000 in 2004.

The motorway was fully operational as of mid 2004 and presented some 30% AADT in the years 2004 to 2009 (pick traffic in 2009 307.993 AADT). Ever since due to the economic crisis AADT has dropped to 200449 in 2013 (281 217 in 2010; 250625 in 2011 and 215767 in 2012). AADT has leveled off at approx 200.000 AADT.

== Key Purpose for PPP Model Selection ==

The Greek Authorities and the European Commission had agreed within the framework of the Community Support Framework 1994 -1999 (CSF II) to maximize private sector partnerships in the development of transport related infrastructure (PwC, 2005). For Greece, this provided funds and off-balance sheet debt. The Athens Tollway was an opportunity.

The hybrid structuring of the project was essential to the project’s success. The public sector, the Greek Government, wanted to allocate most of the project risks to the private sector. It was clear from the beginning, however, that due to several factors (e.g. this was the first PPP in the road sector in Greece, construction difficulties were envisaged, and help was needed in dealing with 30 local authorities), the project required strong state help. This financial help was necessary because, at that time, sponsors considered that the road traffic levels and the tolls the users were prepared to pay were not enough to provide an adequate return on the investment they were required to make. Therefore, the project was developed as a PPP in order to:
* Minimise public funding. Public funding (including EU Structural funds) covered 34% with the private sector providing the remaining 66% project funding.
* Allocate risks to the private sector. The project structure allowed the Greek Government to allocate most risks to the sponsors.
EU funding was requested to close the financial gap, turning the project into a hybrid. The project was not viable for the private sector if the private sector had to provide 100% of funding. EU Structural funds allowed the private sector to reduce its financial commitment by 34% while maintaining the same level of revenues. As a consequence, the bankability increased.

[[File:attica3.png]] 
'''Figure 3. Attica Tollway Concession Structure'''

== Project Timing ==

After the 1960’s, decades passed by without any attempts to start the road project, mainly due to the lack of funding, coupled with its expected high cost. The project’s real advancement began in 1985, when it became part of the official transportation infrastructure plans for metropolitan Athens, along with the goal of obtaining the Centennial Olympic Games in 1996 (they marked the 100th anniversary of the modern Olympic Games). It was in the early 1990’s that the Greek Ministry of Public Works adopted the method of co-financing the road through a Build–Operate–Transfer contract.

The construction work started in 1997 and the motorway was given to traffic in sections. The first one opening to traffic was in March 2001, achieving the milestone of serving the new Athens International Airport. The last section was opened to traffic in 2004. Attica Tollway was built on time and within budget and it met the crucial deadline for the Athens Olympics Games in 2004.

== Project Locality and Market Geography ==

Attica Tollway is an urban motorway and part of the Tran European Network (TEN), connecting the 30 municipalities of the Attica basin, allowing quicker access to areas, which, before its construction, required a great amount of travel time.

== Procurement & Contractual Structure ==

=== Tendering ===

An international tender was announced in 1992 and in March 1996, the project was awarded to the lowest bidder of the three international consortia that participated in the process. The Ministry of Environment, Physical Planning and Public Works was responsible for all the analysis,preparation and tendering. The Concession Contract was ratified by law by the Greek Parliament on the 23rd of May 1996.

The Concession Agreement provides a maximum toll rate that can be charged. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity (13.1%) has been reached.

=== Contract Structure ===

The Concession Contract was ratified by the Greek Parliament in December 1996 by law 2445/96 due to lack of legal framework. It should be noted that any amendments to the concession contract need to be ratified by the Greek parliament. The maximum applicable tariff is defined in the contract. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity has been reached (11.6%). This is a typical concession scheme, under the DBFO structure.

The project financing has been ensured through State contributions including EC Structural Cohesion Funds, private equity and loans.
Commercial banks involved include: Bank of Tokyo-Mitsubishi, HypoVereinsbank, Commercial Bank of Greece, HSBC Athens, National Bank of Greece, Société Generale, European Investment Fund, ABN AMRO Bank NV, Agricultural Bank of Greece, Alpha Credit Bank, Banca Monte dei Paschi di Siena (London), Bank of Scotland, De Nationale Investeringsbank NV, Piraeus Bank Greece, European Investment Bank, ING Bank NVand Ergobank.

Expropriation cost was undertaken entirely by the Greek State. Loan guarantees were provided by the concessionaire during construction and by the State for the operations phase.

=== Risk Allocation ===

Overall, the Greek government was able to transfer construction, operation, and traffic risks (subject to a standard non-compete clause) to the SPV under the concession contract. The lenders to the SPV were therefore fully exposed to these risks, mitigated as they might be through the construction and operation subcontracts. However, EIB's policy is that they do not accept construction risk, and they will usually accept remaining project risks only after a period of satisfactory operation and the demonstration of acceptable cover ratios. Accordingly, as is usually the case, the EIB was guaranteed by the other lenders and, in this case, by the sponsors, providing 50% cover each. Once construction was complete, the EIB allowed these guarantees to be replaced by a guarantee from the Greek government. In this way, the Greek government did effectively transfer construction risk to the SPV, but has taken operation and traffic risk back through the guarantee, albeit at a reduced level compared with the risk at the outset.

A project of such scale met significant difficulties during its realisation. The financial close was delayed, mainly because of uncertainties surrounding the project. These uncertainties increased the risks for the banks, delaying the signing of the financial agreement and forcing the public sector to provide funds to the sponsors to begin construction before financial close was reached. Other difficulties were due to variation orders issued by the State, mainly for environmental reasons, which involved significant design changes.

Furthermore, the concession contract did not include mechanisms for extensions of time and delay make-up in case of State-instructed variations. Solutions were found after extensive negotiations between all parties involved, and amendments to the concession contract were introduced, leading to the satisfaction of the banks and reaching financial close.
Risk allocation is depicted in Figure 4.
[[File:attica4.png]] 
'''Figure 4: Risk allocation'''

The environmental risk was undertaken by the State in reference to environmental law changes. The Greek State for environmental reasons has proceeded to design changes in Imittos Western Peripheral Section, after the concession commencement. Variation orders were also related to water management in the area of the project. On the other hand, the compliance with environmental guidelines was solely attributed to the SPV.

Land expropriation risk was allocated to the Greek State. Considering the difficulties of expropriating land in a city, such as Athens (as opposed to expropriating in the countryside) the concessionaire allocated full risk to the public sector as it .

=== Performance ===

The Independent Engineer was responsible for evaluating construction performance, along with the awarding authority, which is responsible for evaluating operating performance during the operations period.

Table 1 below shows the performance indicators set out in the Operation and Maintenance Agreement with the Attica Tollway Operation Authority.

Attica Tollway Operations Authority (Attikes Diadromes S.A.) has adopted an integrated monitoring system, based on measured Key Performance Indicators (KPIs). The system consists of 35 indicators covering all the major aspects of operation, such as traffic management, toll operation, infrastructure maintenance, human resources, violation enforcement, etc. A reliable and accurate system capable of measuring any fluctuation of performance on the key areas of safety, maintenance effectiveness, mobility, level of provided services and user satisfaction was developed. Various methods were used to measure the KPIs, one of the major sources of data for the KPIs system is the conduction of extensive surveys, such as Road Side Survey (RSS), telephone survey for the subscribers and "mystery shopping". Indicatively, the annual RSS covers about 7500 questionnaires and "mystery shopping" about 8000 questions on an annual basis.
The results of the KPIs are widely used for the continuous improvement of the operation and the services provided to the Tollway users (Tyrogianni et al, 2012).

'''Table 1: Attica Tollway Performance Indicators'''
{| class="wikitable" style="width=100%"
! Ref.
! align="left"| Item
! align="left"| Planned Level of Service
|-
| 1 || Response time in case of incident || 20 minutes
|-
| 2 || Repair time for damage of equipment causing danger to users || Action shall start within 12 hours
|-
| 3 || Repair time for other serious damage of equipment || Action shall start within 24hours
|-
| 4 || Average waiting time in each Toll Station
Level A: waiting time between 0 and 120 seconds
Level B: waiting time above 120 seconds
|| Waiting Time Level B must not exceed 90 hours per year, unless due to exceptional circumstances outside the control of the Operator
|-
| 5 || Standards for money handling: Maximum Accepted Toll Collection Discrepancy (MATCD) between the system and the amount deposited in the Banks || MATCD as per the Manuals Phase B
|}
Furthermore, Attica Tollway considers carbon footprint assessment to be a very powerful tool in understanding the impact of the tollway’s operational activities on global warming. In this context, the company has installed measuring devices and carries out calculations of its carbon footprint (Mandalozis et al, 2012).

Finally, the tollway holds one of the best safety records in the world (Papaioannou, 2006). It serves over 250,000 users daily for short and long trips and has exceeded its forecasts by more than 30% (see figure 5).

From the start of operation and until 2011, the actual traffic was higher than the predicted. However, for the first time in 2012, this has changed and the actual traffic was lower than the predicted one. In addition,based on annual financial reports, Attica tollway is making profits. The report for year 2013 showed net profits (before tax) 68.708.000 and 20.918.000 euros (after tax). Net profits dropped by 19.212.000 euros (net after tax) in relation to 2012.As the traffic drop has stabilised, it is considered that this level of profitability is sustained. No changes have been made to toll prices.

==Project Outcomes==
The Attica Tollway was designed to:
1. provide access to the new Athens International Airport
2. leave urban congestion by providing a ring road around metropolitan Athens
3. reduce accidents
4. reduce environmental impact

All 4 objectives have been met and traffic forecasts under normal macro-economic conditions had been exceeded.After 6 years of recession, the PPP remains profitable even though traffic has been below forecasts since 2011.

The following key critical success factors can be identified:

1. The project was planned since the 1960s. When it was initiated it was a long needed infrastructure to provide alternative route connecting the Athens metropolitan area and reducing traffic through the centre of the city of Athens.

2. The motorway is practically the exclusive access to the Athens Airport. (Alternative are the Athens Metro and sub-urban rail and road link (not-tolled) from the south part of Athens).

3. The motorway is of high quality.

The pioneer construction, the care for the environment, the high-level operation and the pioneer technologies used, in combination with the human factor, are sectors of the project which received international acknowledgements and awards, while they have distinguished Attica Tollway as a model project for Greece.

Attica Tollway was built on time and on budget and it was the backbone of the transportation network during the execution of the Athens Olympic Games in 2004. The problems faced during construction were solved thanks to the good faith negotiations held between all parties involved. Attica Tollway is a successful project and has exceeded forecast expectations of demand. The reason is that Attica Tollway has produced significant improvements to traffic conditions in the metropolitan area, as well as benefits in the economy and overall infrastructure. In addition, it has received enormous public acceptance despite the initial resistance and the imposition of open & flat toll regime.

On the other hand, the long term financial crisis can affect the project significantly. Between 2009 and 2013 the country’s GDP has fallen by 20%. While unemployment has risen from 8% to 29%. Most of this negative impact is concentrated in the Athens metropolitan area where approximately 50% of the population is located. In connection with a significant drop in car ownership and fuel prices, it is considered that the project has show considerable resilience and is still viable. However, it is difficult to predict the future if the situation continues.

The motorway has a very high rate of acceptability. The company runs biannual user satisfaction surveys. These indicate 90% user satisfaction.Only in the very early stages of the project, there was opposition with respect to the flat rate toll as opposed to tolls based on distance.However, this opposition was soon overcome, especially as the scope of the infrastructure was to serve traffic transversing the metropolitan area and not traffic between suburbs.

Regarding project goals, current studies show that the average vehicle - trip time is reduced by 28 mins when choosing the Attica Tollway, there is considerable fuel consumption reduction, while reliability was improved fully in line with expectations and more (ex-post (observed) share of delayed traffic: less than 1%). The same applies to safety with ex-post (observed) total accidents per 1000 vkm by year:0.000547.

===Economic Impact===
The project had a significant economic impact in terms of supporting development in a region which was previously underdeveloped and rural.
The motorway serves the Athens International Airport and provides a link to the major road access in Greece (included in the TEN-T). By relieving congestion in Athens (before all traffic was mainly through the city centre), it also allows for the balanced development in the greater Athens Region.

===Social Impact===
The Attica Tollway was a challenge for the fragmented Greek Construction Sector to prove technical capabilities and ability to take on a major financing/investment project.In the process many initial consortium members dropped off. The project may be considered a milestone in the development of the Greek construction sector.

===Environmental Impact===
The impact to the environment (noise and emissions) is continuously monitored.
The project reduces fuel consumption.It also included anti-flooding works and in practice is the anti-flooding protection of the Athens metropolitan area.

== References ==

#B. Halkias, A. Roumboutsos, A. Pantelias, 2013, Attica Tollway, In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ISBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
#Attiki Odos Contract, Greek Law 2445/1996 of the Official Gazette.
#Halkias, B., Tyrogianni, E., “PPP projects in Greece: The case of Attica Tollway” Routes/Roads PIARC, April 2009.
#Halkias, B., Tyrogianni, E., Kitsos, D., “A significant infrastructure project within the urban environment of Athens: The case of Attica Tollway” IABSE September 2008
#Harito, J. and Morello, S. (2011) Performance Plus, ITS International, 17(3) 44-45
#Mandalozis, D. Halkias, B., Tyrogianni, H. Kalfa, N. (2012) The Carbon Footprint of Attica Tollway, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2988-2998
#Papaioannou, P. (2006) Recent Experience on Success and Failure Stories from Funding Large Transportation Projects in Greece, 1st International Conference on Funding Transportation Infrastructure, Banff, Alberta, Canada, 2-3 August 2006
#Papandreou, K., Tyrogianni, E., “Level of Service in Concession Motorway Projects” XXXV ASECAP Study and Information Days
#PricewaterhouseCoopers (2005) Delivering the PPP promise*: A review of PPP issues and activity, PricewaterhouseCoopers LLP
#Sofianos, A.I., Loukas, P., Chantzkos, Ch. (2004) Pipe jacking a sewer under Athens, Tunnelling and Underground Space Technology, 19(2), 193-203
#Tyrogianni, H., Halkias, B. Politou, A., Kotzampassi, P. (2012) The Attica Tollway Operations Authority KPI Performance System, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2999-3008
#www.aodos.gr
#Roumboutsos, A. (2015), “Attika Tollway, The Athens Ring Road” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Larnaca Port and Marina Re-development, Cyprus

2015-06-12T10:46:07Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Larnaka Port & Marina Re-development, Cyprus
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 35 years for the Port and Marina Infrastructure and 99 years lease for residential units
|header4 =
|label4 = Budget:
|data4 = ~EUR 800M
|title = Project Overview
|image = [[Image:Larnaca1.png|300px]]
|caption = Figure 1: Larnaka Port & Marina, Current Condition and proposed plan

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = April, 2005
| label2= Tender Advertisement of Contract Notice:
| data2 = October 2005
| label3= Invitation to Tender (ITT):
| data3 = November 2006
| label4= Contract Award:
| data4 = August 2012
|label5 = Financial Close:
|data5 = Pending (This date has been since extended multiple times. The last extension was exhausted end Feb 2015 with no progress.)
}}

}}

==Introduction==

For a peripheral, small and insular Member State of the EU such as Cyprus, the extension and upgrading of port infrastructure constitutes a significant factor for enhancing access capability to EU markets. The main strategic objective for a comprehensive development of Cyprus port infrastructure is the enhancement of competitiveness and effectiveness, in order to respond to the modern needs for mobility of passengers and goods. Their role as important nodes in serving international trade is also upgraded in this way. In respect to Trans-European Network maritime policy, Cyprus considers that emphasis should be given in supporting maritime transport of passengers, especially for peripheral/ insular Member States, both as an alternative to air travel in general, but more specifically as an emergency service to maintain connectivity among Member States during incidents of air transport crises (e.g. natural disasters, terrorist activity and others). It should be noted that currently air transport is the only mode of passenger transport to/from Cyprus, because there are no ferry services (passenger ships) that connect Cyprus with Continental Europe or other neighboring Countries. Passenger ships in Cyprus Ports provide exclusively cruise services.

Larnaka is the third largest city on the southern coast of Cyprus, with an urban population of 86.700 (2012). Three main transport infrastructure elements for Cyprus and international gateways for the entire island are located in Larnaka: the island's largest airport (Larnaka International Airport) the Port of Larnaka and the Marina of Larnaka. The Port and the adjacent Marina are situated southeast at the outskirts of the urban civic centre of Larnaka and 3,5kms from the Larnaka International Airport (southwest of the urban area). Figure 1 presents the current condition of Larnaka Port and Marina, as well as the proposed plan of the PPP Project.

The Larnaka Port and Marina Project present unique characteristics in respect to the choice to be re-developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) Concession Contract. Extensive “horizontal and vertical bundling” has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka’s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Negotiations with the preferred Bidder Zenon Consortium successfully were completed in August 2012, but the Concessionaire did not manage so far to find financial lenders (August 2014). The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.

In its current condition Larnaka Port is the second in magnitude port of Cyprus, lacking behind Lemesos Port. Until 1973 it was operating occasionally with inadequate port facilities. With the exception of the oil products, the port had served up to that time very little trade traffic and its storage space was quite small and unsuitable.

In 1973 it was redeveloped and was initially intended to share with Famagusta Port its inland area and supplement the latter. Following the Turkish Invasion of 1974, Famagusta Port, the main port of Cyprus at the time, ceased operation and the role of Larnaka Port increased dramatically. Additional expansion took place in two phases (1976-1979 and 1979-1982), leading to a multipurpose port having an area of 445.000 sq. meters and serving all kinds of loads from unpacked (animal fodder, grain, gypsum), conventional (lumber, iron, fertilizers, automobiles), containers as well as oil products.

Nowadays, it’s within the urban area of Larnaka and on the landside is surrounded by residential units. On the north side there are oil product installations and at the south side it borders with Larnaka Marina.

The level of commercial operations at Larnaka Port has declined over the last two decades, with the majority of commercial traffic now being handled by Lemesos Port. In the late 1980s/ early 1990s, the freight movements were diminishing in Larnaka Port and the passenger movements have been lacking behind Lemesos Port, as the latter has significant operational capabilities and capacity. The Ministry of Communications and Works (MCW) and the Cyprus Ports Authority (CPA), since the late 1980s commissioned various studies in order to explore the possibilities of revitalizing Larnaka Port.

Larnaka Port is protected by two breakwaters the North and the South. It has two quays for the mooring of ships:

* South quay of length 340m, water depth 11,4m and equipped with two gantry cranes of 40 tons, 1 crane on rails of 45 tons as well as a ramp of 25m width suitable for ro-ro ships.
* North quay 326m, water depth 9,3m and equipped with crane on rails (Luffing Crane) of 35 tons able to serve loads 150m to the western part of the quay.

The Port has three warehouses, two of which are located at the north quay each having an area of 3170 sq. meters and one at the south quay of about 11.500 sq. meters. There are also paved open storage spaces of about 150.000 sq. meters as well as non-paved spaces of approximately 65.000 sq. meters. In addition, a Passenger Terminal Building serves mainly cruise traffic. Figure 2 presents the current port masterplan.

[[Image: Marina3.png|500px]] 
'''Figure 2: Larnaka Port, Current masteplan'''

Larnaka Marina is situated next to the Larnaka Port, and is one of the few marinas in Cyprus and the only public owned. The Marina can serve approximately 450 yachts and for the last two decades is oversaturated. Recently small re-construction works were executed awaiting for the Concessionaire to take over.

In the late 1990s, there was a discussion of what procurement method should be used for the development of Larnaka Port. The government decided that the best method for the re-development was through a PPP contract because it was believed that this will help the easiest development without the “slow-moving” processes a governmental project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government those days since the primary goal was the accession to the European Union. The decision for re-developing Larnaka Port through a PPP contract was taken in 1999.The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO-style Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center, Amsterdam Port Consultants), on 24 August 2004. A separate process for the re-development of Larnaka Marina was running in those days by the Ministry of Commerce, Industry and Tourism based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

The same period MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council of Ministers commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the Ministry of Commerce, Industry and Tourism, the CPA, the Public Works Department, the Planning Bureau and the General Accountant.

The tender procedure initiated by the MCW was based on an open call which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder. In 2005 a Contract Notice in the Official Journal of the European Union for express of interest initiated the pre-qualification procedure under the title: Larnaka Port and Marina Re-Development Project. After legal implications the Tender Board name A. Vouros Investments Ltd and Partners as the Preferred Bidder. After several months, the negotiations failed due to a revised proposal that was altering the scoring which led to the preferred Bidder. The Steering Committee invited the second selected Bidder according to the tender rules, which was the Zenon Consortium.

The PPP Project consists of three main components: the re-development of Larnaka Port in order to become the main passenger port (cruises) of Cyprus, the re-development of Larnaka Marina as part of Cyprus Tourism Strategy to enhance the tourism ‘package’ of Cyprus and the Land Development of certain areas that are available within Larnaka Port and Marina (Figure 2). The latter will provide the necessary revenues in order to make viable investment the first two components of the Project. The Land Development will be combined with an extensive landscaping of the Larnaka waterfront, providing public access in areas within the Larnaka Port and Marina.

The Concessionaire, Zenon Consortium will carry out the re-development of the Port and the Marina in three phases and will manage the facility for a period of 35 years.

The Contract requires the Concessionaire to undertake phased development of the Port in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise and commercial zones. The re-development on the Port will focus in providing the necessary infrastructure to accommodate large cruise ships, in order to become the main passenger port of Cyprus. Nevertheless, the Port will not abandon its ability to serve freight ships and will continue to serve the regional commercial (freight) needs of Larnaka and its hinderland to the north and east. The output specification for the port component was setting that the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely to make an approach to and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters.

The re-developed Marina is expected to serve as a key component in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as a tourism, leisure and recreation destination, both nationally and regionally. Recreational boating is a maritime leisure activity that is complementary to cruise tourism.The output specification was setting that the re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme climatic conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity at the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kind of vessels and a new yacht club will be constructed.

The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. The residential units will be available on a 99 years lease. The other Land Development elements will be managed by the Concessionaire for a period of 35 years. The Zenon Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. The Land Development component will be an integral part of the Project in order to enhance the attractiveness of the area to cruise passengers, marina users and the general public.This component can be considered as an extensive level of horizontal “bundling”. The combination of a Marina and a Port in one Project will provide a moderate level of “vertical bundling” in transport sector. On the other hand, the neighboring main airport of Cyprus (Larnaka International Airport) could provide a significant level of “vertical bundling” in transport sector, although it is not part of the Project.

The estimated cost for the first phase of Larnaka Port and Marina redevelopment is about EUR130 M. The other two phases of the port and marina will be constructed at a further cost of EUR 55 M. The Land Development will reach an investment of EUR 600M. Figure 3 presents Larnaka Port & Marina Master Plan overview.

[[Image: Larnacaport3.png|500px]] 
'''Figure 3: Larnaka Port & Marina Master Plan overview'''

==The Contracting Authority (Public Party)==

All port facilities of the island are under the jurisdiction of the Cyprus Port Authority (CPA), a semi-government, public autonomous organisation supervised by Ministry of Communications and Works (MCW) and their activities and development are centrally planned, co-ordinated and supervised. Both Lemesos and Larnaka Ports, the country’s major gateways to international shipping, are owned, managed, operated, marketed and developed by CPA. The MCW is the responsible political instrument for air, maritime and land transport and for the national-wide transport infrastructure including international airports, ports and main road network. Larnaka Marina is also publically owned and it is managed by another semi-government, public autonomous organization: the Cyprus Tourism Organization (CTO), which is supervised by the Ministry of Commerce, Industry and Tourism (MCIT).

The Contracting Authority for the Project is the MCW (Central Government) and the two semi-government, public autonomous organizations participate in the Steering Committee for the negotiations of the Project. CPA and CTO will terminate their managerial duties for Larnaka Port and Marina respectively, when the Project is handed-out to the Concessionaire. The PPP contract will be managed by the Public Works Department (PWD) on behalf of the MCW.

Nevertheless, there are operational jurisdictions that will remain to Central Government mainly due to the legal/ institutional environment. The regulatory jurisdiction of CPA as well as the policing (land and sea), custom services, immigration control, food hygiene, veterinary services, meteorological services, port health services, and shipping safety and control services will remain with central government. Moreover, the CPA will remain the Land Lord for the Port.

Regarding procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

Transport and tourism policy are controlled on a national level. The Project was a national necessity for promoting tourism and maritime connections with Europe. Even if Central Government is responsible on all levels of the development, design, tendering, negotiation procedure and regulating the contract, Larnaka’s local authorities play a significant role in promoting and accelerating the Project by lobbying and exercising pressure on the Central Government.

==The Concessionaire (Private Party)==

Zenon Consortium, the Concessionaire is an International & Cypriot-led Consortium established as the SPV (Special Purpose Vehicle) for undertaking the DBFO Concession Contract for the Larnaka Port and Marina Re-Development Project.

Zenon Consortium was established with the following shareholders (and respective share):

* Louis Group of Companies- 22% (Cruise-ships & Hotels Owners & Operators),
* Bouygues Batiment International- 17,5% (French-led international developer and contractor),
* Iacovou Brothers- 17,5% (Largest Main Contractor in Cyprus, Larnaka based),
* Petrolina (Holdings) Public Ltd- 17,5% (Leading gas and oil products distributor in Cyprus, Larnaka based),
* Costa Crociere SpA- 10% (Largest Cruise Company in the Mediterranean and member of the U.S. Carnival Cruise Lines Group),
* Marinaman - 8,5% (Representing the local community of Larnaka),
* General Construction Company- 5% (Cypriot Contractor, Nicosia based),
* Amsterdam Logistics Group Ltd (Netherlands, Cruise and Commercial Port operations) & Lievense Consulting Engineers- 2% (Port & Marina design).

The majority of companies setting Zenon Consortium are business developers with a balanced participation in two main fields: the construction field (Bouygues Batiment International, Iacovou Brothers and General Construction Company) and in port and marina development field including cruise organization (Amsterdam Logistics, Lievense Consulting Engineers, Costa Crociere and Louis Group of Companies). In addition the participation of Cypriot and international partners can also be considered as balanced. One of the leading companies, Bouygues Batiment International has an extensive experience in PPP’s. It should be noted that Bouygues Batiment International is also the leading company in the Concession Contract for developing and managing the two International Airports in Cyprus (Larnaka and Paphos) until 2031. Alterations are expected in the list of shareholders with their respective shares before the Financial Close for the Project.

Zenon Consortium has selected Scott Brownrigg Architects and Masterplanners as their designing consultants.

According to the procurement documents, all subcontractors shall be approved by the Government. For the construction and maintenance, it is expected that Bouygues Batiment International, Iacovou Brothers Ltd and General Construction Company will be involved. The other shareholders are expected to be involved in operational subcontracting duties.

The Financial Close for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

==Users==

As it was mentioned before, Larnaka Port and Marina Project is presenting unique characteristics due to its extensive “horizontal and vertical bundling”. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin.

Taking into account the project bundles, three main user categories can be identified:

* Cruise operators processing passengers, as well as commercial companies handling commodities through the Port will be the main users. According to the output specification for the port component, the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely approach and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters. The basin and alongside the quays shall have sufficient depth (minimum, 11 meters) to allow safe use of the harbor and port installations by cruise liners, of the maximum anticipated size and commercial vessels serving the current and future export and import needs of the hinterland of Larnaka. The re-developed port is expected to provide a maneuvering area equivalent to a turning circle of 500 meters in diameter. In this respect, the re-construction of the Port infrastructure will include a new passenger terminal (first phase 3500 sq. meters), a new passenger pier and an offshore jetty.

* Tourists using the Marina for recreation-short trips around Cyprus and the Eastern Mediterranean Basin. The re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme weather conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity in the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kinds of vessels and a new yacht club will be constructed.

* Residents that will buy residential units through a 99 year lease and the companies using the services provided in the Land Development component (conference, theater/ Hall, offices, retail shops, food & beverage, entertainment) is another major category of users. Land development is the third main component of the project. The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. - Throughout the project, the Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings, which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. Local authorities and local habitants will also use and have benefits from the project.

==Key Purpose for PPP Model Selection==

Currently, the development of the transport infrastructure of Cyprus through PPP Projects is considered to be unattractive, particularly the road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors in TEN-T projects, because the cost of the investment is usually equivalent to that of a similar project in a central interconnected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the developed infrastructure of the project.

The Larnaka Port & Marina Project combined three major economic fields of economy: tourism, international transport and real estate whereas value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer were the main political motivations for the choice of the contract type. Additionally, the Government’s political decision to dis-engage from managing port and marina services was also considered as a prime reasoning behind the contract type selection.

==Project Timing==

The accession of Republic of Cyprus to the European Union in 2004, followed by the accession to the Eurozone Area in 2008 has been a catalyst for crucial changes in the political, economic and social environment of Cyprus. The need to enhance the competiveness was becoming paramount important for the sustainability of Cyprus economy. The Larnaka Port & Marina Project was combining three major economic fields of Cyprus economy: tourism, international transport and real estate.

The level of commercial operations at Larnaka Port has declined since the late 1980s/ early 1990s, with the majority of commercial traffic now being handled at Lemesos Port. Since then, the MCW and the CPA were exploring various options for revitalizing Larnaka Port. In addition, Larnaka Marina was over-saturated and there was an urgent need to expand its capacity.

By the late 1990s, desalination plants were developed in Cyprus as PPP’s, introducing this method as a sustainable method for project developing. In those days the MCW decided to explore the development of two main transport infrastructure Projects through PPP Contracts: Larnaka and Paphos International Airports in a combined contract and the re-development of Larnaka Port. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The non viability of the Larnaka Port Project led to add within the Project the re-development of Larnaka Marina in a combined Project with considerable land development benefits. The realization of almost 250.000 sq. meters of land development was expected to provide funds from which the Larnaka Port and Marina will be re-developed.

The final decision for re-developing Larnaka Port through a PPP contract was taken in 1999. The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center and Amsterdam Port Consultants), on August 2004. At the same period a separate process for the re-development of Larnaka Marina was due by the MCIT based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

A few months later, MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers of Government of Cyprus verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the MCIT, the CPA, the PWD, the Planning Bureau and the General Accountant.

The delays during the formulation of the Project, the tendering process and the negotiating period with the preferred bidder delayed the agreement until August 2012. The financial crisis had already reached Cyprus. Cyprus Government requested international financial assistance in June 2012 due to the financial crisis that primarily occurred in the over expanded domestic banking sector, which Cyprus was unable to support on its own. In March 2013, a EUR 10 billion international bailout by the Eurogroup, European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) was announced, in return for Cyprus agreeing to close the country's second-largest bank and imposing a one-time bank deposit levy on all uninsured deposits (bail in) in the two main banks of Cyprus.

The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.To this end, the preferred bidder is struggling since August 2012 to secure the necessary funding for the realization of the Project.

==Project Locality and Market Geography==

The special territorial and geographical features of Cyprus play a restrictive role in the improvement of Cyprus’ competitiveness: its very small size combined with its insular character combined with its distant geographical position from the EU’s centre of activity result in a significant increase in the costs for the transportation of goods and services, as well as isolation problems and weakness in the connection to the main Trans-European Network routes. In order for these issues to be addressed, significant investment is required in basic and other supporting infrastructure. Larnaka Port belongs to the Comprehensive TEN-T Network whereas Larnaka Marina is not part of the TEN-T Network. The Connecting Europe Facility CEF Regulation has given priority in the development of the TEN-T Core Network and other horizontal issues (telematic applications etc). Only 5% of the CEF financial envelope will be directed to the TEN-T Comprehensive Network. Under the new TEN-T policy, Larnaka Port is not to be supported by EU financial resources.

Larnaka Port and Marina are at the outskirts of the Larnaka civic centre. Both infrastructure facilities will support the passenger movements of Cyprus with the rest of the world- cross border movements. The third element of the Project, the Land Development within Larnaka Port and Marina will be combined with extensive landscaping of Larnaka’s waterfront area, hence expanding the civic centre of the city towards the Port area.

Larnaka Port operations, mainly cargo/ bulk products have been declining steadily since the late 1980s/ early 1990s. Vessel traffic (mainly freight) has been declining since the late 1980s. The container movements have never been worth mentioning. The passenger movements in the last decade cannot be considered significant. The Port has been lacking behind Lemesos Port since 1973 in respect of operational capacity. The majority of commercial and passenger traffic is being handled by Lemesos Port; Larnaka Port passenger traffic for the period 2006-2013 represents only 10,7% of the aggregated traffic of the two main Ports of Cyprus. Figure 4, presents Larnaka Port traffic for the last 3 decades.

{| class="wikitable"
|-
! Year
! Passenger Traffic
! Vessels Traffic 
(No. ships)
! Freight Transport 
(TEU)
|-
| 2013
| 54.420
| 188
| 713.952
|-
| 2012
| 44.055
| 206
| 740.551
|-
| 2011
| 42.987
| 534
| 801.521
|-
| 2010
| 64.907
| 578
| 901.919
|-
| 2009
| 22.761
| 522
| 858.514
|-
| 2008
| 5.091
| 596
| 1.077.000
|-
| 2007
| 6.154
| 640
| 870.000
|-
| 2006
| 57.162
| 818
| 818.000
|-
| 2004
|
| 712
| 1.855.657
|-
| 2002
|
| 766
| 2.087.192
|-
| 2000
|
| 888
| 2.166.713
|-
| 1995
|
| 1.223
| 2.804.871
|-
| 1990
|
| 1.444
| 2.541.236
|-
| 1984
|
| 1.803
| 2.069.438
|} 
'''Figure 4: Larnaka Port traffic'''

This issue raises doubts in respect of the ultimate goal of the Project to convert Larnaka Port into the main cruise/ passenger Port of Cyprus. In addition, CPA after many years of discussions is constructing (2014) a new passenger terminal building in Lemesos Port (total investment EUR 14,5 M). The new passenger terminal building in Lemesos Port will be about two times the size proposed for Larnaka Port. Furthermore, the delays occurred so far and the uncertainties in developing Larnaka Port and Marina attracts hydrocarbon development and servicing companies for using Larnaka Port as a base for the exploitation of hydrocarbons in Eastern Mediterranean Basin. The MCW has provided a two year license to hydrocarbon development and serving companies to use Larnaka Port’s facilities including development of a mud plant for servicing hydrocarbon drilling needs. Local Authorities expressed their concerns that the MCW is abandoning the goal to convert Larnaka Port into the main cruise/ passenger Port and instead is giving emphasis to its industrial role.

However, the global cruise industry has an annual passenger growth rate of 7% from 1990 – 2018 (2013: almost 21 M passengers). Growth strategies have been focused in providing new larger capacity ships, including more local ports destinations and new on-board/on-shore activities that match demands of consumers. The increasing size of ships leads to the need of infrastructure upgrade and expansion. Mediterranean is the world's second largest cruise shipping market, representing over 23% of the annual cruise capacity. Mediterranean market can be broken down into four regions; Western Mediterranean, Eastern Mediterranean, South Mediterranean and Adriatic. Eastern Mediterranean market lacks behind Western Mediterranean and Adriatic market, markets that are in a more advantageous position, since they are more close to passenger’s origin countries. Having in mind this, a crucial issue for further developing Eastern Mediterranean market is the provision of adequate air transport capacity.

The adjacent new developed Larnaka International Airport can serve adequately Larnaka Port to its ultimate goal in becoming a prime cruise operations destination. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market.

==Procurement & Contractual Structure==

The tender procedure initiated by the MCW was based on an open call, which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder.

In respect to procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

The MCW is supported by PricewaterhouseCoopers (financial consultants), Pinsent Masons (Legal consultants), WSP Group (Technical consultants) in preparing the tender documents, assessing the Bidders and in the negotiation process with the successful Bidder.

===Tendering===

On October 2005, a Contract Notice in the Official Journal of the European Union for express of interest initiated the prequalification procedure under the title: Larnaka Port and Marina Re-Development Project. The Notice was accompanied by an international printed media campaign, with advertisements for the Project appearing in a number of international publications. The Contract Notice and the advertisements invited parties to register their interest in the Project to the MCW and receive the prequalification documents, being the Preliminary Information Memorandum and the accompanying Pre-qualification Questionnaire (PQQ). Three consortia expressed their interest for the project on December 2005. In May 2006, all three Bidders were pre-qualified and shortlisted. The short-list of the Bidders was based on the answers on the PQQ and on the criteria for the pre-qualification evaluation. Subsequently, MCW held a Bidder’s Conference in Lefkosia on January 2007, at which Bidders were invited to present their queries relating to the Project in an open forum. The MCW issued the Invitation to Tender (ITT) on November 2006 and the shortlisted Bidders were invited to submit their proposal.

All three consortia accepted the ITT and submitted their proposals to the Tender Board on July 2007:

* Vouros Investments Ltd and Partners (A. Vouros Investments Ltd, Singapore Cruise Center Pte, Ltd, DP Architects Pte Ltd, Joannou & Paraskevaides Ltd, J & P Avax S.A., Joannou & Paraskevaides (Overseas) Ltd, Ariadne Australia Limited, Cybarco Plc.).

* Zenon Consortium (Bouygues Batiment International, Iacovou Borthers, Amsterdam Logistics Group BV., Lievense Consulting Engineers, Louis Public Company Ltd, Petrolina (Holdings) Public Ltd, Marinaman Ltd, Costa Crociere SpA, General Construction Ltd).

* D.J. Karapatakis & Sons Limited (D.J. Karapatakis & Sons Ltd, Camper & Nicholsons Marinas Ltd, Wimberly Allison Tong & Goo Inc., ERA Economics Research Associates, Spanopoulos Group of Companies, Odell International Inc USA in a Joint Venture with Parsons, G.A.P Vasilopoulos Public Limited, A. Panayides Contracting Public Limited, Sigan Management Ltd, Viset Malta Plc).

Each of the Bids received comprised five separate volumes as described in the ITT:
(i) Executive Summary,
(ii) Volume A: Technical & Operational,
(iii) Volume B: Business Plan,
(iv) Volume C: Legal and
(v) Volume D Financial.

The MCW and the supporting Consultants evaluated originally Volumes A, B and C and following due to ratification by the Tender Board, the Volumes Ds of those Bidders who have satisfied the threshold requirement of 50% score in each of the three evaluation areas:
(i) Technical & Operational (30% of total scoring, criteria on port development plan, on marina development plan, on method statements, on land development plan, on land development policy and method statements) ,
(ii) Business Plan & Legal (20% of total scoring, criteria on business plan- port & marina, on business plan- land development, on assessment of amendments to draft contract) , and
(iii) Project Concept (15% of total scoring).
(iv) Then the Volumes Ds were opened and assessed on two main evaluation aspects:
(a) Financial I: Expected Bid price to the Government (30% of total scoring),
(b) Financial II: Financial robustness and deliverability (5% of total scoring).

The ITT was stating that the Contract will be awarded to the most economically advantageous Bid and this is reflected by the evaluation and scoring distribution.

In July 2008 Zenon Consortium was selected as the preferred Bidder whereas A. Vouros Investments Ltd and Partners was scored in evaluation procedure as the second best with small margin from the preferred Bidder. D.J. Karapatakis & Sons Limited was excluded by the procedure due to failure to provide original documentation. The selection of the preferred bidder led to legal implications since the other two Bidders legally challenged the decision of the Tender Board, adding further delays to a much needed project. The Tender Review Board dismissed the original decision to name Zenon Consortium as the preferred Bidder. Based on that decision, the Tender Board revised its decision and name A. Vouros Investments Ltd and Partners as the preferred Bidder and Zenon Consortium as the second one.

A new Steering Committee was set for the negotiations with the selected preferred Bidder. The Committee was chaired by the Directorate General for European Programmes, Coordination and Development (ex-Planning Bureau) and participants in the Committee are representatives of the Ministry of Finance, the MCW, the CPA, the PWD and the Control Department of MCW. The Steering Committee invited the preferred Bidder for negotiations in May 2009, almost 4 and a half years after the political decision to proceed with this Project. Cyprus was already feeling the pressure of the international financial crisis. This led A. Vouros Investments Ltd and Partners to re-assess their Business Plan and present a revised financial proposal. The Steering Committee dismissed the proposal and decided to terminate the negotiations; the revised proposal was altering the scoring that led to the preferred Bidder.

In July 2010 the Steering Committee invited the second best Bidder according to the tender rules, which was Zenon Consortium. Negotiations with Zenon Consortium were successfully completed in August 2012.

===Contract Structure===

The Project will be undertaken using a DBFO Concession Contract. An output specification, with minimum requirements, was created that includes the way the three components of the Project (Larnaka Port, Larnaka Marina and Land Development) are going to be developed and operated.

The Concessionaire is the sole responsible for designing, financing, building and maintaining Larnaka Port and Marina Project. In addition, the Concessionaire has the main responsibility in operating the project (Larnaka Port, Marina and development). The Project will be transferred from the Concessionaire to the Government when the contract is completed in 35 years. All the residential part of the Land Development will be transferred in 99 years. The Government, through its respective agencies will provide specific services mainly due to the legal/ institutional environment. The Cyprus Government will retain the ownership of all existing and new Port and Marina assets during the Concession period. The Agreement is governed by the Law of the Republic of Cyprus.

In relation to the Port, the Contract will require the Concessionaire to undertake phased development in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise (passenger) and freight operations. The Marina component will serve as a key part in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as tourism, leisure and recreation destination. The re-development of Larnaka’s Marina as a key maritime leisure node in Cyprus will act complementary to cruise tourism. The management, operation and maintenance of the Port and the Marina will be in accordance to the relevant Laws of the Republic of Cyprus and industry’s best practice. Specific performance indicators will monitor the Concessionaire. The Output Specification for the Land Development component was set in a manner to allow each prospective Bidder to determine the form of development that is most appropriate and complementary to the activities of the Port and the Marina, according to his aspirations and commercial judgment. Approximately 283.00 sq. meters of land within the boundaries of the Port and the Marina will be handled out to the Concessionaire for developing in order to maximize the revenues to fund the re-development of the Larnaka Port and Marina. The Government has set minimum requirements based on Cyprus Urban Development and Building Regulations.

The Concessionaire will be responsible for the overall operation and management of all aspects of the business of Port and Marina. In this respect, the Concessionaire will produce and operate the following specific Method Statements:

* Operating Procedures for all its service delivery responsibilities and the establishment of a Quality Management System and Plan.
* Health and Safety Plan.
* Security Plan.
* Chemical and Oil Spill Anti-Pollution Plan
* Emergency Plan.
* Conservation and Heritage Management.
* Environment Plan.

Based on the contract clauses, the charges in the Port will be either regulated or non-regulated. All the charges for core port services will remain regulated whereas the development of other new marinas in Cyprus will lead to deregulation of all relative charges.

Termination clauses are included in the contract and are divided in three categories (Concessionaire default, Government default and force majeure). There are guarantees that the Concessionaire is compensated as follows:

* Concessionaire default- No compensation.
* Force majeure- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).
* Government default- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).

The revenues of the contract arise from the three components of the Project: Larnaka Port, Larnaka Marina and Land Development. These revenues primarily arise from land right fees, development fees, charges from commercial and passenger use of the Port and the Marina and the Concessionaire will collect all the revenues. In consideration of the rights granted by the Cyprus Government to the Concessionaire under the provisions of the Concession Contract, the Concessionaire will pay the Government the Concession Fee. The Concession Fee represents the land development revenues multiplied by the Government’s Percentage. In addition, a Guaranteed Concession Fee has been set representing an aggregate amount of EUR 61.1 M in net present value terms discounted back to the commencement date of the Contract.

At every milestone date, the Concessionaire should pay the relevant fee. The Guaranteed Concession Fee and the Aggregate Concession Fee, which is calculated, are taken into consideration; in case the Aggregate Concession Fee is less than the Guaranteed Concession Fee, the Concessionaire will propose a Guaranteed Concession Fee Shortfall Plan in order to pay the pending amount. The Government’s Percentage means 50% for the period the Contact commences until the date the aggregate amount of the Guaranteed Concession Fee is paid. Whenever the aggregate amount of the Guaranteed Concession Fee is paid, then a certain formula is applicable, setting the Government’s Percentage. In addition, the Cyprus Government participates in profit sharing arrangement, if the actual Equity IRR exceeds 12,5% in real post terms.

A Liaison Committee exists, formulated by three representatives on behalf of the Contracting Authority and three representatives on behalf of the Concessionaire. This Committee is responsible for the day by day review of the Contract. The Committee forms also a forum for strategic discussion on variations of the market orientation as well as for the efficient operation of the Project. The Liaison Committee can be the forum for contract re-negotiation.

In case of any disputes between the Government (Contracting Authority) and the Concessionaire, the Contract sets specific resolution procedures. In case the disputes are not resolved through prompt, good faith discussion, a Fast Track Dispute Resolution Procedure is followed. The Fast Track Dispute Resolution Procedure is handled out by a three member Panel (one member designated by the Contracting Authority, one by the Concessionaire and the third participant/chairman is selected by the other two members of the Panel). The Panel acts as impartial and it may reach to binding decisions. In case all the above procedures failed, an Arbitration procedure is followed and the award of the Arbitral Tribunal is final and binding.

The whole Agreement is governed by the Law of the Republic of Cyprus.

===Risk Allocation===

The risks are allocated in a balance way between the Concessionaire and the Contracting Authority (Government). The allocation is based on the principal: the risk is allocated to whom it can deal with it. Figure 5 presents an overview of the risk allocation.

[[Image: Larnacaport4.png]] 
'''Figure 5: Risk allocation'''

Design and construction risks are totally allocated to the private sector. If there is a problem, the Concessionaire will have certain penalties (delay fees). These risks however are thought to be the most easily regulated and measured. Maintenance risks are also totally allocated to the private sector. For these two risks the Government will measure the performance and if problems arise the Concessionaire will have certain penalties (performance and delays).

Risks of exploitation are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental agencies to provide their services). The demand risk will be shared from both parties but the risk is greater for the private sector. The Concessionaire will have to pay the Government, as a “rent” for the exploitation of the governments’ assets, fees. The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in case of a decision for expanding the infrastructure.

The regulatory risks (changes in Law), which can be considered discriminatory under the Concession Contract are assumed on a greater level by the Government. In that case, the Concessionaire may present its case and ask for compensation. The force majeure risk will be shared by both parties (war, revolution, nuclear explosion, etc), but the risk is greater for the public sector. The Concessionaire is compensated by the Government sufficiently in case the Contract is terminated.

Financial close risk has eventuated. For the last 2.5 years the concessionaire and the government are trying to find solutions.

===Performance===

The Contracting Authority requires that Larnaka Port and Marina under the Concession Contract are operated in accordance with the Law and Regulation of Cyprus, EU Law, Regulation and Policies and international standards for maritime affairs as regulated by the International Maritime Organization (IMO). Consistently poor performance will lead to performance deductions and failure to rectify such performance will lead to penalties or termination of the Contract.

The performance mechanism will combine specific performance/quality indicators, as measured against the Concessionaire’s own Method Statements. It will be self-monitoring from the Concessionaire’s performance monitoring system and designed to encourage the Concessionaire to improve its methods of operation. The Contracting Authority will conduct audits periodically.

After selection of the preferred bidder and prior to financial close, the Concessionaire will be required to submit Method Statements, defining how it will implement each aspect of the Project requirements. The Contracting Authority may consider changes to the Measures of Performance where the Concessionaire will be able to demonstrate that alternative measures are more appropriate. The Concessionaire will be able to change the Method Statements and the performance indicators during the concession period again with the prior approval of the Government.

In order to encourage continuous improvement, penalties will be levied on failure to perform according to a Method Statement, failure of the quality management system and failure to report any shortfall in performance. Penalty points will be levied according to the nature and severity of the failure.

The Contract includes deficiency points and penalties for underperformance in the pre-identified performance indicators. The Contracting Authority assesses this underperformance and levies points/ penalties to the Concessionaire.

The Indicators are according to the component of the Project: Port, Marina or both Port & Marina. Analytically, seventeen Indicators are included in the Contract and presented below with the associated penalty points:

* Port vessels berth processing- Waiting time for berth in excess of 30 minutes except in weather conditions exceeding the design parameters of the port. Points are deducted for each occurrence. 250 Penalty Points.

* Port passenger check-in counters- Less than 85 percent of check-in counters for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Security Check Equipment-Security checking equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Immigration booths- Less than 85 percent of immigration booths for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Baggage handling- Baggage handling equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Marina vessels berth processing (peak period)- Time to allocate a berth in excess of 30 minutes at peak periods provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina vessels berth processing (off peak period)- Time to allocate a berth in excess of 20 minutes at other times provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina facilities/ services- Less than 90 percent of any set of facilities (toilet, washing showering or berth services) available at any time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 250 Penalty Points.

* Marina pump out services- Waiting time for pump out in excess of 30 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina fuel services- Waiting time for fuel in excess of 10 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina security- More than 5 incidents of malicious damage or theft in any month. Points are deducted for each occurrence. 100 Penalty Points.

* Port & Marina response to emergency situation- Response time to an emergency situation in excess of 15 minutes. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina clear or deal to emergency situation- Time to clear or deal with an emergency situation in excess of 12 hours (which may be adjusted by agreement or instruction). Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina health and safety- Any failure to follow health and safety requirements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina navigation- Any failure to provide effective aids to navigation. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Method Statements- Failure to follow agreed procedures as set out in the Concessionaire’s Method Statements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Quality Management System- Failure to maintain the agreed Quality Management System. Points are deducted for each occurrence. 500 Penalty Points.

The penalties are applied based on the aggregated points levied in a specific time frame as follows:

* Less than 500 in any month: No penalty.

* 500 to 1.500 points in any month: 0.25% of the Concession Fee of the specific month the points are levied.

* More than 1.500 points per month: 0.5% of the Concession Fee of the specific month the points are levied.

* More than 2.500 points in any rolling three months: 1% of the Concession Fee of the specific three month period the points are levied.

A score of 10.000 or more penalty points in a rolling six month period will lead to award of a termination point. The Concession Contract will be terminated if three termination points are awarded in any rolling three year period.

==Project Outcomes==
The re-development of Larnaka Port and Marina will transform this area into a major cruise passenger and tourist destination.
In one hand, the level of commercial operations at Larnaka Port were declining over the years and on the other hand the Larnaka Marina was over-saturated. Both infrastructure developments were facing sustainability issues. The Project is expected to assist significantly the tourist industry of Cyprus and transform Larnaka into a prime tourist destination in the Eastern Mediterranean Basin. In addition, it is expected that the Project will support the re-vitalization and the competitiveness of Cyprus economy.

In order to secure viability, 3 separate projects were bundled in a combined development.

The project, while still not abandoned, 2.5 years from the award has not managed to reach financial close.Reasons may be:
1. the mix of shareholders within the concessionaire
2. the economic crisis

The following critical success factors can be considered:
* Basically, the revenue growth of the Project depends on the income earned from the Land Development component of the Project. In that respect, the medium and long term prospects of Cyprus economy are crucial for attracting possible high income residents in the Project. The other two components of the Project (Port and Marina) are expected to provide the necessary revenues in order to be self-sufficient. It is of paramount importance that the Project as a whole gains a Brand Name as a prime cruise, yacht and tourist destination in the Eastern Mediterranean Basin.
Nevertheless, the Concessionaire should seek out the provision of new innovative services, hence new forms of revenues and the Cyprus Government should assist the Zenon Consortium towards this direction.

* The long term sustainability of the Port and the level of success of the Project depend on the growth of the Cruise passenger and marina traffic. Nevertheless, the economic viability of the Project depends mainly on the revenues expected by the Land Development component of the Project.

* Maritime transport as a whole should provide high health and safety standards. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation. The Cruise operators are significant partners too.

* Maritime transport as a whole should provide high security standards. Terrorism and other relevant events have a global effect. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation.

* Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.

* Cooperation between the Concessionaire and the Government (Contracting Authority0 should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should also stand alone.

Regarding failure factors, in 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cyprus Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013, the Cyprus Government reached to an agreement with its lenders. The status of the Cyprus economy and the sustained recession that is expected are factors that could create increase uncertainty for the Project. The Financial Closure for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

Only recently (March 2015), there has been opposition, as Larnaca Port employees are against the government’s proposition to allow the concessionaire to start works based on equity (50 million euros) and look for financing in the future, as this bears the risk of very small investments, while ownership transfer would have been concluded.

===Economic Impact===
The project is expected to provide the basis for business development with respect to cruise and recreational marine traffic. The project also foresees co-development of the area between the port and airport of Larnaca.Larnaka and Marina Project is presenting unique characteristics in respect to the choice to be developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) concession contract. The extensive “horizontal and vertical bundling’’ has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka ’ s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka ’ s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project.

The delays occurred during the formulation of the Project, the tender process and negotiations with the preferred Bidders led to an agreement when Cyprus was already affected by the financial crisis and a deep recession hit the Cyprus economy. The Zenon Consortium under this financial environment is struggling to find lenders or other possible investors, hence reaching to financial close with the Cyprus Government. The Cyprus economy presented so far remarkable resistance in “Armageddon scenarios’’. The extensive land development rights included in the Project are expected to attract new lenders and investors.

Nevertheless, the Project is expected to face competition in all of its main components. The investments in Lemesos Port in a new passenger terminal building, twice as big as to what is proposed in Larnaca, raises questions with regard to whether Larnaka could become the main Passenger Port of Cyprus. In that respect, the Zenon Consortium should investigate the provision of innovative new services in order to expand Project revenues’ diversity. In addition, the commercial capacity of Larnaka Port should be sustained. A new maritime market is arising in the Eastern Mediterranean Basin, the support of hydrocarbon exploitation companies and Larnaca has already attracted relevant servicing companies.

The long term sustainability of the Project depends on whether the Zenon Consortium and all the other stakeholders manage to convert the Project into a Brand Tourist and Leisure Name in the Eastern Mediterranean Basin.

===Social Impact===
The development of the water front area of Larnaca places the foundation for further development and business opportunities in the region.

===Environmental Impact===
The organised co-development secures the protection of the environment.

==References==

*Government of the Republic of Cyprus. 2006. Larnaka Port & Marina Re-development Project, Invitation to Tender (ITT). Lefkosia: Government of Cyprus.

*Christodoulou Ch., Efstathiades Ch.. 2013. Cyprus, Discussion Papers Part I Country Profiles. Public Private Partnerships in Transport: Trends & Theory P3T3. Brussels: COST Office.

*Government of the Republic of Cyprus. 2014. Strategy of Cyprus on Sea (Port) and Land Transport (Executive Summary). Lefkosia: Ministry of Communications and Works.

*Government of the Republic of Cyprus. 2013. Transport Statistics 2012, Statistical Service. Lefkosia: Government of Cyprus.

*Aristidou St.. 2014. Secretary of the Steering Committee negotiating the Larnaka Port and Marina DBFO Contract. Personal Interview. Lefkosia.

*Government of Cyprus, Ministry of Communications and Works, Website: www.mcw.gov.cy/

*Government of the Republic of Cyprus, Cyprus Port Authority, Website: www.cpa.gov.cy/

*Zenon Consortium –Larnaka Port & Marina Re- development Brochure. LARNAKA ECO-WATERFRONT: Sustainable Expansion of a Historic Cypriot City. Larnaka: Zenon Consortium.

*Daily Cypriot Newspapers: Philelepheros, Politis, Cyprus Mail. Period 2005-2014. Lefkosia.

*Cruise market watch, Website: http://www.cruisemarketwatch.com/growth/

*Larnaka Municipality, http://www.larnaka.org.cy

*C. Christodoulou, C. Efstathiades, 2014, Larnaca Port and Marina Re-development, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015), “Larnaca Port and Marina Re-development” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Larnaca Port and Marina Re-development, Cyprus

2015-06-12T10:45:30Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Larnaka Port & Marina Re-development, Cyprus
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 35 years for the Port and Marina Infrastructure and 99 years lease for residential units
|header4 =
|label4 = Budget:
|data4 = ~EUR 800M
|title = Project Overview
|image = [[Image:Larnaca1.png|300px]]
|caption = Figure 1: Larnaka Port & Marina, Current Condition and proposed plan

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = April, 2005
| label2= Tender Advertisement of Contract Notice:
| data2 = October 2005
| label3= Invitation to Tender (ITT):
| data3 = November 2006
| label4= Contract Award:
| data4 = August 2012
|label5 = Financial Close:
|data5 = Pending (This date has been since extended multiple times. The last extension was exhausted end Feb 2015 with no progress.)
}}

}}

==Introduction==

For a peripheral, small and insular Member State of the EU such as Cyprus, the extension and upgrading of port infrastructure constitutes a significant factor for enhancing access capability to EU markets. The main strategic objective for a comprehensive development of Cyprus port infrastructure is the enhancement of competitiveness and effectiveness, in order to respond to the modern needs for mobility of passengers and goods. Their role as important nodes in serving international trade is also upgraded in this way. In respect to Trans-European Network maritime policy, Cyprus considers that emphasis should be given in supporting maritime transport of passengers, especially for peripheral/ insular Member States, both as an alternative to air travel in general, but more specifically as an emergency service to maintain connectivity among Member States during incidents of air transport crises (e.g. natural disasters, terrorist activity and others). It should be noted that currently air transport is the only mode of passenger transport to/from Cyprus, because there are no ferry services (passenger ships) that connect Cyprus with Continental Europe or other neighboring Countries. Passenger ships in Cyprus Ports provide exclusively cruise services.

Larnaka is the third largest city on the southern coast of Cyprus, with an urban population of 86.700 (2012). Three main transport infrastructure elements for Cyprus and international gateways for the entire island are located in Larnaka: the island's largest airport (Larnaka International Airport) the Port of Larnaka and the Marina of Larnaka. The Port and the adjacent Marina are situated southeast at the outskirts of the urban civic centre of Larnaka and 3,5kms from the Larnaka International Airport (southwest of the urban area). Figure 1 presents the current condition of Larnaka Port and Marina, as well as the proposed plan of the PPP Project.

The Larnaka Port and Marina Project present unique characteristics in respect to the choice to be re-developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) Concession Contract. Extensive “horizontal and vertical bundling” has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka’s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Negotiations with the preferred Bidder Zenon Consortium successfully were completed in August 2012, but the Concessionaire did not manage so far to find financial lenders (August 2014). The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.

In its current condition Larnaka Port is the second in magnitude port of Cyprus, lacking behind Lemesos Port. Until 1973 it was operating occasionally with inadequate port facilities. With the exception of the oil products, the port had served up to that time very little trade traffic and its storage space was quite small and unsuitable.

In 1973 it was redeveloped and was initially intended to share with Famagusta Port its inland area and supplement the latter. Following the Turkish Invasion of 1974, Famagusta Port, the main port of Cyprus at the time, ceased operation and the role of Larnaka Port increased dramatically. Additional expansion took place in two phases (1976-1979 and 1979-1982), leading to a multipurpose port having an area of 445.000 sq. meters and serving all kinds of loads from unpacked (animal fodder, grain, gypsum), conventional (lumber, iron, fertilizers, automobiles), containers as well as oil products.

Nowadays, it’s within the urban area of Larnaka and on the landside is surrounded by residential units. On the north side there are oil product installations and at the south side it borders with Larnaka Marina.

The level of commercial operations at Larnaka Port has declined over the last two decades, with the majority of commercial traffic now being handled by Lemesos Port. In the late 1980s/ early 1990s, the freight movements were diminishing in Larnaka Port and the passenger movements have been lacking behind Lemesos Port, as the latter has significant operational capabilities and capacity. The Ministry of Communications and Works (MCW) and the Cyprus Ports Authority (CPA), since the late 1980s commissioned various studies in order to explore the possibilities of revitalizing Larnaka Port.

Larnaka Port is protected by two breakwaters the North and the South. It has two quays for the mooring of ships:

* South quay of length 340m, water depth 11,4m and equipped with two gantry cranes of 40 tons, 1 crane on rails of 45 tons as well as a ramp of 25m width suitable for ro-ro ships.
* North quay 326m, water depth 9,3m and equipped with crane on rails (Luffing Crane) of 35 tons able to serve loads 150m to the western part of the quay.

The Port has three warehouses, two of which are located at the north quay each having an area of 3170 sq. meters and one at the south quay of about 11.500 sq. meters. There are also paved open storage spaces of about 150.000 sq. meters as well as non-paved spaces of approximately 65.000 sq. meters. In addition, a Passenger Terminal Building serves mainly cruise traffic. Figure 2 presents the current port masterplan.

[[Image: Marina3.png|500px]] 
'''Figure 2: Larnaka Port, Current masteplan'''

Larnaka Marina is situated next to the Larnaka Port, and is one of the few marinas in Cyprus and the only public owned. The Marina can serve approximately 450 yachts and for the last two decades is oversaturated. Recently small re-construction works were executed awaiting for the Concessionaire to take over.

In the late 1990s, there was a discussion of what procurement method should be used for the development of Larnaka Port. The government decided that the best method for the re-development was through a PPP contract because it was believed that this will help the easiest development without the “slow-moving” processes a governmental project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government those days since the primary goal was the accession to the European Union. The decision for re-developing Larnaka Port through a PPP contract was taken in 1999.The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO-style Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center, Amsterdam Port Consultants), on 24 August 2004. A separate process for the re-development of Larnaka Marina was running in those days by the Ministry of Commerce, Industry and Tourism based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

The same period MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council of Ministers commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the Ministry of Commerce, Industry and Tourism, the CPA, the Public Works Department, the Planning Bureau and the General Accountant.

The tender procedure initiated by the MCW was based on an open call which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder. In 2005 a Contract Notice in the Official Journal of the European Union for express of interest initiated the pre-qualification procedure under the title: Larnaka Port and Marina Re-Development Project. After legal implications the Tender Board name A. Vouros Investments Ltd and Partners as the Preferred Bidder. After several months, the negotiations failed due to a revised proposal that was altering the scoring which led to the preferred Bidder. The Steering Committee invited the second selected Bidder according to the tender rules, which was the Zenon Consortium.

The PPP Project consists of three main components: the re-development of Larnaka Port in order to become the main passenger port (cruises) of Cyprus, the re-development of Larnaka Marina as part of Cyprus Tourism Strategy to enhance the tourism ‘package’ of Cyprus and the Land Development of certain areas that are available within Larnaka Port and Marina (Figure 2). The latter will provide the necessary revenues in order to make viable investment the first two components of the Project. The Land Development will be combined with an extensive landscaping of the Larnaka waterfront, providing public access in areas within the Larnaka Port and Marina.

The Concessionaire, Zenon Consortium will carry out the re-development of the Port and the Marina in three phases and will manage the facility for a period of 35 years.

The Contract requires the Concessionaire to undertake phased development of the Port in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise and commercial zones. The re-development on the Port will focus in providing the necessary infrastructure to accommodate large cruise ships, in order to become the main passenger port of Cyprus. Nevertheless, the Port will not abandon its ability to serve freight ships and will continue to serve the regional commercial (freight) needs of Larnaka and its hinderland to the north and east. The output specification for the port component was setting that the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely to make an approach to and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters.

The re-developed Marina is expected to serve as a key component in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as a tourism, leisure and recreation destination, both nationally and regionally. Recreational boating is a maritime leisure activity that is complementary to cruise tourism.The output specification was setting that the re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme climatic conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity at the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kind of vessels and a new yacht club will be constructed.

The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. The residential units will be available on a 99 years lease. The other Land Development elements will be managed by the Concessionaire for a period of 35 years. The Zenon Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. The Land Development component will be an integral part of the Project in order to enhance the attractiveness of the area to cruise passengers, marina users and the general public.This component can be considered as an extensive level of horizontal “bundling”. The combination of a Marina and a Port in one Project will provide a moderate level of “vertical bundling” in transport sector. On the other hand, the neighboring main airport of Cyprus (Larnaka International Airport) could provide a significant level of “vertical bundling” in transport sector, although it is not part of the Project.

The estimated cost for the first phase of Larnaka Port and Marina redevelopment is about EUR130 M. The other two phases of the port and marina will be constructed at a further cost of EUR 55 M. The Land Development will reach an investment of EUR 600M. Figure 3 presents Larnaka Port & Marina Master Plan overview.

[[Image: Larnacaport3.png|500px]] 
'''Figure 3: Larnaka Port & Marina Master Plan overview'''

==The Contracting Authority (Public Party)==

All port facilities of the island are under the jurisdiction of the Cyprus Port Authority (CPA), a semi-government, public autonomous organisation supervised by Ministry of Communications and Works (MCW) and their activities and development are centrally planned, co-ordinated and supervised. Both Lemesos and Larnaka Ports, the country’s major gateways to international shipping, are owned, managed, operated, marketed and developed by CPA. The MCW is the responsible political instrument for air, maritime and land transport and for the national-wide transport infrastructure including international airports, ports and main road network. Larnaka Marina is also publically owned and it is managed by another semi-government, public autonomous organization: the Cyprus Tourism Organization (CTO), which is supervised by the Ministry of Commerce, Industry and Tourism (MCIT).

The Contracting Authority for the Project is the MCW (Central Government) and the two semi-government, public autonomous organizations participate in the Steering Committee for the negotiations of the Project. CPA and CTO will terminate their managerial duties for Larnaka Port and Marina respectively, when the Project is handed-out to the Concessionaire. The PPP contract will be managed by the Public Works Department (PWD) on behalf of the MCW.

Nevertheless, there are operational jurisdictions that will remain to Central Government mainly due to the legal/ institutional environment. The regulatory jurisdiction of CPA as well as the policing (land and sea), custom services, immigration control, food hygiene, veterinary services, meteorological services, port health services, and shipping safety and control services will remain with central government. Moreover, the CPA will remain the Land Lord for the Port.

Regarding procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

Transport and tourism policy are controlled on a national level. The Project was a national necessity for promoting tourism and maritime connections with Europe. Even if Central Government is responsible on all levels of the development, design, tendering, negotiation procedure and regulating the contract, Larnaka’s local authorities play a significant role in promoting and accelerating the Project by lobbying and exercising pressure on the Central Government.

==The Concessionaire (Private Party)==

Zenon Consortium, the Concessionaire is an International & Cypriot-led Consortium established as the SPV (Special Purpose Vehicle) for undertaking the DBFO Concession Contract for the Larnaka Port and Marina Re-Development Project.

Zenon Consortium was established with the following shareholders (and respective share):

* Louis Group of Companies- 22% (Cruise-ships & Hotels Owners & Operators),
* Bouygues Batiment International- 17,5% (French-led international developer and contractor),
* Iacovou Brothers- 17,5% (Largest Main Contractor in Cyprus, Larnaka based),
* Petrolina (Holdings) Public Ltd- 17,5% (Leading gas and oil products distributor in Cyprus, Larnaka based),
* Costa Crociere SpA- 10% (Largest Cruise Company in the Mediterranean and member of the U.S. Carnival Cruise Lines Group),
* Marinaman - 8,5% (Representing the local community of Larnaka),
* General Construction Company- 5% (Cypriot Contractor, Nicosia based),
* Amsterdam Logistics Group Ltd (Netherlands, Cruise and Commercial Port operations) & Lievense Consulting Engineers- 2% (Port & Marina design).

The majority of companies setting Zenon Consortium are business developers with a balanced participation in two main fields: the construction field (Bouygues Batiment International, Iacovou Brothers and General Construction Company) and in port and marina development field including cruise organization (Amsterdam Logistics, Lievense Consulting Engineers, Costa Crociere and Louis Group of Companies). In addition the participation of Cypriot and international partners can also be considered as balanced. One of the leading companies, Bouygues Batiment International has an extensive experience in PPP’s. It should be noted that Bouygues Batiment International is also the leading company in the Concession Contract for developing and managing the two International Airports in Cyprus (Larnaka and Paphos) until 2031. Alterations are expected in the list of shareholders with their respective shares before the Financial Close for the Project.

Zenon Consortium has selected Scott Brownrigg Architects and Masterplanners as their designing consultants.

According to the procurement documents, all subcontractors shall be approved by the Government. For the construction and maintenance, it is expected that Bouygues Batiment International, Iacovou Brothers Ltd and General Construction Company will be involved. The other shareholders are expected to be involved in operational subcontracting duties.

The Financial Close for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

==Users==

As it was mentioned before, Larnaka Port and Marina Project is presenting unique characteristics due to its extensive “horizontal and vertical bundling”. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin.

Taking into account the project bundles, three main user categories can be identified:

* Cruise operators processing passengers, as well as commercial companies handling commodities through the Port will be the main users. According to the output specification for the port component, the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely approach and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters. The basin and alongside the quays shall have sufficient depth (minimum, 11 meters) to allow safe use of the harbor and port installations by cruise liners, of the maximum anticipated size and commercial vessels serving the current and future export and import needs of the hinterland of Larnaka. The re-developed port is expected to provide a maneuvering area equivalent to a turning circle of 500 meters in diameter. In this respect, the re-construction of the Port infrastructure will include a new passenger terminal (first phase 3500 sq. meters), a new passenger pier and an offshore jetty.

* Tourists using the Marina for recreation-short trips around Cyprus and the Eastern Mediterranean Basin. The re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme weather conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity in the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kinds of vessels and a new yacht club will be constructed.

* Residents that will buy residential units through a 99 year lease and the companies using the services provided in the Land Development component (conference, theater/ Hall, offices, retail shops, food & beverage, entertainment) is another major category of users. Land development is the third main component of the project. The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. - Throughout the project, the Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings, which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. Local authorities and local habitants will also use and have benefits from the project.

==Key Purpose for PPP Model Selection==

Currently, the development of the transport infrastructure of Cyprus through PPP Projects is considered to be unattractive, particularly the road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors in TEN-T projects, because the cost of the investment is usually equivalent to that of a similar project in a central interconnected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the developed infrastructure of the project.

The Larnaka Port & Marina Project combined three major economic fields of economy: tourism, international transport and real estate whereas value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer were the main political motivations for the choice of the contract type. Additionally, the Government’s political decision to dis-engage from managing port and marina services was also considered as a prime reasoning behind the contract type selection.

==Project Timing==

The accession of Republic of Cyprus to the European Union in 2004, followed by the accession to the Eurozone Area in 2008 has been a catalyst for crucial changes in the political, economic and social environment of Cyprus. The need to enhance the competiveness was becoming paramount important for the sustainability of Cyprus economy. The Larnaka Port & Marina Project was combining three major economic fields of Cyprus economy: tourism, international transport and real estate.

The level of commercial operations at Larnaka Port has declined since the late 1980s/ early 1990s, with the majority of commercial traffic now being handled at Lemesos Port. Since then, the MCW and the CPA were exploring various options for revitalizing Larnaka Port. In addition, Larnaka Marina was over-saturated and there was an urgent need to expand its capacity.

By the late 1990s, desalination plants were developed in Cyprus as PPP’s, introducing this method as a sustainable method for project developing. In those days the MCW decided to explore the development of two main transport infrastructure Projects through PPP Contracts: Larnaka and Paphos International Airports in a combined contract and the re-development of Larnaka Port. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The non viability of the Larnaka Port Project led to add within the Project the re-development of Larnaka Marina in a combined Project with considerable land development benefits. The realization of almost 250.000 sq. meters of land development was expected to provide funds from which the Larnaka Port and Marina will be re-developed.

The final decision for re-developing Larnaka Port through a PPP contract was taken in 1999. The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center and Amsterdam Port Consultants), on August 2004. At the same period a separate process for the re-development of Larnaka Marina was due by the MCIT based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

A few months later, MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers of Government of Cyprus verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the MCIT, the CPA, the PWD, the Planning Bureau and the General Accountant.

The delays during the formulation of the Project, the tendering process and the negotiating period with the preferred bidder delayed the agreement until August 2012. The financial crisis had already reached Cyprus. Cyprus Government requested international financial assistance in June 2012 due to the financial crisis that primarily occurred in the over expanded domestic banking sector, which Cyprus was unable to support on its own. In March 2013, a EUR 10 billion international bailout by the Eurogroup, European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) was announced, in return for Cyprus agreeing to close the country's second-largest bank and imposing a one-time bank deposit levy on all uninsured deposits (bail in) in the two main banks of Cyprus.

The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.To this end, the preferred bidder is struggling since August 2012 to secure the necessary funding for the realization of the Project.

==Project Locality and Market Geography==

The special territorial and geographical features of Cyprus play a restrictive role in the improvement of Cyprus’ competitiveness: its very small size combined with its insular character combined with its distant geographical position from the EU’s centre of activity result in a significant increase in the costs for the transportation of goods and services, as well as isolation problems and weakness in the connection to the main Trans-European Network routes. In order for these issues to be addressed, significant investment is required in basic and other supporting infrastructure. Larnaka Port belongs to the Comprehensive TEN-T Network whereas Larnaka Marina is not part of the TEN-T Network. The Connecting Europe Facility CEF Regulation has given priority in the development of the TEN-T Core Network and other horizontal issues (telematic applications etc). Only 5% of the CEF financial envelope will be directed to the TEN-T Comprehensive Network. Under the new TEN-T policy, Larnaka Port is not to be supported by EU financial resources.

Larnaka Port and Marina are at the outskirts of the Larnaka civic centre. Both infrastructure facilities will support the passenger movements of Cyprus with the rest of the world- cross border movements. The third element of the Project, the Land Development within Larnaka Port and Marina will be combined with extensive landscaping of Larnaka’s waterfront area, hence expanding the civic centre of the city towards the Port area.

Larnaka Port operations, mainly cargo/ bulk products have been declining steadily since the late 1980s/ early 1990s. Vessel traffic (mainly freight) has been declining since the late 1980s. The container movements have never been worth mentioning. The passenger movements in the last decade cannot be considered significant. The Port has been lacking behind Lemesos Port since 1973 in respect of operational capacity. The majority of commercial and passenger traffic is being handled by Lemesos Port; Larnaka Port passenger traffic for the period 2006-2013 represents only 10,7% of the aggregated traffic of the two main Ports of Cyprus. Figure 4, presents Larnaka Port traffic for the last 3 decades.

{| class="wikitable"
|-
! Year
! Passenger Traffic
! Vessels Traffic 
(No. ships)
! Freight Transport 
(TEU)
|-
| 2013
| 54.420
| 188
| 713.952
|-
| 2012
| 44.055
| 206
| 740.551
|-
| 2011
| 42.987
| 534
| 801.521
|-
| 2010
| 64.907
| 578
| 901.919
|-
| 2009
| 22.761
| 522
| 858.514
|-
| 2008
| 5.091
| 596
| 1.077.000
|-
| 2007
| 6.154
| 640
| 870.000
|-
| 2006
| 57.162
| 818
| 818.000
|-
| 2004
|
| 712
| 1.855.657
|-
| 2002
|
| 766
| 2.087.192
|-
| 2000
|
| 888
| 2.166.713
|-
| 1995
|
| 1.223
| 2.804.871
|-
| 1990
|
| 1.444
| 2.541.236
|-
| 1984
|
| 1.803
| 2.069.438
|} 
'''Figure 4: Larnaka Port traffic'''

This issue raises doubts in respect of the ultimate goal of the Project to convert Larnaka Port into the main cruise/ passenger Port of Cyprus. In addition, CPA after many years of discussions is constructing (2014) a new passenger terminal building in Lemesos Port (total investment EUR 14,5 M). The new passenger terminal building in Lemesos Port will be about two times the size proposed for Larnaka Port. Furthermore, the delays occurred so far and the uncertainties in developing Larnaka Port and Marina attracts hydrocarbon development and servicing companies for using Larnaka Port as a base for the exploitation of hydrocarbons in Eastern Mediterranean Basin. The MCW has provided a two year license to hydrocarbon development and serving companies to use Larnaka Port’s facilities including development of a mud plant for servicing hydrocarbon drilling needs. Local Authorities expressed their concerns that the MCW is abandoning the goal to convert Larnaka Port into the main cruise/ passenger Port and instead is giving emphasis to its industrial role.

However, the global cruise industry has an annual passenger growth rate of 7% from 1990 – 2018 (2013: almost 21 M passengers). Growth strategies have been focused in providing new larger capacity ships, including more local ports destinations and new on-board/on-shore activities that match demands of consumers. The increasing size of ships leads to the need of infrastructure upgrade and expansion. Mediterranean is the world's second largest cruise shipping market, representing over 23% of the annual cruise capacity. Mediterranean market can be broken down into four regions; Western Mediterranean, Eastern Mediterranean, South Mediterranean and Adriatic. Eastern Mediterranean market lacks behind Western Mediterranean and Adriatic market, markets that are in a more advantageous position, since they are more close to passenger’s origin countries. Having in mind this, a crucial issue for further developing Eastern Mediterranean market is the provision of adequate air transport capacity.

The adjacent new developed Larnaka International Airport can serve adequately Larnaka Port to its ultimate goal in becoming a prime cruise operations destination. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market.

==Procurement & Contractual Structure==

The tender procedure initiated by the MCW was based on an open call, which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder.

In respect to procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

The MCW is supported by PricewaterhouseCoopers (financial consultants), Pinsent Masons (Legal consultants), WSP Group (Technical consultants) in preparing the tender documents, assessing the Bidders and in the negotiation process with the successful Bidder.

===Tendering===

On October 2005, a Contract Notice in the Official Journal of the European Union for express of interest initiated the prequalification procedure under the title: Larnaka Port and Marina Re-Development Project. The Notice was accompanied by an international printed media campaign, with advertisements for the Project appearing in a number of international publications. The Contract Notice and the advertisements invited parties to register their interest in the Project to the MCW and receive the prequalification documents, being the Preliminary Information Memorandum and the accompanying Pre-qualification Questionnaire (PQQ). Three consortia expressed their interest for the project on December 2005. In May 2006, all three Bidders were pre-qualified and shortlisted. The short-list of the Bidders was based on the answers on the PQQ and on the criteria for the pre-qualification evaluation. Subsequently, MCW held a Bidder’s Conference in Lefkosia on January 2007, at which Bidders were invited to present their queries relating to the Project in an open forum. The MCW issued the Invitation to Tender (ITT) on November 2006 and the shortlisted Bidders were invited to submit their proposal.

All three consortia accepted the ITT and submitted their proposals to the Tender Board on July 2007:

* Vouros Investments Ltd and Partners (A. Vouros Investments Ltd, Singapore Cruise Center Pte, Ltd, DP Architects Pte Ltd, Joannou & Paraskevaides Ltd, J & P Avax S.A., Joannou & Paraskevaides (Overseas) Ltd, Ariadne Australia Limited, Cybarco Plc.).

* Zenon Consortium (Bouygues Batiment International, Iacovou Borthers, Amsterdam Logistics Group BV., Lievense Consulting Engineers, Louis Public Company Ltd, Petrolina (Holdings) Public Ltd, Marinaman Ltd, Costa Crociere SpA, General Construction Ltd).

* D.J. Karapatakis & Sons Limited (D.J. Karapatakis & Sons Ltd, Camper & Nicholsons Marinas Ltd, Wimberly Allison Tong & Goo Inc., ERA Economics Research Associates, Spanopoulos Group of Companies, Odell International Inc USA in a Joint Venture with Parsons, G.A.P Vasilopoulos Public Limited, A. Panayides Contracting Public Limited, Sigan Management Ltd, Viset Malta Plc).

Each of the Bids received comprised five separate volumes as described in the ITT:
(i) Executive Summary,
(ii) Volume A: Technical & Operational,
(iii) Volume B: Business Plan,
(iv) Volume C: Legal and
(v) Volume D Financial.

The MCW and the supporting Consultants evaluated originally Volumes A, B and C and following due to ratification by the Tender Board, the Volumes Ds of those Bidders who have satisfied the threshold requirement of 50% score in each of the three evaluation areas:
(i) Technical & Operational (30% of total scoring, criteria on port development plan, on marina development plan, on method statements, on land development plan, on land development policy and method statements) ,
(ii) Business Plan & Legal (20% of total scoring, criteria on business plan- port & marina, on business plan- land development, on assessment of amendments to draft contract) , and
(iii) Project Concept (15% of total scoring).
(iv) Then the Volumes Ds were opened and assessed on two main evaluation aspects:
(a) Financial I: Expected Bid price to the Government (30% of total scoring),
(b) Financial II: Financial robustness and deliverability (5% of total scoring).

The ITT was stating that the Contract will be awarded to the most economically advantageous Bid and this is reflected by the evaluation and scoring distribution.

In July 2008 Zenon Consortium was selected as the preferred Bidder whereas A. Vouros Investments Ltd and Partners was scored in evaluation procedure as the second best with small margin from the preferred Bidder. D.J. Karapatakis & Sons Limited was excluded by the procedure due to failure to provide original documentation. The selection of the preferred bidder led to legal implications since the other two Bidders legally challenged the decision of the Tender Board, adding further delays to a much needed project. The Tender Review Board dismissed the original decision to name Zenon Consortium as the preferred Bidder. Based on that decision, the Tender Board revised its decision and name A. Vouros Investments Ltd and Partners as the preferred Bidder and Zenon Consortium as the second one.

A new Steering Committee was set for the negotiations with the selected preferred Bidder. The Committee was chaired by the Directorate General for European Programmes, Coordination and Development (ex-Planning Bureau) and participants in the Committee are representatives of the Ministry of Finance, the MCW, the CPA, the PWD and the Control Department of MCW. The Steering Committee invited the preferred Bidder for negotiations in May 2009, almost 4 and a half years after the political decision to proceed with this Project. Cyprus was already feeling the pressure of the international financial crisis. This led A. Vouros Investments Ltd and Partners to re-assess their Business Plan and present a revised financial proposal. The Steering Committee dismissed the proposal and decided to terminate the negotiations; the revised proposal was altering the scoring that led to the preferred Bidder.

In July 2010 the Steering Committee invited the second best Bidder according to the tender rules, which was Zenon Consortium. Negotiations with Zenon Consortium were successfully completed in August 2012.

===Contract Structure===

The Project will be undertaken using a DBFO Concession Contract. An output specification, with minimum requirements, was created that includes the way the three components of the Project (Larnaka Port, Larnaka Marina and Land Development) are going to be developed and operated.

The Concessionaire is the sole responsible for designing, financing, building and maintaining Larnaka Port and Marina Project. In addition, the Concessionaire has the main responsibility in operating the project (Larnaka Port, Marina and development). The Project will be transferred from the Concessionaire to the Government when the contract is completed in 35 years. All the residential part of the Land Development will be transferred in 99 years. The Government, through its respective agencies will provide specific services mainly due to the legal/ institutional environment. The Cyprus Government will retain the ownership of all existing and new Port and Marina assets during the Concession period. The Agreement is governed by the Law of the Republic of Cyprus.

In relation to the Port, the Contract will require the Concessionaire to undertake phased development in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise (passenger) and freight operations. The Marina component will serve as a key part in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as tourism, leisure and recreation destination. The re-development of Larnaka’s Marina as a key maritime leisure node in Cyprus will act complementary to cruise tourism. The management, operation and maintenance of the Port and the Marina will be in accordance to the relevant Laws of the Republic of Cyprus and industry’s best practice. Specific performance indicators will monitor the Concessionaire. The Output Specification for the Land Development component was set in a manner to allow each prospective Bidder to determine the form of development that is most appropriate and complementary to the activities of the Port and the Marina, according to his aspirations and commercial judgment. Approximately 283.00 sq. meters of land within the boundaries of the Port and the Marina will be handled out to the Concessionaire for developing in order to maximize the revenues to fund the re-development of the Larnaka Port and Marina. The Government has set minimum requirements based on Cyprus Urban Development and Building Regulations.

The Concessionaire will be responsible for the overall operation and management of all aspects of the business of Port and Marina. In this respect, the Concessionaire will produce and operate the following specific Method Statements:

* Operating Procedures for all its service delivery responsibilities and the establishment of a Quality Management System and Plan.
* Health and Safety Plan.
* Security Plan.
* Chemical and Oil Spill Anti-Pollution Plan
* Emergency Plan.
* Conservation and Heritage Management.
* Environment Plan.

Based on the contract clauses, the charges in the Port will be either regulated or non-regulated. All the charges for core port services will remain regulated whereas the development of other new marinas in Cyprus will lead to deregulation of all relative charges.

Termination clauses are included in the contract and are divided in three categories (Concessionaire default, Government default and force majeure). There are guarantees that the Concessionaire is compensated as follows:

* Concessionaire default- No compensation.
* Force majeure- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).
* Government default- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).

The revenues of the contract arise from the three components of the Project: Larnaka Port, Larnaka Marina and Land Development. These revenues primarily arise from land right fees, development fees, charges from commercial and passenger use of the Port and the Marina and the Concessionaire will collect all the revenues. In consideration of the rights granted by the Cyprus Government to the Concessionaire under the provisions of the Concession Contract, the Concessionaire will pay the Government the Concession Fee. The Concession Fee represents the land development revenues multiplied by the Government’s Percentage. In addition, a Guaranteed Concession Fee has been set representing an aggregate amount of EUR 61.1 M in net present value terms discounted back to the commencement date of the Contract.

At every milestone date, the Concessionaire should pay the relevant fee. The Guaranteed Concession Fee and the Aggregate Concession Fee, which is calculated, are taken into consideration; in case the Aggregate Concession Fee is less than the Guaranteed Concession Fee, the Concessionaire will propose a Guaranteed Concession Fee Shortfall Plan in order to pay the pending amount. The Government’s Percentage means 50% for the period the Contact commences until the date the aggregate amount of the Guaranteed Concession Fee is paid. Whenever the aggregate amount of the Guaranteed Concession Fee is paid, then a certain formula is applicable, setting the Government’s Percentage. In addition, the Cyprus Government participates in profit sharing arrangement, if the actual Equity IRR exceeds 12,5% in real post terms.

A Liaison Committee exists, formulated by three representatives on behalf of the Contracting Authority and three representatives on behalf of the Concessionaire. This Committee is responsible for the day by day review of the Contract. The Committee forms also a forum for strategic discussion on variations of the market orientation as well as for the efficient operation of the Project. The Liaison Committee can be the forum for contract re-negotiation.

In case of any disputes between the Government (Contracting Authority) and the Concessionaire, the Contract sets specific resolution procedures. In case the disputes are not resolved through prompt, good faith discussion, a Fast Track Dispute Resolution Procedure is followed. The Fast Track Dispute Resolution Procedure is handled out by a three member Panel (one member designated by the Contracting Authority, one by the Concessionaire and the third participant/chairman is selected by the other two members of the Panel). The Panel acts as impartial and it may reach to binding decisions. In case all the above procedures failed, an Arbitration procedure is followed and the award of the Arbitral Tribunal is final and binding.

The whole Agreement is governed by the Law of the Republic of Cyprus.

===Risk Allocation===

The risks are allocated in a balance way between the Concessionaire and the Contracting Authority (Government). The allocation is based on the principal: the risk is allocated to whom it can deal with it. Figure 5 presents an overview of the risk allocation.

[[Image: Larnacaport4.png]] 
'''Figure 5: Risk allocation'''

Design and construction risks are totally allocated to the private sector. If there is a problem, the Concessionaire will have certain penalties (delay fees). These risks however are thought to be the most easily regulated and measured. Maintenance risks are also totally allocated to the private sector. For these two risks the Government will measure the performance and if problems arise the Concessionaire will have certain penalties (performance and delays).

Risks of exploitation are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental agencies to provide their services). The demand risk will be shared from both parties but the risk is greater for the private sector. The Concessionaire will have to pay the Government, as a “rent” for the exploitation of the governments’ assets, fees. The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in case of a decision for expanding the infrastructure.

The regulatory risks (changes in Law), which can be considered discriminatory under the Concession Contract are assumed on a greater level by the Government. In that case, the Concessionaire may present its case and ask for compensation. The force majeure risk will be shared by both parties (war, revolution, nuclear explosion, etc), but the risk is greater for the public sector. The Concessionaire is compensated by the Government sufficiently in case the Contract is terminated.

Financial close risk has eventuated. For the last 2.5 years the concessionaire and the government are trying to find solutions.

===Performance===

The Contracting Authority requires that Larnaka Port and Marina under the Concession Contract are operated in accordance with the Law and Regulation of Cyprus, EU Law, Regulation and Policies and international standards for maritime affairs as regulated by the International Maritime Organization (IMO). Consistently poor performance will lead to performance deductions and failure to rectify such performance will lead to penalties or termination of the Contract.

The performance mechanism will combine specific performance/quality indicators, as measured against the Concessionaire’s own Method Statements. It will be self-monitoring from the Concessionaire’s performance monitoring system and designed to encourage the Concessionaire to improve its methods of operation. The Contracting Authority will conduct audits periodically.

After selection of the preferred bidder and prior to financial close, the Concessionaire will be required to submit Method Statements, defining how it will implement each aspect of the Project requirements. The Contracting Authority may consider changes to the Measures of Performance where the Concessionaire will be able to demonstrate that alternative measures are more appropriate. The Concessionaire will be able to change the Method Statements and the performance indicators during the concession period again with the prior approval of the Government.

In order to encourage continuous improvement, penalties will be levied on failure to perform according to a Method Statement, failure of the quality management system and failure to report any shortfall in performance. Penalty points will be levied according to the nature and severity of the failure.

The Contract includes deficiency points and penalties for underperformance in the pre-identified performance indicators. The Contracting Authority assesses this underperformance and levies points/ penalties to the Concessionaire.

The Indicators are according to the component of the Project: Port, Marina or both Port & Marina. Analytically, seventeen Indicators are included in the Contract and presented below with the associated penalty points:

* Port vessels berth processing- Waiting time for berth in excess of 30 minutes except in weather conditions exceeding the design parameters of the port. Points are deducted for each occurrence. 250 Penalty Points.

* Port passenger check-in counters- Less than 85 percent of check-in counters for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Security Check Equipment-Security checking equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Immigration booths- Less than 85 percent of immigration booths for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Baggage handling- Baggage handling equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Marina vessels berth processing (peak period)- Time to allocate a berth in excess of 30 minutes at peak periods provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina vessels berth processing (off peak period)- Time to allocate a berth in excess of 20 minutes at other times provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina facilities/ services- Less than 90 percent of any set of facilities (toilet, washing showering or berth services) available at any time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 250 Penalty Points.

* Marina pump out services- Waiting time for pump out in excess of 30 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina fuel services- Waiting time for fuel in excess of 10 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina security- More than 5 incidents of malicious damage or theft in any month. Points are deducted for each occurrence. 100 Penalty Points.

* Port & Marina response to emergency situation- Response time to an emergency situation in excess of 15 minutes. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina clear or deal to emergency situation- Time to clear or deal with an emergency situation in excess of 12 hours (which may be adjusted by agreement or instruction). Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina health and safety- Any failure to follow health and safety requirements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina navigation- Any failure to provide effective aids to navigation. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Method Statements- Failure to follow agreed procedures as set out in the Concessionaire’s Method Statements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Quality Management System- Failure to maintain the agreed Quality Management System. Points are deducted for each occurrence. 500 Penalty Points.

The penalties are applied based on the aggregated points levied in a specific time frame as follows:

* Less than 500 in any month: No penalty.

* 500 to 1.500 points in any month: 0.25% of the Concession Fee of the specific month the points are levied.

* More than 1.500 points per month: 0.5% of the Concession Fee of the specific month the points are levied.

* More than 2.500 points in any rolling three months: 1% of the Concession Fee of the specific three month period the points are levied.

A score of 10.000 or more penalty points in a rolling six month period will lead to award of a termination point. The Concession Contract will be terminated if three termination points are awarded in any rolling three year period.

==Project Outcomes==
The re-development of Larnaka Port and Marina will transform this area into a major cruise passenger and tourist destination.
In one hand, the level of commercial operations at Larnaka Port were declining over the years and on the other hand the Larnaka Marina was over-saturated. Both infrastructure developments were facing sustainability issues. The Project is expected to assist significantly the tourist industry of Cyprus and transform Larnaka into a prime tourist destination in the Eastern Mediterranean Basin. In addition, it is expected that the Project will support the re-vitalization and the competitiveness of Cyprus economy.

In order to secure viability, 3 separate projects were bundled in a combined development.

The project, while still not abandoned, 2.5 years from the award has not managed to reach financial close.Reasons may be:
1. the mix of shareholders within the concessionaire
2. the economic crisis

The following critical success factors can be considered:
* Basically, the revenue growth of the Project depends on the income earned from the Land Development component of the Project. In that respect, the medium and long term prospects of Cyprus economy are crucial for attracting possible high income residents in the Project. The other two components of the Project (Port and Marina) are expected to provide the necessary revenues in order to be self-sufficient. It is of paramount importance that the Project as a whole gains a Brand Name as a prime cruise, yacht and tourist destination in the Eastern Mediterranean Basin.
Nevertheless, the Concessionaire should seek out the provision of new innovative services, hence new forms of revenues and the Cyprus Government should assist the Zenon Consortium towards this direction.

* The long term sustainability of the Port and the level of success of the Project depend on the growth of the Cruise passenger and marina traffic. Nevertheless, the economic viability of the Project depends mainly on the revenues expected by the Land Development component of the Project.

* Maritime transport as a whole should provide high health and safety standards. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation. The Cruise operators are significant partners too.

* Maritime transport as a whole should provide high security standards. Terrorism and other relevant events have a global effect. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation.

* Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.

* Cooperation between the Concessionaire and the Government (Contracting Authority0 should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should also stand alone.

Regarding failure factors, in 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cyprus Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013, the Cyprus Government reached to an agreement with its lenders. The status of the Cyprus economy and the sustained recession that is expected are factors that could create increase uncertainty for the Project. The Financial Closure for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

Only recently (March 2015), there has been opposition, as Larnaca Port employees are against the government’s proposition to allow the concessionaire to start works based on equity (50 million euros) and look for financing in the future, as this bears the risk of very small investments, while ownership transfer would have been concluded.

===Economic Impact===
The project is expected to provide the basis for business development with respect to cruise and recreational marine traffic. The project also foresees co-development of the area between the port and airport of Larnaca.Larnaka and Marina Project is presenting unique characteristics in respect to the choice to be developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) concession contract. The extensive “horizontal and vertical bundling’’ has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka ’ s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka ’ s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project.

The delays occurred during the formulation of the Project, the tender process and negotiations with the preferred Bidders led to an agreement when Cyprus was already affected by the financial crisis and a deep recession hit the Cyprus economy. The Zenon Consortium under this financial environment is struggling to find lenders or other possible investors, hence reaching to financial close with the Cyprus Government. The Cyprus economy presented so far remarkable resistance in “Armageddon scenarios’’. The extensive land development rights included in the Project are expected to attract new lenders and investors.

Nevertheless, the Project is expected to face competition in all of its main components. The investments in Lemesos Port in a new passenger terminal building, twice as big as to what is proposed in Larnaca, raises questions with regard to whether Larnaka could become the main Passenger Port of Cyprus. In that respect, the Zenon Consortium should investigate the provision of innovative new services in order to expand Project revenues’ diversity. In addition, the commercial capacity of Larnaka Port should be sustained. A new maritime market is arising in the Eastern Mediterranean Basin, the support of hydrocarbon exploitation companies and Larnaca has already attracted relevant servicing companies.

The long term sustainability of the Project depends on whether the Zenon Consortium and all the other stakeholders manage to convert the Project into a Brand Tourist and Leisure Name in the Eastern Mediterranean Basin.

===Social Impact===
The development of the water front area of Larnaca places the foundation for further development and business opportunities in the region.

===Environmental Impact===
The organised co-development secures the protection of the environment.

==References==

*Government of the Republic of Cyprus. 2006. Larnaka Port & Marina Re-development Project, Invitation to Tender (ITT). Lefkosia: Government of Cyprus.

*Christodoulou Ch., Efstathiades Ch.. 2013. Cyprus, Discussion Papers Part I Country Profiles. Public Private Partnerships in Transport: Trends & Theory P3T3. Brussels: COST Office.

*Government of the Republic of Cyprus. 2014. Strategy of Cyprus on Sea (Port) and Land Transport (Executive Summary). Lefkosia: Ministry of Communications and Works.

*Government of the Republic of Cyprus. 2013. Transport Statistics 2012, Statistical Service. Lefkosia: Government of Cyprus.

*Aristidou St.. 2014. Secretary of the Steering Committee negotiating the Larnaka Port and Marina DBFO Contract. Personal Interview. Lefkosia.

*Government of Cyprus, Ministry of Communications and Works, Website: www.mcw.gov.cy/

*Government of the Republic of Cyprus, Cyprus Port Authority, Website: www.cpa.gov.cy/

*Zenon Consortium –Larnaka Port & Marina Re- development Brochure. LARNAKA ECO-WATERFRONT: Sustainable Expansion of a Historic Cypriot City. Larnaka: Zenon Consortium.

*Daily Cypriot Newspapers: Philelepheros, Politis, Cyprus Mail. Period 2005-2014. Lefkosia.

*Cruise market watch, Website: http://www.cruisemarketwatch.com/growth/

*Larnaka Municipality, http://www.larnaka.org.cy

*C. Christodoulou, C. Efstathiades, 2014, Larnaca Port and Marina Re-development, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015) “Larnaca Port and Marina Re-development” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Larnaca Port and Marina Re-development, Cyprus

2015-06-12T10:45:10Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Larnaka Port & Marina Re-development, Cyprus
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 35 years for the Port and Marina Infrastructure and 99 years lease for residential units
|header4 =
|label4 = Budget:
|data4 = ~EUR 800M
|title = Project Overview
|image = [[Image:Larnaca1.png|300px]]
|caption = Figure 1: Larnaka Port & Marina, Current Condition and proposed plan

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = April, 2005
| label2= Tender Advertisement of Contract Notice:
| data2 = October 2005
| label3= Invitation to Tender (ITT):
| data3 = November 2006
| label4= Contract Award:
| data4 = August 2012
|label5 = Financial Close:
|data5 = Pending (This date has been since extended multiple times. The last extension was exhausted end Feb 2015 with no progress.)
}}

}}

==Introduction==

For a peripheral, small and insular Member State of the EU such as Cyprus, the extension and upgrading of port infrastructure constitutes a significant factor for enhancing access capability to EU markets. The main strategic objective for a comprehensive development of Cyprus port infrastructure is the enhancement of competitiveness and effectiveness, in order to respond to the modern needs for mobility of passengers and goods. Their role as important nodes in serving international trade is also upgraded in this way. In respect to Trans-European Network maritime policy, Cyprus considers that emphasis should be given in supporting maritime transport of passengers, especially for peripheral/ insular Member States, both as an alternative to air travel in general, but more specifically as an emergency service to maintain connectivity among Member States during incidents of air transport crises (e.g. natural disasters, terrorist activity and others). It should be noted that currently air transport is the only mode of passenger transport to/from Cyprus, because there are no ferry services (passenger ships) that connect Cyprus with Continental Europe or other neighboring Countries. Passenger ships in Cyprus Ports provide exclusively cruise services.

Larnaka is the third largest city on the southern coast of Cyprus, with an urban population of 86.700 (2012). Three main transport infrastructure elements for Cyprus and international gateways for the entire island are located in Larnaka: the island's largest airport (Larnaka International Airport) the Port of Larnaka and the Marina of Larnaka. The Port and the adjacent Marina are situated southeast at the outskirts of the urban civic centre of Larnaka and 3,5kms from the Larnaka International Airport (southwest of the urban area). Figure 1 presents the current condition of Larnaka Port and Marina, as well as the proposed plan of the PPP Project.

The Larnaka Port and Marina Project present unique characteristics in respect to the choice to be re-developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) Concession Contract. Extensive “horizontal and vertical bundling” has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka’s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Negotiations with the preferred Bidder Zenon Consortium successfully were completed in August 2012, but the Concessionaire did not manage so far to find financial lenders (August 2014). The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.

In its current condition Larnaka Port is the second in magnitude port of Cyprus, lacking behind Lemesos Port. Until 1973 it was operating occasionally with inadequate port facilities. With the exception of the oil products, the port had served up to that time very little trade traffic and its storage space was quite small and unsuitable.

In 1973 it was redeveloped and was initially intended to share with Famagusta Port its inland area and supplement the latter. Following the Turkish Invasion of 1974, Famagusta Port, the main port of Cyprus at the time, ceased operation and the role of Larnaka Port increased dramatically. Additional expansion took place in two phases (1976-1979 and 1979-1982), leading to a multipurpose port having an area of 445.000 sq. meters and serving all kinds of loads from unpacked (animal fodder, grain, gypsum), conventional (lumber, iron, fertilizers, automobiles), containers as well as oil products.

Nowadays, it’s within the urban area of Larnaka and on the landside is surrounded by residential units. On the north side there are oil product installations and at the south side it borders with Larnaka Marina.

The level of commercial operations at Larnaka Port has declined over the last two decades, with the majority of commercial traffic now being handled by Lemesos Port. In the late 1980s/ early 1990s, the freight movements were diminishing in Larnaka Port and the passenger movements have been lacking behind Lemesos Port, as the latter has significant operational capabilities and capacity. The Ministry of Communications and Works (MCW) and the Cyprus Ports Authority (CPA), since the late 1980s commissioned various studies in order to explore the possibilities of revitalizing Larnaka Port.

Larnaka Port is protected by two breakwaters the North and the South. It has two quays for the mooring of ships:

* South quay of length 340m, water depth 11,4m and equipped with two gantry cranes of 40 tons, 1 crane on rails of 45 tons as well as a ramp of 25m width suitable for ro-ro ships.
* North quay 326m, water depth 9,3m and equipped with crane on rails (Luffing Crane) of 35 tons able to serve loads 150m to the western part of the quay.

The Port has three warehouses, two of which are located at the north quay each having an area of 3170 sq. meters and one at the south quay of about 11.500 sq. meters. There are also paved open storage spaces of about 150.000 sq. meters as well as non-paved spaces of approximately 65.000 sq. meters. In addition, a Passenger Terminal Building serves mainly cruise traffic. Figure 2 presents the current port masterplan.

[[Image: Marina3.png|500px]] 
'''Figure 2: Larnaka Port, Current masteplan'''

Larnaka Marina is situated next to the Larnaka Port, and is one of the few marinas in Cyprus and the only public owned. The Marina can serve approximately 450 yachts and for the last two decades is oversaturated. Recently small re-construction works were executed awaiting for the Concessionaire to take over.

In the late 1990s, there was a discussion of what procurement method should be used for the development of Larnaka Port. The government decided that the best method for the re-development was through a PPP contract because it was believed that this will help the easiest development without the “slow-moving” processes a governmental project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government those days since the primary goal was the accession to the European Union. The decision for re-developing Larnaka Port through a PPP contract was taken in 1999.The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO-style Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center, Amsterdam Port Consultants), on 24 August 2004. A separate process for the re-development of Larnaka Marina was running in those days by the Ministry of Commerce, Industry and Tourism based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

The same period MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council of Ministers commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the Ministry of Commerce, Industry and Tourism, the CPA, the Public Works Department, the Planning Bureau and the General Accountant.

The tender procedure initiated by the MCW was based on an open call which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder. In 2005 a Contract Notice in the Official Journal of the European Union for express of interest initiated the pre-qualification procedure under the title: Larnaka Port and Marina Re-Development Project. After legal implications the Tender Board name A. Vouros Investments Ltd and Partners as the Preferred Bidder. After several months, the negotiations failed due to a revised proposal that was altering the scoring which led to the preferred Bidder. The Steering Committee invited the second selected Bidder according to the tender rules, which was the Zenon Consortium.

The PPP Project consists of three main components: the re-development of Larnaka Port in order to become the main passenger port (cruises) of Cyprus, the re-development of Larnaka Marina as part of Cyprus Tourism Strategy to enhance the tourism ‘package’ of Cyprus and the Land Development of certain areas that are available within Larnaka Port and Marina (Figure 2). The latter will provide the necessary revenues in order to make viable investment the first two components of the Project. The Land Development will be combined with an extensive landscaping of the Larnaka waterfront, providing public access in areas within the Larnaka Port and Marina.

The Concessionaire, Zenon Consortium will carry out the re-development of the Port and the Marina in three phases and will manage the facility for a period of 35 years.

The Contract requires the Concessionaire to undertake phased development of the Port in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise and commercial zones. The re-development on the Port will focus in providing the necessary infrastructure to accommodate large cruise ships, in order to become the main passenger port of Cyprus. Nevertheless, the Port will not abandon its ability to serve freight ships and will continue to serve the regional commercial (freight) needs of Larnaka and its hinderland to the north and east. The output specification for the port component was setting that the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely to make an approach to and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters.

The re-developed Marina is expected to serve as a key component in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as a tourism, leisure and recreation destination, both nationally and regionally. Recreational boating is a maritime leisure activity that is complementary to cruise tourism.The output specification was setting that the re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme climatic conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity at the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kind of vessels and a new yacht club will be constructed.

The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. The residential units will be available on a 99 years lease. The other Land Development elements will be managed by the Concessionaire for a period of 35 years. The Zenon Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. The Land Development component will be an integral part of the Project in order to enhance the attractiveness of the area to cruise passengers, marina users and the general public.This component can be considered as an extensive level of horizontal “bundling”. The combination of a Marina and a Port in one Project will provide a moderate level of “vertical bundling” in transport sector. On the other hand, the neighboring main airport of Cyprus (Larnaka International Airport) could provide a significant level of “vertical bundling” in transport sector, although it is not part of the Project.

The estimated cost for the first phase of Larnaka Port and Marina redevelopment is about EUR130 M. The other two phases of the port and marina will be constructed at a further cost of EUR 55 M. The Land Development will reach an investment of EUR 600M. Figure 3 presents Larnaka Port & Marina Master Plan overview.

[[Image: Larnacaport3.png|500px]] 
'''Figure 3: Larnaka Port & Marina Master Plan overview'''

==The Contracting Authority (Public Party)==

All port facilities of the island are under the jurisdiction of the Cyprus Port Authority (CPA), a semi-government, public autonomous organisation supervised by Ministry of Communications and Works (MCW) and their activities and development are centrally planned, co-ordinated and supervised. Both Lemesos and Larnaka Ports, the country’s major gateways to international shipping, are owned, managed, operated, marketed and developed by CPA. The MCW is the responsible political instrument for air, maritime and land transport and for the national-wide transport infrastructure including international airports, ports and main road network. Larnaka Marina is also publically owned and it is managed by another semi-government, public autonomous organization: the Cyprus Tourism Organization (CTO), which is supervised by the Ministry of Commerce, Industry and Tourism (MCIT).

The Contracting Authority for the Project is the MCW (Central Government) and the two semi-government, public autonomous organizations participate in the Steering Committee for the negotiations of the Project. CPA and CTO will terminate their managerial duties for Larnaka Port and Marina respectively, when the Project is handed-out to the Concessionaire. The PPP contract will be managed by the Public Works Department (PWD) on behalf of the MCW.

Nevertheless, there are operational jurisdictions that will remain to Central Government mainly due to the legal/ institutional environment. The regulatory jurisdiction of CPA as well as the policing (land and sea), custom services, immigration control, food hygiene, veterinary services, meteorological services, port health services, and shipping safety and control services will remain with central government. Moreover, the CPA will remain the Land Lord for the Port.

Regarding procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

Transport and tourism policy are controlled on a national level. The Project was a national necessity for promoting tourism and maritime connections with Europe. Even if Central Government is responsible on all levels of the development, design, tendering, negotiation procedure and regulating the contract, Larnaka’s local authorities play a significant role in promoting and accelerating the Project by lobbying and exercising pressure on the Central Government.

==The Concessionaire (Private Party)==

Zenon Consortium, the Concessionaire is an International & Cypriot-led Consortium established as the SPV (Special Purpose Vehicle) for undertaking the DBFO Concession Contract for the Larnaka Port and Marina Re-Development Project.

Zenon Consortium was established with the following shareholders (and respective share):

* Louis Group of Companies- 22% (Cruise-ships & Hotels Owners & Operators),
* Bouygues Batiment International- 17,5% (French-led international developer and contractor),
* Iacovou Brothers- 17,5% (Largest Main Contractor in Cyprus, Larnaka based),
* Petrolina (Holdings) Public Ltd- 17,5% (Leading gas and oil products distributor in Cyprus, Larnaka based),
* Costa Crociere SpA- 10% (Largest Cruise Company in the Mediterranean and member of the U.S. Carnival Cruise Lines Group),
* Marinaman - 8,5% (Representing the local community of Larnaka),
* General Construction Company- 5% (Cypriot Contractor, Nicosia based),
* Amsterdam Logistics Group Ltd (Netherlands, Cruise and Commercial Port operations) & Lievense Consulting Engineers- 2% (Port & Marina design).

The majority of companies setting Zenon Consortium are business developers with a balanced participation in two main fields: the construction field (Bouygues Batiment International, Iacovou Brothers and General Construction Company) and in port and marina development field including cruise organization (Amsterdam Logistics, Lievense Consulting Engineers, Costa Crociere and Louis Group of Companies). In addition the participation of Cypriot and international partners can also be considered as balanced. One of the leading companies, Bouygues Batiment International has an extensive experience in PPP’s. It should be noted that Bouygues Batiment International is also the leading company in the Concession Contract for developing and managing the two International Airports in Cyprus (Larnaka and Paphos) until 2031. Alterations are expected in the list of shareholders with their respective shares before the Financial Close for the Project.

Zenon Consortium has selected Scott Brownrigg Architects and Masterplanners as their designing consultants.

According to the procurement documents, all subcontractors shall be approved by the Government. For the construction and maintenance, it is expected that Bouygues Batiment International, Iacovou Brothers Ltd and General Construction Company will be involved. The other shareholders are expected to be involved in operational subcontracting duties.

The Financial Close for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

==Users==

As it was mentioned before, Larnaka Port and Marina Project is presenting unique characteristics due to its extensive “horizontal and vertical bundling”. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka’s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin.

Taking into account the project bundles, three main user categories can be identified:

* Cruise operators processing passengers, as well as commercial companies handling commodities through the Port will be the main users. According to the output specification for the port component, the harbor approach shall be of such depth, width and alignment that cruise liners of the maximum size anticipated to be operating in the Eastern Mediterranean in the future are able safely approach and leave the harbor without the aid of tugs, except for maneuvering within the harbor basin, in all weather conditions and around the clock. As a minimum, the anticipated length of vessel was set to 300 meters. The basin and alongside the quays shall have sufficient depth (minimum, 11 meters) to allow safe use of the harbor and port installations by cruise liners, of the maximum anticipated size and commercial vessels serving the current and future export and import needs of the hinterland of Larnaka. The re-developed port is expected to provide a maneuvering area equivalent to a turning circle of 500 meters in diameter. In this respect, the re-construction of the Port infrastructure will include a new passenger terminal (first phase 3500 sq. meters), a new passenger pier and an offshore jetty.

* Tourists using the Marina for recreation-short trips around Cyprus and the Eastern Mediterranean Basin. The re-developed Marina will serve recreational powerboats and sailing yachts for safe navigational access to and egress from, well-protected waters and comfortable and secure berthing in the most extreme weather conditions expected to occur in the vicinity of Larnaka. The re-developed marina will have a 500-berth capacity in the first phase and will later expand to 1.000 berths for serving boats with a minimum length of 10 metres. Vessels of the order of 30 meters will be capable of entering, maneuvering and berthing in the new Marina. It will also include the necessary infrastructure to support all kinds of vessels and a new yacht club will be constructed.

* Residents that will buy residential units through a 99 year lease and the companies using the services provided in the Land Development component (conference, theater/ Hall, offices, retail shops, food & beverage, entertainment) is another major category of users. Land development is the third main component of the project. The Land Development includes residential units, shops, offices, restaurants, hotel and conference facilities with approximately 250.000 sq. meters floor space. - Throughout the project, the Consortium will provide to the Local Authorities (Larnaka Municipality) community service buildings, which will include a theater/hall and offices. The project will also include an extensive road network with walkways and cycle track facilities, expanding the waterfront promenade of Larnaka, parking spaces for more than 1000 cars, parks and other public open spaces. Local authorities and local habitants will also use and have benefits from the project.

==Key Purpose for PPP Model Selection==

Currently, the development of the transport infrastructure of Cyprus through PPP Projects is considered to be unattractive, particularly the road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors in TEN-T projects, because the cost of the investment is usually equivalent to that of a similar project in a central interconnected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the developed infrastructure of the project.

The Larnaka Port & Marina Project combined three major economic fields of economy: tourism, international transport and real estate whereas value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer were the main political motivations for the choice of the contract type. Additionally, the Government’s political decision to dis-engage from managing port and marina services was also considered as a prime reasoning behind the contract type selection.

==Project Timing==

The accession of Republic of Cyprus to the European Union in 2004, followed by the accession to the Eurozone Area in 2008 has been a catalyst for crucial changes in the political, economic and social environment of Cyprus. The need to enhance the competiveness was becoming paramount important for the sustainability of Cyprus economy. The Larnaka Port & Marina Project was combining three major economic fields of Cyprus economy: tourism, international transport and real estate.

The level of commercial operations at Larnaka Port has declined since the late 1980s/ early 1990s, with the majority of commercial traffic now being handled at Lemesos Port. Since then, the MCW and the CPA were exploring various options for revitalizing Larnaka Port. In addition, Larnaka Marina was over-saturated and there was an urgent need to expand its capacity.

By the late 1990s, desalination plants were developed in Cyprus as PPP’s, introducing this method as a sustainable method for project developing. In those days the MCW decided to explore the development of two main transport infrastructure Projects through PPP Contracts: Larnaka and Paphos International Airports in a combined contract and the re-development of Larnaka Port. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The non viability of the Larnaka Port Project led to add within the Project the re-development of Larnaka Marina in a combined Project with considerable land development benefits. The realization of almost 250.000 sq. meters of land development was expected to provide funds from which the Larnaka Port and Marina will be re-developed.

The final decision for re-developing Larnaka Port through a PPP contract was taken in 1999. The MCW launched the procurement process for the original Project in September 2001 with a tender for DBFO Concession Contract exclusively for the re-development and operation of Larnaka Port. The initial procurement process resulted in the pre-qualification of two Bidders (A. Vouros Investments/ Singapore Cruise Center and Amsterdam Port Consultants), on August 2004. At the same period a separate process for the re-development of Larnaka Marina was due by the MCIT based on a revised Strategy for Tourism. This strategy included the development of several marinas around the shores of Cyprus through PPP Projects.

A few months later, MCW having assessed the viability of Project and discussed it with possible investors, proposed to the stakeholders a joined re-development of Larnaka Port and the adjacent Marina in a combined PPP contract. The Council of Ministers of Government of Cyprus verified the proposal in April 2005 and set a Steering Committee for PPP Projects. The Council commissioned the Steering Committee to monitor the tender documentation/ procedure. The Committee was chaired by the MCW and participants in the Committee were representatives by the Ministry of Finance, the MCIT, the CPA, the PWD, the Planning Bureau and the General Accountant.

The delays during the formulation of the Project, the tendering process and the negotiating period with the preferred bidder delayed the agreement until August 2012. The financial crisis had already reached Cyprus. Cyprus Government requested international financial assistance in June 2012 due to the financial crisis that primarily occurred in the over expanded domestic banking sector, which Cyprus was unable to support on its own. In March 2013, a EUR 10 billion international bailout by the Eurogroup, European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) was announced, in return for Cyprus agreeing to close the country's second-largest bank and imposing a one-time bank deposit levy on all uninsured deposits (bail in) in the two main banks of Cyprus.

The Government provides repeated extension of time to the Concessionaire since August 2012, recognizing the limitations due to the financial crisis and Cyprus economy recession status.To this end, the preferred bidder is struggling since August 2012 to secure the necessary funding for the realization of the Project.

==Project Locality and Market Geography==

The special territorial and geographical features of Cyprus play a restrictive role in the improvement of Cyprus’ competitiveness: its very small size combined with its insular character combined with its distant geographical position from the EU’s centre of activity result in a significant increase in the costs for the transportation of goods and services, as well as isolation problems and weakness in the connection to the main Trans-European Network routes. In order for these issues to be addressed, significant investment is required in basic and other supporting infrastructure. Larnaka Port belongs to the Comprehensive TEN-T Network whereas Larnaka Marina is not part of the TEN-T Network. The Connecting Europe Facility CEF Regulation has given priority in the development of the TEN-T Core Network and other horizontal issues (telematic applications etc). Only 5% of the CEF financial envelope will be directed to the TEN-T Comprehensive Network. Under the new TEN-T policy, Larnaka Port is not to be supported by EU financial resources.

Larnaka Port and Marina are at the outskirts of the Larnaka civic centre. Both infrastructure facilities will support the passenger movements of Cyprus with the rest of the world- cross border movements. The third element of the Project, the Land Development within Larnaka Port and Marina will be combined with extensive landscaping of Larnaka’s waterfront area, hence expanding the civic centre of the city towards the Port area.

Larnaka Port operations, mainly cargo/ bulk products have been declining steadily since the late 1980s/ early 1990s. Vessel traffic (mainly freight) has been declining since the late 1980s. The container movements have never been worth mentioning. The passenger movements in the last decade cannot be considered significant. The Port has been lacking behind Lemesos Port since 1973 in respect of operational capacity. The majority of commercial and passenger traffic is being handled by Lemesos Port; Larnaka Port passenger traffic for the period 2006-2013 represents only 10,7% of the aggregated traffic of the two main Ports of Cyprus. Figure 4, presents Larnaka Port traffic for the last 3 decades.

{| class="wikitable"
|-
! Year
! Passenger Traffic
! Vessels Traffic 
(No. ships)
! Freight Transport 
(TEU)
|-
| 2013
| 54.420
| 188
| 713.952
|-
| 2012
| 44.055
| 206
| 740.551
|-
| 2011
| 42.987
| 534
| 801.521
|-
| 2010
| 64.907
| 578
| 901.919
|-
| 2009
| 22.761
| 522
| 858.514
|-
| 2008
| 5.091
| 596
| 1.077.000
|-
| 2007
| 6.154
| 640
| 870.000
|-
| 2006
| 57.162
| 818
| 818.000
|-
| 2004
|
| 712
| 1.855.657
|-
| 2002
|
| 766
| 2.087.192
|-
| 2000
|
| 888
| 2.166.713
|-
| 1995
|
| 1.223
| 2.804.871
|-
| 1990
|
| 1.444
| 2.541.236
|-
| 1984
|
| 1.803
| 2.069.438
|} 
'''Figure 4: Larnaka Port traffic'''

This issue raises doubts in respect of the ultimate goal of the Project to convert Larnaka Port into the main cruise/ passenger Port of Cyprus. In addition, CPA after many years of discussions is constructing (2014) a new passenger terminal building in Lemesos Port (total investment EUR 14,5 M). The new passenger terminal building in Lemesos Port will be about two times the size proposed for Larnaka Port. Furthermore, the delays occurred so far and the uncertainties in developing Larnaka Port and Marina attracts hydrocarbon development and servicing companies for using Larnaka Port as a base for the exploitation of hydrocarbons in Eastern Mediterranean Basin. The MCW has provided a two year license to hydrocarbon development and serving companies to use Larnaka Port’s facilities including development of a mud plant for servicing hydrocarbon drilling needs. Local Authorities expressed their concerns that the MCW is abandoning the goal to convert Larnaka Port into the main cruise/ passenger Port and instead is giving emphasis to its industrial role.

However, the global cruise industry has an annual passenger growth rate of 7% from 1990 – 2018 (2013: almost 21 M passengers). Growth strategies have been focused in providing new larger capacity ships, including more local ports destinations and new on-board/on-shore activities that match demands of consumers. The increasing size of ships leads to the need of infrastructure upgrade and expansion. Mediterranean is the world's second largest cruise shipping market, representing over 23% of the annual cruise capacity. Mediterranean market can be broken down into four regions; Western Mediterranean, Eastern Mediterranean, South Mediterranean and Adriatic. Eastern Mediterranean market lacks behind Western Mediterranean and Adriatic market, markets that are in a more advantageous position, since they are more close to passenger’s origin countries. Having in mind this, a crucial issue for further developing Eastern Mediterranean market is the provision of adequate air transport capacity.

The adjacent new developed Larnaka International Airport can serve adequately Larnaka Port to its ultimate goal in becoming a prime cruise operations destination. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market.

==Procurement & Contractual Structure==

The tender procedure initiated by the MCW was based on an open call, which led to prequalification- short listing, invitation to tender and negotiations with the preferred Bidder.

In respect to procurement regulations, the tender procedures was based those days on the Public Tender Law (Law No. 12(I)/2006) and the relevant Regulations enacted under that Law. The Law was consistent with the relevant EU Directive 2000/18/EC, governing the award of works concessions.

The MCW is supported by PricewaterhouseCoopers (financial consultants), Pinsent Masons (Legal consultants), WSP Group (Technical consultants) in preparing the tender documents, assessing the Bidders and in the negotiation process with the successful Bidder.

===Tendering===

On October 2005, a Contract Notice in the Official Journal of the European Union for express of interest initiated the prequalification procedure under the title: Larnaka Port and Marina Re-Development Project. The Notice was accompanied by an international printed media campaign, with advertisements for the Project appearing in a number of international publications. The Contract Notice and the advertisements invited parties to register their interest in the Project to the MCW and receive the prequalification documents, being the Preliminary Information Memorandum and the accompanying Pre-qualification Questionnaire (PQQ). Three consortia expressed their interest for the project on December 2005. In May 2006, all three Bidders were pre-qualified and shortlisted. The short-list of the Bidders was based on the answers on the PQQ and on the criteria for the pre-qualification evaluation. Subsequently, MCW held a Bidder’s Conference in Lefkosia on January 2007, at which Bidders were invited to present their queries relating to the Project in an open forum. The MCW issued the Invitation to Tender (ITT) on November 2006 and the shortlisted Bidders were invited to submit their proposal.

All three consortia accepted the ITT and submitted their proposals to the Tender Board on July 2007:

* Vouros Investments Ltd and Partners (A. Vouros Investments Ltd, Singapore Cruise Center Pte, Ltd, DP Architects Pte Ltd, Joannou & Paraskevaides Ltd, J & P Avax S.A., Joannou & Paraskevaides (Overseas) Ltd, Ariadne Australia Limited, Cybarco Plc.).

* Zenon Consortium (Bouygues Batiment International, Iacovou Borthers, Amsterdam Logistics Group BV., Lievense Consulting Engineers, Louis Public Company Ltd, Petrolina (Holdings) Public Ltd, Marinaman Ltd, Costa Crociere SpA, General Construction Ltd).

* D.J. Karapatakis & Sons Limited (D.J. Karapatakis & Sons Ltd, Camper & Nicholsons Marinas Ltd, Wimberly Allison Tong & Goo Inc., ERA Economics Research Associates, Spanopoulos Group of Companies, Odell International Inc USA in a Joint Venture with Parsons, G.A.P Vasilopoulos Public Limited, A. Panayides Contracting Public Limited, Sigan Management Ltd, Viset Malta Plc).

Each of the Bids received comprised five separate volumes as described in the ITT:
(i) Executive Summary,
(ii) Volume A: Technical & Operational,
(iii) Volume B: Business Plan,
(iv) Volume C: Legal and
(v) Volume D Financial.

The MCW and the supporting Consultants evaluated originally Volumes A, B and C and following due to ratification by the Tender Board, the Volumes Ds of those Bidders who have satisfied the threshold requirement of 50% score in each of the three evaluation areas:
(i) Technical & Operational (30% of total scoring, criteria on port development plan, on marina development plan, on method statements, on land development plan, on land development policy and method statements) ,
(ii) Business Plan & Legal (20% of total scoring, criteria on business plan- port & marina, on business plan- land development, on assessment of amendments to draft contract) , and
(iii) Project Concept (15% of total scoring).
(iv) Then the Volumes Ds were opened and assessed on two main evaluation aspects:
(a) Financial I: Expected Bid price to the Government (30% of total scoring),
(b) Financial II: Financial robustness and deliverability (5% of total scoring).

The ITT was stating that the Contract will be awarded to the most economically advantageous Bid and this is reflected by the evaluation and scoring distribution.

In July 2008 Zenon Consortium was selected as the preferred Bidder whereas A. Vouros Investments Ltd and Partners was scored in evaluation procedure as the second best with small margin from the preferred Bidder. D.J. Karapatakis & Sons Limited was excluded by the procedure due to failure to provide original documentation. The selection of the preferred bidder led to legal implications since the other two Bidders legally challenged the decision of the Tender Board, adding further delays to a much needed project. The Tender Review Board dismissed the original decision to name Zenon Consortium as the preferred Bidder. Based on that decision, the Tender Board revised its decision and name A. Vouros Investments Ltd and Partners as the preferred Bidder and Zenon Consortium as the second one.

A new Steering Committee was set for the negotiations with the selected preferred Bidder. The Committee was chaired by the Directorate General for European Programmes, Coordination and Development (ex-Planning Bureau) and participants in the Committee are representatives of the Ministry of Finance, the MCW, the CPA, the PWD and the Control Department of MCW. The Steering Committee invited the preferred Bidder for negotiations in May 2009, almost 4 and a half years after the political decision to proceed with this Project. Cyprus was already feeling the pressure of the international financial crisis. This led A. Vouros Investments Ltd and Partners to re-assess their Business Plan and present a revised financial proposal. The Steering Committee dismissed the proposal and decided to terminate the negotiations; the revised proposal was altering the scoring that led to the preferred Bidder.

In July 2010 the Steering Committee invited the second best Bidder according to the tender rules, which was Zenon Consortium. Negotiations with Zenon Consortium were successfully completed in August 2012.

===Contract Structure===

The Project will be undertaken using a DBFO Concession Contract. An output specification, with minimum requirements, was created that includes the way the three components of the Project (Larnaka Port, Larnaka Marina and Land Development) are going to be developed and operated.

The Concessionaire is the sole responsible for designing, financing, building and maintaining Larnaka Port and Marina Project. In addition, the Concessionaire has the main responsibility in operating the project (Larnaka Port, Marina and development). The Project will be transferred from the Concessionaire to the Government when the contract is completed in 35 years. All the residential part of the Land Development will be transferred in 99 years. The Government, through its respective agencies will provide specific services mainly due to the legal/ institutional environment. The Cyprus Government will retain the ownership of all existing and new Port and Marina assets during the Concession period. The Agreement is governed by the Law of the Republic of Cyprus.

In relation to the Port, the Contract will require the Concessionaire to undertake phased development in conjunction with its cruise passenger marketing plan, sufficient to meet demand as it arises in cruise (passenger) and freight operations. The Marina component will serve as a key part in the overall waterfront re-development plan, enhancing the attractiveness of Larnaka as tourism, leisure and recreation destination. The re-development of Larnaka’s Marina as a key maritime leisure node in Cyprus will act complementary to cruise tourism. The management, operation and maintenance of the Port and the Marina will be in accordance to the relevant Laws of the Republic of Cyprus and industry’s best practice. Specific performance indicators will monitor the Concessionaire. The Output Specification for the Land Development component was set in a manner to allow each prospective Bidder to determine the form of development that is most appropriate and complementary to the activities of the Port and the Marina, according to his aspirations and commercial judgment. Approximately 283.00 sq. meters of land within the boundaries of the Port and the Marina will be handled out to the Concessionaire for developing in order to maximize the revenues to fund the re-development of the Larnaka Port and Marina. The Government has set minimum requirements based on Cyprus Urban Development and Building Regulations.

The Concessionaire will be responsible for the overall operation and management of all aspects of the business of Port and Marina. In this respect, the Concessionaire will produce and operate the following specific Method Statements:

* Operating Procedures for all its service delivery responsibilities and the establishment of a Quality Management System and Plan.
* Health and Safety Plan.
* Security Plan.
* Chemical and Oil Spill Anti-Pollution Plan
* Emergency Plan.
* Conservation and Heritage Management.
* Environment Plan.

Based on the contract clauses, the charges in the Port will be either regulated or non-regulated. All the charges for core port services will remain regulated whereas the development of other new marinas in Cyprus will lead to deregulation of all relative charges.

Termination clauses are included in the contract and are divided in three categories (Concessionaire default, Government default and force majeure). There are guarantees that the Concessionaire is compensated as follows:

* Concessionaire default- No compensation.
* Force majeure- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).
* Government default- Compensation on various cost elements (e.g. Senior Debt Termination Amount, Junior Debt, redundancy payments for employees, subcontractor breakage costs).

The revenues of the contract arise from the three components of the Project: Larnaka Port, Larnaka Marina and Land Development. These revenues primarily arise from land right fees, development fees, charges from commercial and passenger use of the Port and the Marina and the Concessionaire will collect all the revenues. In consideration of the rights granted by the Cyprus Government to the Concessionaire under the provisions of the Concession Contract, the Concessionaire will pay the Government the Concession Fee. The Concession Fee represents the land development revenues multiplied by the Government’s Percentage. In addition, a Guaranteed Concession Fee has been set representing an aggregate amount of EUR 61.1 M in net present value terms discounted back to the commencement date of the Contract.

At every milestone date, the Concessionaire should pay the relevant fee. The Guaranteed Concession Fee and the Aggregate Concession Fee, which is calculated, are taken into consideration; in case the Aggregate Concession Fee is less than the Guaranteed Concession Fee, the Concessionaire will propose a Guaranteed Concession Fee Shortfall Plan in order to pay the pending amount. The Government’s Percentage means 50% for the period the Contact commences until the date the aggregate amount of the Guaranteed Concession Fee is paid. Whenever the aggregate amount of the Guaranteed Concession Fee is paid, then a certain formula is applicable, setting the Government’s Percentage. In addition, the Cyprus Government participates in profit sharing arrangement, if the actual Equity IRR exceeds 12,5% in real post terms.

A Liaison Committee exists, formulated by three representatives on behalf of the Contracting Authority and three representatives on behalf of the Concessionaire. This Committee is responsible for the day by day review of the Contract. The Committee forms also a forum for strategic discussion on variations of the market orientation as well as for the efficient operation of the Project. The Liaison Committee can be the forum for contract re-negotiation.

In case of any disputes between the Government (Contracting Authority) and the Concessionaire, the Contract sets specific resolution procedures. In case the disputes are not resolved through prompt, good faith discussion, a Fast Track Dispute Resolution Procedure is followed. The Fast Track Dispute Resolution Procedure is handled out by a three member Panel (one member designated by the Contracting Authority, one by the Concessionaire and the third participant/chairman is selected by the other two members of the Panel). The Panel acts as impartial and it may reach to binding decisions. In case all the above procedures failed, an Arbitration procedure is followed and the award of the Arbitral Tribunal is final and binding.

The whole Agreement is governed by the Law of the Republic of Cyprus.

===Risk Allocation===

The risks are allocated in a balance way between the Concessionaire and the Contracting Authority (Government). The allocation is based on the principal: the risk is allocated to whom it can deal with it. Figure 5 presents an overview of the risk allocation.

[[Image: Larnacaport4.png]] 
'''Figure 5: Risk allocation'''

Design and construction risks are totally allocated to the private sector. If there is a problem, the Concessionaire will have certain penalties (delay fees). These risks however are thought to be the most easily regulated and measured. Maintenance risks are also totally allocated to the private sector. For these two risks the Government will measure the performance and if problems arise the Concessionaire will have certain penalties (performance and delays).

Risks of exploitation are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental agencies to provide their services). The demand risk will be shared from both parties but the risk is greater for the private sector. The Concessionaire will have to pay the Government, as a “rent” for the exploitation of the governments’ assets, fees. The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in case of a decision for expanding the infrastructure.

The regulatory risks (changes in Law), which can be considered discriminatory under the Concession Contract are assumed on a greater level by the Government. In that case, the Concessionaire may present its case and ask for compensation. The force majeure risk will be shared by both parties (war, revolution, nuclear explosion, etc), but the risk is greater for the public sector. The Concessionaire is compensated by the Government sufficiently in case the Contract is terminated.

Financial close risk has eventuated. For the last 2.5 years the concessionaire and the government are trying to find solutions.

===Performance===

The Contracting Authority requires that Larnaka Port and Marina under the Concession Contract are operated in accordance with the Law and Regulation of Cyprus, EU Law, Regulation and Policies and international standards for maritime affairs as regulated by the International Maritime Organization (IMO). Consistently poor performance will lead to performance deductions and failure to rectify such performance will lead to penalties or termination of the Contract.

The performance mechanism will combine specific performance/quality indicators, as measured against the Concessionaire’s own Method Statements. It will be self-monitoring from the Concessionaire’s performance monitoring system and designed to encourage the Concessionaire to improve its methods of operation. The Contracting Authority will conduct audits periodically.

After selection of the preferred bidder and prior to financial close, the Concessionaire will be required to submit Method Statements, defining how it will implement each aspect of the Project requirements. The Contracting Authority may consider changes to the Measures of Performance where the Concessionaire will be able to demonstrate that alternative measures are more appropriate. The Concessionaire will be able to change the Method Statements and the performance indicators during the concession period again with the prior approval of the Government.

In order to encourage continuous improvement, penalties will be levied on failure to perform according to a Method Statement, failure of the quality management system and failure to report any shortfall in performance. Penalty points will be levied according to the nature and severity of the failure.

The Contract includes deficiency points and penalties for underperformance in the pre-identified performance indicators. The Contracting Authority assesses this underperformance and levies points/ penalties to the Concessionaire.

The Indicators are according to the component of the Project: Port, Marina or both Port & Marina. Analytically, seventeen Indicators are included in the Contract and presented below with the associated penalty points:

* Port vessels berth processing- Waiting time for berth in excess of 30 minutes except in weather conditions exceeding the design parameters of the port. Points are deducted for each occurrence. 250 Penalty Points.

* Port passenger check-in counters- Less than 85 percent of check-in counters for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Security Check Equipment-Security checking equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Immigration booths- Less than 85 percent of immigration booths for processing passengers are fully functional. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Port Baggage handling- Baggage handling equipment is fully functional for less than 90 percent of the time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 100 Penalty Points.

* Marina vessels berth processing (peak period)- Time to allocate a berth in excess of 30 minutes at peak periods provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina vessels berth processing (off peak period)- Time to allocate a berth in excess of 20 minutes at other times provided that there are unoccupied berths. Points are deducted for each occurrence. 100 Penalty Points.

* Marina facilities/ services- Less than 90 percent of any set of facilities (toilet, washing showering or berth services) available at any time. The Concessionaire should prepare a Rectification Plan within three days. The Rectification should be completed with ten days unless otherwise agreed. 250 Penalty Points.

* Marina pump out services- Waiting time for pump out in excess of 30 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina fuel services- Waiting time for fuel in excess of 10 minutes during normal operating hours. If the event can be rectified through management action, the rectification period is set to one month. If upgrading of facilities is required, the upgrade plans should be available within three months. Criterion re-applied after completion of upgrade. 100 Penalty Points.

* Marina security- More than 5 incidents of malicious damage or theft in any month. Points are deducted for each occurrence. 100 Penalty Points.

* Port & Marina response to emergency situation- Response time to an emergency situation in excess of 15 minutes. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina clear or deal to emergency situation- Time to clear or deal with an emergency situation in excess of 12 hours (which may be adjusted by agreement or instruction). Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina health and safety- Any failure to follow health and safety requirements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina navigation- Any failure to provide effective aids to navigation. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Method Statements- Failure to follow agreed procedures as set out in the Concessionaire’s Method Statements. Points are deducted for each occurrence. 500 Penalty Points.

* Port & Marina Quality Management System- Failure to maintain the agreed Quality Management System. Points are deducted for each occurrence. 500 Penalty Points.

The penalties are applied based on the aggregated points levied in a specific time frame as follows:

* Less than 500 in any month: No penalty.

* 500 to 1.500 points in any month: 0.25% of the Concession Fee of the specific month the points are levied.

* More than 1.500 points per month: 0.5% of the Concession Fee of the specific month the points are levied.

* More than 2.500 points in any rolling three months: 1% of the Concession Fee of the specific three month period the points are levied.

A score of 10.000 or more penalty points in a rolling six month period will lead to award of a termination point. The Concession Contract will be terminated if three termination points are awarded in any rolling three year period.

==Project Outcomes==
The re-development of Larnaka Port and Marina will transform this area into a major cruise passenger and tourist destination.
In one hand, the level of commercial operations at Larnaka Port were declining over the years and on the other hand the Larnaka Marina was over-saturated. Both infrastructure developments were facing sustainability issues. The Project is expected to assist significantly the tourist industry of Cyprus and transform Larnaka into a prime tourist destination in the Eastern Mediterranean Basin. In addition, it is expected that the Project will support the re-vitalization and the competitiveness of Cyprus economy.

In order to secure viability, 3 separate projects were bundled in a combined development.

The project, while still not abandoned, 2.5 years from the award has not managed to reach financial close.Reasons may be:
1. the mix of shareholders within the concessionaire
2. the economic crisis

The following critical success factors can be considered:
* Basically, the revenue growth of the Project depends on the income earned from the Land Development component of the Project. In that respect, the medium and long term prospects of Cyprus economy are crucial for attracting possible high income residents in the Project. The other two components of the Project (Port and Marina) are expected to provide the necessary revenues in order to be self-sufficient. It is of paramount importance that the Project as a whole gains a Brand Name as a prime cruise, yacht and tourist destination in the Eastern Mediterranean Basin.
Nevertheless, the Concessionaire should seek out the provision of new innovative services, hence new forms of revenues and the Cyprus Government should assist the Zenon Consortium towards this direction.

* The long term sustainability of the Port and the level of success of the Project depend on the growth of the Cruise passenger and marina traffic. Nevertheless, the economic viability of the Project depends mainly on the revenues expected by the Land Development component of the Project.

* Maritime transport as a whole should provide high health and safety standards. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation. The Cruise operators are significant partners too.

* Maritime transport as a whole should provide high security standards. Terrorism and other relevant events have a global effect. Even small events can ruin the good image of a port. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies maintain excellent cooperation.

* Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.

* Cooperation between the Concessionaire and the Government (Contracting Authority0 should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should also stand alone.

Regarding failure factors, in 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cyprus Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013, the Cyprus Government reached to an agreement with its lenders. The status of the Cyprus economy and the sustained recession that is expected are factors that could create increase uncertainty for the Project. The Financial Closure for the Project is still pending (August 2014) due to the fact that Zenon has not managed so far to acquire the necessary financial resources from lenders or other possible investors.

Only recently (March 2015), there has been opposition, as Larnaca Port employees are against the government’s proposition to allow the concessionaire to start works based on equity (50 million euros) and look for financing in the future, as this bears the risk of very small investments, while ownership transfer would have been concluded.

===Economic Impact===
The project is expected to provide the basis for business development with respect to cruise and recreational marine traffic. The project also foresees co-development of the area between the port and airport of Larnaca.Larnaka and Marina Project is presenting unique characteristics in respect to the choice to be developed through a Public Private Partnership (PPP), using a Design- Build- Finance- Operate (DBFO) concession contract. The extensive “horizontal and vertical bundling’’ has formulated a viable Project. The three main components of the Project, Larnaka Port, Larnaka Marina and the Land Development with the expansion of Larnaka ’ s waterfront area can present to the end users a prime cruise, recreation yacht, leisure and tourist destination in the Eastern Mediterranean Basin. Larnaka with its hinterland areas can provide a supreme cultural and leisure tourist package in order to attract cruise organizers operating in the Eastern Mediterranean market. The adjacent new developed Larnaka International Airport can play a vital role in supporting the vision to convert Larnaka ’ s Port into the main Cruise/ passenger Port of Cyprus. In addition, the steady growth in the cruise industry can be a promising factor for the realization of the Project.

The delays occurred during the formulation of the Project, the tender process and negotiations with the preferred Bidders led to an agreement when Cyprus was already affected by the financial crisis and a deep recession hit the Cyprus economy. The Zenon Consortium under this financial environment is struggling to find lenders or other possible investors, hence reaching to financial close with the Cyprus Government. The Cyprus economy presented so far remarkable resistance in “Armageddon scenarios’’. The extensive land development rights included in the Project are expected to attract new lenders and investors.

Nevertheless, the Project is expected to face competition in all of its main components. The investments in Lemesos Port in a new passenger terminal building, twice as big as to what is proposed in Larnaca, raises questions with regard to whether Larnaka could become the main Passenger Port of Cyprus. In that respect, the Zenon Consortium should investigate the provision of innovative new services in order to expand Project revenues’ diversity. In addition, the commercial capacity of Larnaka Port should be sustained. A new maritime market is arising in the Eastern Mediterranean Basin, the support of hydrocarbon exploitation companies and Larnaca has already attracted relevant servicing companies.

The long term sustainability of the Project depends on whether the Zenon Consortium and all the other stakeholders manage to convert the Project into a Brand Tourist and Leisure Name in the Eastern Mediterranean Basin.

===Social Impact===
The development of the water front area of Larnaca places the foundation for further development and business opportunities in the region.

===Environmental Impact===
The organised co-development secures the protection of the environment.

==References==

*Government of the Republic of Cyprus. 2006. Larnaka Port & Marina Re-development Project, Invitation to Tender (ITT). Lefkosia: Government of Cyprus.

*Christodoulou Ch., Efstathiades Ch.. 2013. Cyprus, Discussion Papers Part I Country Profiles. Public Private Partnerships in Transport: Trends & Theory P3T3. Brussels: COST Office.

*Government of the Republic of Cyprus. 2014. Strategy of Cyprus on Sea (Port) and Land Transport (Executive Summary). Lefkosia: Ministry of Communications and Works.

*Government of the Republic of Cyprus. 2013. Transport Statistics 2012, Statistical Service. Lefkosia: Government of Cyprus.

*Aristidou St.. 2014. Secretary of the Steering Committee negotiating the Larnaka Port and Marina DBFO Contract. Personal Interview. Lefkosia.

*Government of Cyprus, Ministry of Communications and Works, Website: www.mcw.gov.cy/

*Government of the Republic of Cyprus, Cyprus Port Authority, Website: www.cpa.gov.cy/

*Zenon Consortium –Larnaka Port & Marina Re- development Brochure. LARNAKA ECO-WATERFRONT: Sustainable Expansion of a Historic Cypriot City. Larnaka: Zenon Consortium.

*Daily Cypriot Newspapers: Philelepheros, Politis, Cyprus Mail. Period 2005-2014. Lefkosia.

*Cruise market watch, Website: http://www.cruisemarketwatch.com/growth/

*Roumboutsos, A. (2015) “Larnaca Port and Marina Re-development” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

*Larnaka Municipality, http://www.larnaka.org.cy

*C. Christodoulou, C. Efstathiades, 2014, Larnaca Port and Marina Re-development, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Istrian Y Toll Motorway

2015-06-12T10:44:08Z

Pmoraiti: /* References */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

State financial contribution has averaged EUR 17M p.a. since 2000, and is expected to remain at this level until the end of the contract period. Therefore, the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

Concessionaire's total revenues are currently around 38million euro, expected to rise to 60 million euro at the end of the concession period.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts to small towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015) “Ystrian Y Toll Motorway” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-12T10:43:59Z

Pmoraiti: /* References */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

State financial contribution has averaged EUR 17M p.a. since 2000, and is expected to remain at this level until the end of the contract period. Therefore, the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

Concessionaire's total revenues are currently around 38million euro, expected to rise to 60 million euro at the end of the concession period.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts to small towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

**Roumboutsos, A. (2015) “Ystrian Y Toll Motorway” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Attica Tollway, The Athens Ring Road

2015-06-12T10:43:11Z

Pmoraiti: /* References */

{{Infobox
|header1 = Attica Tollway (Athens Ring Road), Greece
|header2 =
|label2 = Project Type:
|data2 = Greenfield
|header3 =
|label3 = Contract duration:
|data3 = maximum of 25 years or earlier if the maximum Return on Equity has been reached.
|header4 =
|label4 = Budget:
|data4 = EUR 1300M (This budget includes Project Development Costs)
|title = Project Overview
|image = [[Image:attica1.png|300px]]
|caption = Photo Courtesy of Attica Tollway Figure 1: Overview of Attica Tollway (detail)
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Conception:
| data1 = 1963;
| label2= Tender:
| data2 = 1992;
| label3= Contract Award:
| data3 = March 1996;
| label4= Date of contract ratification:
| data4 = 23/5/1996 Law 2445/1996;
| label5= Financial Close:
| data5 = 6 of March 2000;
| label6= Open to traffic (1st section):
| data6 = March 2001 to serve the new Athens International Airport;
| label7= Open to traffic (2nd section) and Project Completion:
| data7 = August 2004 in time for the Athens Olympic Games;
| label8= Works Completion Certificate (WCC) issued:
| data8 = 2 Dec. 2004
}}
}}

== Introduction ==

Attica Tollway is a pioneering project constructed on a concession basis and constitutes one of the biggest co-financed road projects in Europe. It belongs to the first generation of co-financed projects awarded in Greece during the '90s and essentially paved the way and laid the foundations for the execution of future successful concession contracts, in Greece and in other European countries.
Attica Tollway in Greece forms part of the Trans European Network, as planned by the European Commission. It extends along 70 km and connects the 30 municipalities of the Attica basin. It actually constitutes the backbone of the entire transport network of the metropolitan area of Athens and it meets the transportation needs of millions of people on an annual basis. It constitutes a unique piece of infrastructure, even in European terms, since it is essentially a closed toll motorway, within a metropolitan capital, where the problem of traffic congestion is acute.

Attica Tollway is an urban motorway, with three traffic lanes in each direction and an emergency lane. In the centre, it has a special traffic island, reserved for the operation of the suburban railway that has been constructed and is operated by another entity.

Attica Tollway is part of the PATHE road axis (Patra - Athens - Thessaloniki - Evzoni) and connects the Athens - Lamia National Road with the Athens - Κorinthοs National Road, by-passing the centre of Athens. Being a closed motorway, it has controlled access points and consists of three sections:
* The Elefsina – Stavros – Spata A/P motorway (ESSM), extending along approximately 52 km;
* The Imittos Western Peripheral Motorway (IWPM), extending along approximately 13 km; and
* The Egaleo Western Peripheral Motorway (EWPM), extending along approximately 5 km.

Works include:
* Other main lines: 31,33 km.
* Network Utility / side roads: 150 km.
* Interchanges: 32
* Road bridges (Overpasses): 104
* Road bridges (underpasses): 38
* Rail Bridges: 37
* Footbridges: 15
* Tunnels (Cut & Cover): 63
* Total length of tunnels and Cut & Cover: 15,64 km.
* Anti-flood works: 66.7 km.
* Total area of support facilities premises: 122,000 sq.m.

[[File:attica2.png]] 
'''Figure 2: Attica Tollway sections''' 
'''''Photo from [http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm]'''''

The idea of building the Attica Tollway dates back to 1963, when Wilbur Smith came from the United States to undertake the first ever regional traffic planning study for the city of Athens and its metropolitan area. Sprawling development to the north of Athens over the years, the decision in the late 1970’s to build the new airport in its present location at Mesogeia and the decision to build a city connector road along the foothills of the Mountain of Imittos in the early 1990’s departed from the concept of a “ring” road, and transformed the Attica Tollway into an urban tollway that serves the heart of the city.

In addition, the Attica Tollway during its construction and operation introduced a number of innovations to the Greek construction and motorway operation sector. More specifically, construction within urbanized area under adverse geotechnical conditions called upon employing vibration recorders to restrict peak particle velocity below 6mm/sec in open-cast mining excavations; the ΝΑΤΜ (Drill & Blast) method, the tunnel construction method using Roadheader machinery was also applied to reduce vibrations (the peak particle velocity was limited to 0.7 mm/sec) and to avoid using explosives in areas of historical interest (monuments, churches etc.) for tunnel construction; the Incremental Launching System has also been used for constructing the superstructure of bridges; road pavement was constructed using the latest construction methods and mechanical equipment, reliable materials and specialized laboratory measurements and tests to ensure durability over time. A deep level sewer installation, employing a trenchless technology method (pipe-jacking) was used for the first time to drive sections over 200 m in length under the city. (Sofianos et al, 2004). In operations, the Attica Tollway was the first to introduce in Greece an electronic toll collection system.

Finally, the project was constructed in parallel with flood protection works (contract value of EUR 791M), as the Attica Tollway passes through the three large hydrographic basins of Attica (Thriasio Pedio, Athens basin and Mesogeia) and interrupts the surface runoff coming from the Parnitha, Penteli and Imittos mountains to the sea. The morphology of the aforementioned areas, now featuring minimum natural receptors, the exponential expansion of the land use and the various types of human interventions had rendered the construction of substantial extensive flood protection works within the scope of the Attica Tollway implementation imperative. The flood protection works constructed were dimensioned to be adequate for the existing and future land use.

== The Contracting Authority (Public Party) ==

The Attica Tollway project was planned on a central government level, by the Ministry of Development, Competitiveness, Infrastructure and Transport Networks (previously called Ministry of Environment, Physical Planning and Public Works). Ε.Υ.D.Ε. / L.S.E.P is the special agency of the Ministry which undertakes the supervision of the motorway’s operation and maintenance.

A breakdown of key objectives, as stated by the Government, consists of the following:
* to develop the ring road for the Metropolitan area of Athens and integrate a full road network for fast and safe transport in the entire Attica region;
* to provide the connection to Athens International Airport;
* to decrease traffic congestion in the main arteries of Athens;
* to provide the crucial segment of PATHE TEN-T (priority axis 7) by connecting the two main National Roads of Greece (National Road of Patras – Athens and National Road of Athens – Thessaloniki);
* to contribute to an integrated regional/urban plan for Attica;
* to provide direct connection between the western and the eastern areas of Attica

Other secondary objectives quoted by the Government include:
* to access a future spur (presently served by a 4 to 6 lane arterial street) that will connect to the passenger and cargo harbor of Rafina, which offers quicker connections to central and northern Aegean islands than the main port of Piraeus.
* to support significantly the flood prevention system for the entire region of Attiki by substantial interventions in the three main hydrographical basins of Attiki, i.e. the Thriasio Plain, the Athens Basin and Mesogeia.

Central government was directly involved in all stages of the development, design, tendering and negotiation procedure, and is also overseeing operation and maintenance.The concession contract was approved by parliament as Law 2445/96 and amended by Presidential Decree 75/99.

== The Concessionaire (Private Party) ==

Attiki Odos S.A was formed as a joint venture of almost all large Greek construction companies [AKTOR, AVAX, ALTE, ATTI-KAT, HELLENIC TECHNODOMIKI, ETETH, SARANTOPOULOS, PANTECHNIKI, TEV, TEG, EGIS PROJECTS.]. ATTIKI ODOS S.A. is the SPV, the consortium Attiki odos is the construction consortium and Attikes Diadromes S.A. is the operator. All companies were involved in all three formulations with slightly varying shares.

A subsequent consolidation in the Greek construction industry has led, through bankruptcies, mergers and acquisitions, to the formation of a few large construction groups. Attiki Odos consortium was a catalyst for this consolidation.

The Concession Company's shareholders' current (31.12.2013) structure consists of:
- AKTOR CONCESSIONS S.A. (member ELLAKTOR S.A. Group) 59.25%,
- J.&P. AVAX S.A. 21.00%,
- ETETH S.A. (member J.&P. AVAX S.A.Group) 9.82%,
- PIREAUS -ATE BANK S.A. 9.88% and
- Transroute International. 0.04%.

"ATTIKI ODOS S.A.", is the Concession Company (Concessionaire) of the project, which has undertaken the design, construction, financing, operation and maintenance of the motorway, through the execution of a Concession Contract with the Greek State.
he Concessionaire has established Contracts back to back with the Concession Agreement with “ATTIKI ODOS CONSTRUCTION JOINT VENTURE” for the project construction and with “ATTIKES DIADROMES S.A.” (also known as Attica Tollway Operations Authority) for the operation and maintenance of the project.

A total of 138 contracts and agreements were let to 65 different contracting parties. The contracts included:
- 23 Principal Engineering Contracts;
- 78 Lending and Guarantee Agreements;
- eight Special Fees & Payments Contracts;
- seven Other Special Agreements;
- 22 Other Contracts.

The construction was financed (tl 1.346.309.241 euros) as follows:
*Equity: 157.577.077 euros
*Loans: 666.246.607 euros (the majority were EIB loans)
*Greek State: 420.569.293 euros
*Income from interest: 11.985.546 euros
*Income from operation (during construction): 89.930.718 euros

== Users ==

The motorway is open to all users private vehicles and freight traffic.Attica Tollway serves, however, mainly passenger cars and the main purpose of travel of its users is commuting. It provides links to the Athens International Airport and to the two main National Roads (NR Athens –Thessaloniki and NR Athens-Corinth-Patras). In addition, many large logistics centers have emerged or relocated to the western part of the Tollway, since this location combines large open spaces and quick access to ports, railway and National Roads.

For the first time in Greece, tolls were imposed in urban axis and this practice was foreseen at the beginning as controversial. The high level of provided service by Attica Tollway succeeded to diminish any reluctance of paying tolls.

The forecasted AADT was estimated to level off at approx. 245.000 vehicles after 10 years of operation with a gradual increase from 160.000 in 2004.

The motorway was fully operational as of mid 2004 and presented some 30% AADT in the years 2004 to 2009 (pick traffic in 2009 307.993 AADT). Ever since due to the economic crisis AADT has dropped to 200449 in 2013 (281 217 in 2010; 250625 in 2011 and 215767 in 2012). AADT has leveled off at approx 200.000 AADT.

== Key Purpose for PPP Model Selection ==

The Greek Authorities and the European Commission had agreed within the framework of the Community Support Framework 1994 -1999 (CSF II) to maximize private sector partnerships in the development of transport related infrastructure (PwC, 2005). For Greece, this provided funds and off-balance sheet debt. The Athens Tollway was an opportunity.

The hybrid structuring of the project was essential to the project’s success. The public sector, the Greek Government, wanted to allocate most of the project risks to the private sector. It was clear from the beginning, however, that due to several factors (e.g. this was the first PPP in the road sector in Greece, construction difficulties were envisaged, and help was needed in dealing with 30 local authorities), the project required strong state help. This financial help was necessary because, at that time, sponsors considered that the road traffic levels and the tolls the users were prepared to pay were not enough to provide an adequate return on the investment they were required to make. Therefore, the project was developed as a PPP in order to:
* Minimise public funding. Public funding (including EU Structural funds) covered 34% with the private sector providing the remaining 66% project funding.
* Allocate risks to the private sector. The project structure allowed the Greek Government to allocate most risks to the sponsors.
EU funding was requested to close the financial gap, turning the project into a hybrid. The project was not viable for the private sector if the private sector had to provide 100% of funding. EU Structural funds allowed the private sector to reduce its financial commitment by 34% while maintaining the same level of revenues. As a consequence, the bankability increased.

[[File:attica3.png]] 
'''Figure 3. Attica Tollway Concession Structure'''

== Project Timing ==

After the 1960’s, decades passed by without any attempts to start the road project, mainly due to the lack of funding, coupled with its expected high cost. The project’s real advancement began in 1985, when it became part of the official transportation infrastructure plans for metropolitan Athens, along with the goal of obtaining the Centennial Olympic Games in 1996 (they marked the 100th anniversary of the modern Olympic Games). It was in the early 1990’s that the Greek Ministry of Public Works adopted the method of co-financing the road through a Build–Operate–Transfer contract.

The construction work started in 1997 and the motorway was given to traffic in sections. The first one opening to traffic was in March 2001, achieving the milestone of serving the new Athens International Airport. The last section was opened to traffic in 2004. Attica Tollway was built on time and within budget and it met the crucial deadline for the Athens Olympics Games in 2004.

== Project Locality and Market Geography ==

Attica Tollway is an urban motorway and part of the Tran European Network (TEN), connecting the 30 municipalities of the Attica basin, allowing quicker access to areas, which, before its construction, required a great amount of travel time.

== Procurement & Contractual Structure ==

=== Tendering ===

An international tender was announced in 1992 and in March 1996, the project was awarded to the lowest bidder of the three international consortia that participated in the process. The Ministry of Environment, Physical Planning and Public Works was responsible for all the analysis,preparation and tendering. The Concession Contract was ratified by law by the Greek Parliament on the 23rd of May 1996.

The Concession Agreement provides a maximum toll rate that can be charged. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity (13.1%) has been reached.

=== Contract Structure ===

The Concession Contract was ratified by the Greek Parliament in December 1996 by law 2445/96 due to lack of legal framework. It should be noted that any amendments to the concession contract need to be ratified by the Greek parliament. The maximum applicable tariff is defined in the contract. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity has been reached (11.6%). This is a typical concession scheme, under the DBFO structure.

The project financing has been ensured through State contributions including EC Structural Cohesion Funds, private equity and loans.
Commercial banks involved include: Bank of Tokyo-Mitsubishi, HypoVereinsbank, Commercial Bank of Greece, HSBC Athens, National Bank of Greece, Société Generale, European Investment Fund, ABN AMRO Bank NV, Agricultural Bank of Greece, Alpha Credit Bank, Banca Monte dei Paschi di Siena (London), Bank of Scotland, De Nationale Investeringsbank NV, Piraeus Bank Greece, European Investment Bank, ING Bank NVand Ergobank.

Expropriation cost was undertaken entirely by the Greek State. Loan guarantees were provided by the concessionaire during construction and by the State for the operations phase.

=== Risk Allocation ===

Overall, the Greek government was able to transfer construction, operation, and traffic risks (subject to a standard non-compete clause) to the SPV under the concession contract. The lenders to the SPV were therefore fully exposed to these risks, mitigated as they might be through the construction and operation subcontracts. However, EIB's policy is that they do not accept construction risk, and they will usually accept remaining project risks only after a period of satisfactory operation and the demonstration of acceptable cover ratios. Accordingly, as is usually the case, the EIB was guaranteed by the other lenders and, in this case, by the sponsors, providing 50% cover each. Once construction was complete, the EIB allowed these guarantees to be replaced by a guarantee from the Greek government. In this way, the Greek government did effectively transfer construction risk to the SPV, but has taken operation and traffic risk back through the guarantee, albeit at a reduced level compared with the risk at the outset.

A project of such scale met significant difficulties during its realisation. The financial close was delayed, mainly because of uncertainties surrounding the project. These uncertainties increased the risks for the banks, delaying the signing of the financial agreement and forcing the public sector to provide funds to the sponsors to begin construction before financial close was reached. Other difficulties were due to variation orders issued by the State, mainly for environmental reasons, which involved significant design changes.

Furthermore, the concession contract did not include mechanisms for extensions of time and delay make-up in case of State-instructed variations. Solutions were found after extensive negotiations between all parties involved, and amendments to the concession contract were introduced, leading to the satisfaction of the banks and reaching financial close.
Risk allocation is depicted in Figure 4.
[[File:attica4.png]] 
'''Figure 4: Risk allocation'''

The environmental risk was undertaken by the State in reference to environmental law changes. The Greek State for environmental reasons has proceeded to design changes in Imittos Western Peripheral Section, after the concession commencement. Variation orders were also related to water management in the area of the project. On the other hand, the compliance with environmental guidelines was solely attributed to the SPV.

Land expropriation risk was allocated to the Greek State. Considering the difficulties of expropriating land in a city, such as Athens (as opposed to expropriating in the countryside) the concessionaire allocated full risk to the public sector as it .

=== Performance ===

The Independent Engineer was responsible for evaluating construction performance, along with the awarding authority, which is responsible for evaluating operating performance during the operations period.

Table 1 below shows the performance indicators set out in the Operation and Maintenance Agreement with the Attica Tollway Operation Authority.

Attica Tollway Operations Authority (Attikes Diadromes S.A.) has adopted an integrated monitoring system, based on measured Key Performance Indicators (KPIs). The system consists of 35 indicators covering all the major aspects of operation, such as traffic management, toll operation, infrastructure maintenance, human resources, violation enforcement, etc. A reliable and accurate system capable of measuring any fluctuation of performance on the key areas of safety, maintenance effectiveness, mobility, level of provided services and user satisfaction was developed. Various methods were used to measure the KPIs, one of the major sources of data for the KPIs system is the conduction of extensive surveys, such as Road Side Survey (RSS), telephone survey for the subscribers and "mystery shopping". Indicatively, the annual RSS covers about 7500 questionnaires and "mystery shopping" about 8000 questions on an annual basis.
The results of the KPIs are widely used for the continuous improvement of the operation and the services provided to the Tollway users (Tyrogianni et al, 2012).

'''Table 1: Attica Tollway Performance Indicators'''
{| class="wikitable" style="width=100%"
! Ref.
! align="left"| Item
! align="left"| Planned Level of Service
|-
| 1 || Response time in case of incident || 20 minutes
|-
| 2 || Repair time for damage of equipment causing danger to users || Action shall start within 12 hours
|-
| 3 || Repair time for other serious damage of equipment || Action shall start within 24hours
|-
| 4 || Average waiting time in each Toll Station
Level A: waiting time between 0 and 120 seconds
Level B: waiting time above 120 seconds
|| Waiting Time Level B must not exceed 90 hours per year, unless due to exceptional circumstances outside the control of the Operator
|-
| 5 || Standards for money handling: Maximum Accepted Toll Collection Discrepancy (MATCD) between the system and the amount deposited in the Banks || MATCD as per the Manuals Phase B
|}
Furthermore, Attica Tollway considers carbon footprint assessment to be a very powerful tool in understanding the impact of the tollway’s operational activities on global warming. In this context, the company has installed measuring devices and carries out calculations of its carbon footprint (Mandalozis et al, 2012).

Finally, the tollway holds one of the best safety records in the world (Papaioannou, 2006). It serves over 250,000 users daily for short and long trips and has exceeded its forecasts by more than 30% (see figure 5).

From the start of operation and until 2011, the actual traffic was higher than the predicted. However, for the first time in 2012, this has changed and the actual traffic was lower than the predicted one. In addition,based on annual financial reports, Attica tollway is making profits. The report for year 2013 showed net profits (before tax) 68.708.000 and 20.918.000 euros (after tax). Net profits dropped by 19.212.000 euros (net after tax) in relation to 2012.As the traffic drop has stabilised, it is considered that this level of profitability is sustained. No changes have been made to toll prices.

==Project Outcomes==
The Attica Tollway was designed to:
1. provide access to the new Athens International Airport
2. leave urban congestion by providing a ring road around metropolitan Athens
3. reduce accidents
4. reduce environmental impact

All 4 objectives have been met and traffic forecasts under normal macro-economic conditions had been exceeded.After 6 years of recession, the PPP remains profitable even though traffic has been below forecasts since 2011.

The following key critical success factors can be identified:

1. The project was planned since the 1960s. When it was initiated it was a long needed infrastructure to provide alternative route connecting the Athens metropolitan area and reducing traffic through the centre of the city of Athens.

2. The motorway is practically the exclusive access to the Athens Airport. (Alternative are the Athens Metro and sub-urban rail and road link (not-tolled) from the south part of Athens).

3. The motorway is of high quality.

The pioneer construction, the care for the environment, the high-level operation and the pioneer technologies used, in combination with the human factor, are sectors of the project which received international acknowledgements and awards, while they have distinguished Attica Tollway as a model project for Greece.

Attica Tollway was built on time and on budget and it was the backbone of the transportation network during the execution of the Athens Olympic Games in 2004. The problems faced during construction were solved thanks to the good faith negotiations held between all parties involved. Attica Tollway is a successful project and has exceeded forecast expectations of demand. The reason is that Attica Tollway has produced significant improvements to traffic conditions in the metropolitan area, as well as benefits in the economy and overall infrastructure. In addition, it has received enormous public acceptance despite the initial resistance and the imposition of open & flat toll regime.

On the other hand, the long term financial crisis can affect the project significantly. Between 2009 and 2013 the country’s GDP has fallen by 20%. While unemployment has risen from 8% to 29%. Most of this negative impact is concentrated in the Athens metropolitan area where approximately 50% of the population is located. In connection with a significant drop in car ownership and fuel prices, it is considered that the project has show considerable resilience and is still viable. However, it is difficult to predict the future if the situation continues.

The motorway has a very high rate of acceptability. The company runs biannual user satisfaction surveys. These indicate 90% user satisfaction.Only in the very early stages of the project, there was opposition with respect to the flat rate toll as opposed to tolls based on distance.However, this opposition was soon overcome, especially as the scope of the infrastructure was to serve traffic transversing the metropolitan area and not traffic between suburbs.

Regarding project goals, current studies show that the average vehicle - trip time is reduced by 28 mins when choosing the Attica Tollway, there is considerable fuel consumption reduction, while reliability was improved fully in line with expectations and more (ex-post (observed) share of delayed traffic: less than 1%). The same applies to safety with ex-post (observed) total accidents per 1000 vkm by year:0.000547.

===Economic Impact===
The project had a significant economic impact in terms of supporting development in a region which was previously underdeveloped and rural.
The motorway serves the Athens International Airport and provides a link to the major road access in Greece (included in the TEN-T). By relieving congestion in Athens (before all traffic was mainly through the city centre), it also allows for the balanced development in the greater Athens Region.

===Social Impact===
The Attica Tollway was a challenge for the fragmented Greek Construction Sector to prove technical capabilities and ability to take on a major financing/investment project.In the process many initial consortium members dropped off. The project may be considered a milestone in the development of the Greek construction sector.

===Environmental Impact===
The impact to the environment (noise and emissions) is continuously monitored.
The project reduces fuel consumption.It also included anti-flooding works and in practice is the anti-flooding protection of the Athens metropolitan area.

== References ==

#B. Halkias, A. Roumboutsos, A. Pantelias, 2013, Attica Tollway, In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ISBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
#Attiki Odos Contract, Greek Law 2445/1996 of the Official Gazette.
#Halkias, B., Tyrogianni, E., “PPP projects in Greece: The case of Attica Tollway” Routes/Roads PIARC, April 2009.
#Halkias, B., Tyrogianni, E., Kitsos, D., “A significant infrastructure project within the urban environment of Athens: The case of Attica Tollway” IABSE September 2008
#Harito, J. and Morello, S. (2011) Performance Plus, ITS International, 17(3) 44-45
#Mandalozis, D. Halkias, B., Tyrogianni, H. Kalfa, N. (2012) The Carbon Footprint of Attica Tollway, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2988-2998
#Papaioannou, P. (2006) Recent Experience on Success and Failure Stories from Funding Large Transportation Projects in Greece, 1st International Conference on Funding Transportation Infrastructure, Banff, Alberta, Canada, 2-3 August 2006
#Papandreou, K., Tyrogianni, E., “Level of Service in Concession Motorway Projects” XXXV ASECAP Study and Information Days
#PricewaterhouseCoopers (2005) Delivering the PPP promise*: A review of PPP issues and activity, PricewaterhouseCoopers LLP
#Sofianos, A.I., Loukas, P., Chantzkos, Ch. (2004) Pipe jacking a sewer under Athens, Tunnelling and Underground Space Technology, 19(2), 193-203
#Tyrogianni, H., Halkias, B. Politou, A., Kotzampassi, P. (2012) The Attica Tollway Operations Authority KPI Performance System, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2999-3008
#www.aodos.gr
#Roumboutsos, A. (2015) “Attika Tollway, The Athens Ring Road” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Attica Tollway, The Athens Ring Road

2015-06-12T10:42:53Z

Pmoraiti: /* References */

{{Infobox
|header1 = Attica Tollway (Athens Ring Road), Greece
|header2 =
|label2 = Project Type:
|data2 = Greenfield
|header3 =
|label3 = Contract duration:
|data3 = maximum of 25 years or earlier if the maximum Return on Equity has been reached.
|header4 =
|label4 = Budget:
|data4 = EUR 1300M (This budget includes Project Development Costs)
|title = Project Overview
|image = [[Image:attica1.png|300px]]
|caption = Photo Courtesy of Attica Tollway Figure 1: Overview of Attica Tollway (detail)
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Conception:
| data1 = 1963;
| label2= Tender:
| data2 = 1992;
| label3= Contract Award:
| data3 = March 1996;
| label4= Date of contract ratification:
| data4 = 23/5/1996 Law 2445/1996;
| label5= Financial Close:
| data5 = 6 of March 2000;
| label6= Open to traffic (1st section):
| data6 = March 2001 to serve the new Athens International Airport;
| label7= Open to traffic (2nd section) and Project Completion:
| data7 = August 2004 in time for the Athens Olympic Games;
| label8= Works Completion Certificate (WCC) issued:
| data8 = 2 Dec. 2004
}}
}}

== Introduction ==

Attica Tollway is a pioneering project constructed on a concession basis and constitutes one of the biggest co-financed road projects in Europe. It belongs to the first generation of co-financed projects awarded in Greece during the '90s and essentially paved the way and laid the foundations for the execution of future successful concession contracts, in Greece and in other European countries.
Attica Tollway in Greece forms part of the Trans European Network, as planned by the European Commission. It extends along 70 km and connects the 30 municipalities of the Attica basin. It actually constitutes the backbone of the entire transport network of the metropolitan area of Athens and it meets the transportation needs of millions of people on an annual basis. It constitutes a unique piece of infrastructure, even in European terms, since it is essentially a closed toll motorway, within a metropolitan capital, where the problem of traffic congestion is acute.

Attica Tollway is an urban motorway, with three traffic lanes in each direction and an emergency lane. In the centre, it has a special traffic island, reserved for the operation of the suburban railway that has been constructed and is operated by another entity.

Attica Tollway is part of the PATHE road axis (Patra - Athens - Thessaloniki - Evzoni) and connects the Athens - Lamia National Road with the Athens - Κorinthοs National Road, by-passing the centre of Athens. Being a closed motorway, it has controlled access points and consists of three sections:
* The Elefsina – Stavros – Spata A/P motorway (ESSM), extending along approximately 52 km;
* The Imittos Western Peripheral Motorway (IWPM), extending along approximately 13 km; and
* The Egaleo Western Peripheral Motorway (EWPM), extending along approximately 5 km.

Works include:
* Other main lines: 31,33 km.
* Network Utility / side roads: 150 km.
* Interchanges: 32
* Road bridges (Overpasses): 104
* Road bridges (underpasses): 38
* Rail Bridges: 37
* Footbridges: 15
* Tunnels (Cut & Cover): 63
* Total length of tunnels and Cut & Cover: 15,64 km.
* Anti-flood works: 66.7 km.
* Total area of support facilities premises: 122,000 sq.m.

[[File:attica2.png]] 
'''Figure 2: Attica Tollway sections''' 
'''''Photo from [http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm http://www.trg.soton.ac.uk/prime/attiki_odos/descr1.htm]'''''

The idea of building the Attica Tollway dates back to 1963, when Wilbur Smith came from the United States to undertake the first ever regional traffic planning study for the city of Athens and its metropolitan area. Sprawling development to the north of Athens over the years, the decision in the late 1970’s to build the new airport in its present location at Mesogeia and the decision to build a city connector road along the foothills of the Mountain of Imittos in the early 1990’s departed from the concept of a “ring” road, and transformed the Attica Tollway into an urban tollway that serves the heart of the city.

In addition, the Attica Tollway during its construction and operation introduced a number of innovations to the Greek construction and motorway operation sector. More specifically, construction within urbanized area under adverse geotechnical conditions called upon employing vibration recorders to restrict peak particle velocity below 6mm/sec in open-cast mining excavations; the ΝΑΤΜ (Drill & Blast) method, the tunnel construction method using Roadheader machinery was also applied to reduce vibrations (the peak particle velocity was limited to 0.7 mm/sec) and to avoid using explosives in areas of historical interest (monuments, churches etc.) for tunnel construction; the Incremental Launching System has also been used for constructing the superstructure of bridges; road pavement was constructed using the latest construction methods and mechanical equipment, reliable materials and specialized laboratory measurements and tests to ensure durability over time. A deep level sewer installation, employing a trenchless technology method (pipe-jacking) was used for the first time to drive sections over 200 m in length under the city. (Sofianos et al, 2004). In operations, the Attica Tollway was the first to introduce in Greece an electronic toll collection system.

Finally, the project was constructed in parallel with flood protection works (contract value of EUR 791M), as the Attica Tollway passes through the three large hydrographic basins of Attica (Thriasio Pedio, Athens basin and Mesogeia) and interrupts the surface runoff coming from the Parnitha, Penteli and Imittos mountains to the sea. The morphology of the aforementioned areas, now featuring minimum natural receptors, the exponential expansion of the land use and the various types of human interventions had rendered the construction of substantial extensive flood protection works within the scope of the Attica Tollway implementation imperative. The flood protection works constructed were dimensioned to be adequate for the existing and future land use.

== The Contracting Authority (Public Party) ==

The Attica Tollway project was planned on a central government level, by the Ministry of Development, Competitiveness, Infrastructure and Transport Networks (previously called Ministry of Environment, Physical Planning and Public Works). Ε.Υ.D.Ε. / L.S.E.P is the special agency of the Ministry which undertakes the supervision of the motorway’s operation and maintenance.

A breakdown of key objectives, as stated by the Government, consists of the following:
* to develop the ring road for the Metropolitan area of Athens and integrate a full road network for fast and safe transport in the entire Attica region;
* to provide the connection to Athens International Airport;
* to decrease traffic congestion in the main arteries of Athens;
* to provide the crucial segment of PATHE TEN-T (priority axis 7) by connecting the two main National Roads of Greece (National Road of Patras – Athens and National Road of Athens – Thessaloniki);
* to contribute to an integrated regional/urban plan for Attica;
* to provide direct connection between the western and the eastern areas of Attica

Other secondary objectives quoted by the Government include:
* to access a future spur (presently served by a 4 to 6 lane arterial street) that will connect to the passenger and cargo harbor of Rafina, which offers quicker connections to central and northern Aegean islands than the main port of Piraeus.
* to support significantly the flood prevention system for the entire region of Attiki by substantial interventions in the three main hydrographical basins of Attiki, i.e. the Thriasio Plain, the Athens Basin and Mesogeia.

Central government was directly involved in all stages of the development, design, tendering and negotiation procedure, and is also overseeing operation and maintenance.The concession contract was approved by parliament as Law 2445/96 and amended by Presidential Decree 75/99.

== The Concessionaire (Private Party) ==

Attiki Odos S.A was formed as a joint venture of almost all large Greek construction companies [AKTOR, AVAX, ALTE, ATTI-KAT, HELLENIC TECHNODOMIKI, ETETH, SARANTOPOULOS, PANTECHNIKI, TEV, TEG, EGIS PROJECTS.]. ATTIKI ODOS S.A. is the SPV, the consortium Attiki odos is the construction consortium and Attikes Diadromes S.A. is the operator. All companies were involved in all three formulations with slightly varying shares.

A subsequent consolidation in the Greek construction industry has led, through bankruptcies, mergers and acquisitions, to the formation of a few large construction groups. Attiki Odos consortium was a catalyst for this consolidation.

The Concession Company's shareholders' current (31.12.2013) structure consists of:
- AKTOR CONCESSIONS S.A. (member ELLAKTOR S.A. Group) 59.25%,
- J.&P. AVAX S.A. 21.00%,
- ETETH S.A. (member J.&P. AVAX S.A.Group) 9.82%,
- PIREAUS -ATE BANK S.A. 9.88% and
- Transroute International. 0.04%.

"ATTIKI ODOS S.A.", is the Concession Company (Concessionaire) of the project, which has undertaken the design, construction, financing, operation and maintenance of the motorway, through the execution of a Concession Contract with the Greek State.
he Concessionaire has established Contracts back to back with the Concession Agreement with “ATTIKI ODOS CONSTRUCTION JOINT VENTURE” for the project construction and with “ATTIKES DIADROMES S.A.” (also known as Attica Tollway Operations Authority) for the operation and maintenance of the project.

A total of 138 contracts and agreements were let to 65 different contracting parties. The contracts included:
- 23 Principal Engineering Contracts;
- 78 Lending and Guarantee Agreements;
- eight Special Fees & Payments Contracts;
- seven Other Special Agreements;
- 22 Other Contracts.

The construction was financed (tl 1.346.309.241 euros) as follows:
*Equity: 157.577.077 euros
*Loans: 666.246.607 euros (the majority were EIB loans)
*Greek State: 420.569.293 euros
*Income from interest: 11.985.546 euros
*Income from operation (during construction): 89.930.718 euros

== Users ==

The motorway is open to all users private vehicles and freight traffic.Attica Tollway serves, however, mainly passenger cars and the main purpose of travel of its users is commuting. It provides links to the Athens International Airport and to the two main National Roads (NR Athens –Thessaloniki and NR Athens-Corinth-Patras). In addition, many large logistics centers have emerged or relocated to the western part of the Tollway, since this location combines large open spaces and quick access to ports, railway and National Roads.

For the first time in Greece, tolls were imposed in urban axis and this practice was foreseen at the beginning as controversial. The high level of provided service by Attica Tollway succeeded to diminish any reluctance of paying tolls.

The forecasted AADT was estimated to level off at approx. 245.000 vehicles after 10 years of operation with a gradual increase from 160.000 in 2004.

The motorway was fully operational as of mid 2004 and presented some 30% AADT in the years 2004 to 2009 (pick traffic in 2009 307.993 AADT). Ever since due to the economic crisis AADT has dropped to 200449 in 2013 (281 217 in 2010; 250625 in 2011 and 215767 in 2012). AADT has leveled off at approx 200.000 AADT.

== Key Purpose for PPP Model Selection ==

The Greek Authorities and the European Commission had agreed within the framework of the Community Support Framework 1994 -1999 (CSF II) to maximize private sector partnerships in the development of transport related infrastructure (PwC, 2005). For Greece, this provided funds and off-balance sheet debt. The Athens Tollway was an opportunity.

The hybrid structuring of the project was essential to the project’s success. The public sector, the Greek Government, wanted to allocate most of the project risks to the private sector. It was clear from the beginning, however, that due to several factors (e.g. this was the first PPP in the road sector in Greece, construction difficulties were envisaged, and help was needed in dealing with 30 local authorities), the project required strong state help. This financial help was necessary because, at that time, sponsors considered that the road traffic levels and the tolls the users were prepared to pay were not enough to provide an adequate return on the investment they were required to make. Therefore, the project was developed as a PPP in order to:
* Minimise public funding. Public funding (including EU Structural funds) covered 34% with the private sector providing the remaining 66% project funding.
* Allocate risks to the private sector. The project structure allowed the Greek Government to allocate most risks to the sponsors.
EU funding was requested to close the financial gap, turning the project into a hybrid. The project was not viable for the private sector if the private sector had to provide 100% of funding. EU Structural funds allowed the private sector to reduce its financial commitment by 34% while maintaining the same level of revenues. As a consequence, the bankability increased.

[[File:attica3.png]] 
'''Figure 3. Attica Tollway Concession Structure'''

== Project Timing ==

After the 1960’s, decades passed by without any attempts to start the road project, mainly due to the lack of funding, coupled with its expected high cost. The project’s real advancement began in 1985, when it became part of the official transportation infrastructure plans for metropolitan Athens, along with the goal of obtaining the Centennial Olympic Games in 1996 (they marked the 100th anniversary of the modern Olympic Games). It was in the early 1990’s that the Greek Ministry of Public Works adopted the method of co-financing the road through a Build–Operate–Transfer contract.

The construction work started in 1997 and the motorway was given to traffic in sections. The first one opening to traffic was in March 2001, achieving the milestone of serving the new Athens International Airport. The last section was opened to traffic in 2004. Attica Tollway was built on time and within budget and it met the crucial deadline for the Athens Olympics Games in 2004.

== Project Locality and Market Geography ==

Attica Tollway is an urban motorway and part of the Tran European Network (TEN), connecting the 30 municipalities of the Attica basin, allowing quicker access to areas, which, before its construction, required a great amount of travel time.

== Procurement & Contractual Structure ==

=== Tendering ===

An international tender was announced in 1992 and in March 1996, the project was awarded to the lowest bidder of the three international consortia that participated in the process. The Ministry of Environment, Physical Planning and Public Works was responsible for all the analysis,preparation and tendering. The Concession Contract was ratified by law by the Greek Parliament on the 23rd of May 1996.

The Concession Agreement provides a maximum toll rate that can be charged. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity (13.1%) has been reached.

=== Contract Structure ===

The Concession Contract was ratified by the Greek Parliament in December 1996 by law 2445/96 due to lack of legal framework. It should be noted that any amendments to the concession contract need to be ratified by the Greek parliament. The maximum applicable tariff is defined in the contract. It also includes a safety mechanism, securing the interests of the Greek State through a maximum Return on Equity. The Concession period will extend for a maximum of 25 years (including construction period), or it will end earlier, in the case that the maximum Return on Equity has been reached (11.6%). This is a typical concession scheme, under the DBFO structure.

The project financing has been ensured through State contributions including EC Structural Cohesion Funds, private equity and loans.
Commercial banks involved include: Bank of Tokyo-Mitsubishi, HypoVereinsbank, Commercial Bank of Greece, HSBC Athens, National Bank of Greece, Société Generale, European Investment Fund, ABN AMRO Bank NV, Agricultural Bank of Greece, Alpha Credit Bank, Banca Monte dei Paschi di Siena (London), Bank of Scotland, De Nationale Investeringsbank NV, Piraeus Bank Greece, European Investment Bank, ING Bank NVand Ergobank.

Expropriation cost was undertaken entirely by the Greek State. Loan guarantees were provided by the concessionaire during construction and by the State for the operations phase.

=== Risk Allocation ===

Overall, the Greek government was able to transfer construction, operation, and traffic risks (subject to a standard non-compete clause) to the SPV under the concession contract. The lenders to the SPV were therefore fully exposed to these risks, mitigated as they might be through the construction and operation subcontracts. However, EIB's policy is that they do not accept construction risk, and they will usually accept remaining project risks only after a period of satisfactory operation and the demonstration of acceptable cover ratios. Accordingly, as is usually the case, the EIB was guaranteed by the other lenders and, in this case, by the sponsors, providing 50% cover each. Once construction was complete, the EIB allowed these guarantees to be replaced by a guarantee from the Greek government. In this way, the Greek government did effectively transfer construction risk to the SPV, but has taken operation and traffic risk back through the guarantee, albeit at a reduced level compared with the risk at the outset.

A project of such scale met significant difficulties during its realisation. The financial close was delayed, mainly because of uncertainties surrounding the project. These uncertainties increased the risks for the banks, delaying the signing of the financial agreement and forcing the public sector to provide funds to the sponsors to begin construction before financial close was reached. Other difficulties were due to variation orders issued by the State, mainly for environmental reasons, which involved significant design changes.

Furthermore, the concession contract did not include mechanisms for extensions of time and delay make-up in case of State-instructed variations. Solutions were found after extensive negotiations between all parties involved, and amendments to the concession contract were introduced, leading to the satisfaction of the banks and reaching financial close.
Risk allocation is depicted in Figure 4.
[[File:attica4.png]] 
'''Figure 4: Risk allocation'''

The environmental risk was undertaken by the State in reference to environmental law changes. The Greek State for environmental reasons has proceeded to design changes in Imittos Western Peripheral Section, after the concession commencement. Variation orders were also related to water management in the area of the project. On the other hand, the compliance with environmental guidelines was solely attributed to the SPV.

Land expropriation risk was allocated to the Greek State. Considering the difficulties of expropriating land in a city, such as Athens (as opposed to expropriating in the countryside) the concessionaire allocated full risk to the public sector as it .

=== Performance ===

The Independent Engineer was responsible for evaluating construction performance, along with the awarding authority, which is responsible for evaluating operating performance during the operations period.

Table 1 below shows the performance indicators set out in the Operation and Maintenance Agreement with the Attica Tollway Operation Authority.

Attica Tollway Operations Authority (Attikes Diadromes S.A.) has adopted an integrated monitoring system, based on measured Key Performance Indicators (KPIs). The system consists of 35 indicators covering all the major aspects of operation, such as traffic management, toll operation, infrastructure maintenance, human resources, violation enforcement, etc. A reliable and accurate system capable of measuring any fluctuation of performance on the key areas of safety, maintenance effectiveness, mobility, level of provided services and user satisfaction was developed. Various methods were used to measure the KPIs, one of the major sources of data for the KPIs system is the conduction of extensive surveys, such as Road Side Survey (RSS), telephone survey for the subscribers and "mystery shopping". Indicatively, the annual RSS covers about 7500 questionnaires and "mystery shopping" about 8000 questions on an annual basis.
The results of the KPIs are widely used for the continuous improvement of the operation and the services provided to the Tollway users (Tyrogianni et al, 2012).

'''Table 1: Attica Tollway Performance Indicators'''
{| class="wikitable" style="width=100%"
! Ref.
! align="left"| Item
! align="left"| Planned Level of Service
|-
| 1 || Response time in case of incident || 20 minutes
|-
| 2 || Repair time for damage of equipment causing danger to users || Action shall start within 12 hours
|-
| 3 || Repair time for other serious damage of equipment || Action shall start within 24hours
|-
| 4 || Average waiting time in each Toll Station
Level A: waiting time between 0 and 120 seconds
Level B: waiting time above 120 seconds
|| Waiting Time Level B must not exceed 90 hours per year, unless due to exceptional circumstances outside the control of the Operator
|-
| 5 || Standards for money handling: Maximum Accepted Toll Collection Discrepancy (MATCD) between the system and the amount deposited in the Banks || MATCD as per the Manuals Phase B
|}
Furthermore, Attica Tollway considers carbon footprint assessment to be a very powerful tool in understanding the impact of the tollway’s operational activities on global warming. In this context, the company has installed measuring devices and carries out calculations of its carbon footprint (Mandalozis et al, 2012).

Finally, the tollway holds one of the best safety records in the world (Papaioannou, 2006). It serves over 250,000 users daily for short and long trips and has exceeded its forecasts by more than 30% (see figure 5).

From the start of operation and until 2011, the actual traffic was higher than the predicted. However, for the first time in 2012, this has changed and the actual traffic was lower than the predicted one. In addition,based on annual financial reports, Attica tollway is making profits. The report for year 2013 showed net profits (before tax) 68.708.000 and 20.918.000 euros (after tax). Net profits dropped by 19.212.000 euros (net after tax) in relation to 2012.As the traffic drop has stabilised, it is considered that this level of profitability is sustained. No changes have been made to toll prices.

==Project Outcomes==
The Attica Tollway was designed to:
1. provide access to the new Athens International Airport
2. leave urban congestion by providing a ring road around metropolitan Athens
3. reduce accidents
4. reduce environmental impact

All 4 objectives have been met and traffic forecasts under normal macro-economic conditions had been exceeded.After 6 years of recession, the PPP remains profitable even though traffic has been below forecasts since 2011.

The following key critical success factors can be identified:

1. The project was planned since the 1960s. When it was initiated it was a long needed infrastructure to provide alternative route connecting the Athens metropolitan area and reducing traffic through the centre of the city of Athens.

2. The motorway is practically the exclusive access to the Athens Airport. (Alternative are the Athens Metro and sub-urban rail and road link (not-tolled) from the south part of Athens).

3. The motorway is of high quality.

The pioneer construction, the care for the environment, the high-level operation and the pioneer technologies used, in combination with the human factor, are sectors of the project which received international acknowledgements and awards, while they have distinguished Attica Tollway as a model project for Greece.

Attica Tollway was built on time and on budget and it was the backbone of the transportation network during the execution of the Athens Olympic Games in 2004. The problems faced during construction were solved thanks to the good faith negotiations held between all parties involved. Attica Tollway is a successful project and has exceeded forecast expectations of demand. The reason is that Attica Tollway has produced significant improvements to traffic conditions in the metropolitan area, as well as benefits in the economy and overall infrastructure. In addition, it has received enormous public acceptance despite the initial resistance and the imposition of open & flat toll regime.

On the other hand, the long term financial crisis can affect the project significantly. Between 2009 and 2013 the country’s GDP has fallen by 20%. While unemployment has risen from 8% to 29%. Most of this negative impact is concentrated in the Athens metropolitan area where approximately 50% of the population is located. In connection with a significant drop in car ownership and fuel prices, it is considered that the project has show considerable resilience and is still viable. However, it is difficult to predict the future if the situation continues.

The motorway has a very high rate of acceptability. The company runs biannual user satisfaction surveys. These indicate 90% user satisfaction.Only in the very early stages of the project, there was opposition with respect to the flat rate toll as opposed to tolls based on distance.However, this opposition was soon overcome, especially as the scope of the infrastructure was to serve traffic transversing the metropolitan area and not traffic between suburbs.

Regarding project goals, current studies show that the average vehicle - trip time is reduced by 28 mins when choosing the Attica Tollway, there is considerable fuel consumption reduction, while reliability was improved fully in line with expectations and more (ex-post (observed) share of delayed traffic: less than 1%). The same applies to safety with ex-post (observed) total accidents per 1000 vkm by year:0.000547.

===Economic Impact===
The project had a significant economic impact in terms of supporting development in a region which was previously underdeveloped and rural.
The motorway serves the Athens International Airport and provides a link to the major road access in Greece (included in the TEN-T). By relieving congestion in Athens (before all traffic was mainly through the city centre), it also allows for the balanced development in the greater Athens Region.

===Social Impact===
The Attica Tollway was a challenge for the fragmented Greek Construction Sector to prove technical capabilities and ability to take on a major financing/investment project.In the process many initial consortium members dropped off. The project may be considered a milestone in the development of the Greek construction sector.

===Environmental Impact===
The impact to the environment (noise and emissions) is continuously monitored.
The project reduces fuel consumption.It also included anti-flooding works and in practice is the anti-flooding protection of the Athens metropolitan area.

== References ==

#B. Halkias, A. Roumboutsos, A. Pantelias, 2013, Attica Tollway, In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ISBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
#Attiki Odos Contract, Greek Law 2445/1996 of the Official Gazette.
#Halkias, B., Tyrogianni, E., “PPP projects in Greece: The case of Attica Tollway” Routes/Roads PIARC, April 2009.
#Halkias, B., Tyrogianni, E., Kitsos, D., “A significant infrastructure project within the urban environment of Athens: The case of Attica Tollway” IABSE September 2008
#Harito, J. and Morello, S. (2011) Performance Plus, ITS International, 17(3) 44-45
#Mandalozis, D. Halkias, B., Tyrogianni, H. Kalfa, N. (2012) The Carbon Footprint of Attica Tollway, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2988-2998
#Papaioannou, P. (2006) Recent Experience on Success and Failure Stories from Funding Large Transportation Projects in Greece, 1st International Conference on Funding Transportation Infrastructure, Banff, Alberta, Canada, 2-3 August 2006
#Papandreou, K., Tyrogianni, E., “Level of Service in Concession Motorway Projects” XXXV ASECAP Study and Information Days
#PricewaterhouseCoopers (2005) Delivering the PPP promise*: A review of PPP issues and activity, PricewaterhouseCoopers LLP
#Sofianos, A.I., Loukas, P., Chantzkos, Ch. (2004) Pipe jacking a sewer under Athens, Tunnelling and Underground Space Technology, 19(2), 193-203
#Tyrogianni, H., Halkias, B. Politou, A., Kotzampassi, P. (2012) The Attica Tollway Operations Authority KPI Performance System, TRA-Europe 2012, Prodedia- Social and Behavioural Sciences, 48, 2999-3008
#www.aodos.gr
#*Roumboutsos, A. (2015) “Attika Tollway, The Athens Ring Road” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

[[Category:Case Studies]]

Case Studies: Moreas Motorway, Greece

2015-06-12T10:41:48Z

Pmoraiti: /* References */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==Project Outcomes==
The project has achieved the key construction goal, which was to reduce travel time between Corinth or Athens and Kalamata (and in general the south of the Peloponnese). Travel time has been reduced from 6-7 hrs (from Athens) to 2hrs15.The motorway supports tourism and mobility in the Peloponnese in a region that suffered severely from under development of infrastructure.The project managed to continue construction during the economic crisis, while the other four (4) motorway concessions that were assigned in 2007/2008 stopped works in 2010 and were involved in lengthy re-negotiations for four years. The economic crisis has had, however, a severe impact on traffic and has impacted the success of the project.

The following critical success factors can be considered:

Transport success criteria
* The motorway was very needed to allow the connection of the south of the Peloponnese with the rest of the country
* The new road is safe and allows for comfortable driving in total contrast to the previous connection.

Contract success criteria
* Forecasts are updated twice a year and the state supports the difference
* The major shareholder of the concession (70%) is also the main concessionaire in the Attika tollway and, through that, project “collateral” was managed.
* The concessionaire followed a staged development giving the most important parts of the motorway providing very soon an adequate level of operation
* There are many toll stations with low tolls throughout the motorway. This allows for the motorway to be used as a better alternative for commuting between adjacent agglomerations - thus serving local transport.

Critical failure factors include:
*economic crisis, which greatly influenced traffic demand
*archeological sites
*lack of common traffic monitoring system

None of the above could be avoided by the State or the concessionaire. The contract specifically states that the concessionaire monitors traffic and toll collection and the State has direct access to this information. This has not been effected, resulting in the lack of a common assessment of the actual traffic.

Toll prices increased in 2014 and had a negative impact on revenues and traffic. As of Jan 2015, toll prices have been reduced.Finally, the project has high acceptability.

===Economic Impact===
*Reducing travel time has allowed /improved the access to tourism locations in the south of Peloponnese: Kalamata, Mani, Monemvasia, Mistra, Sparta, Pylos etc.
*There are announcements on the considerable increase in tourists.

===Social Impact===
The motorway has significantly supported mobility and safety in the region.

===Environmental Impact===
The reduction in travel time has significant impact on the environment.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

*Roumboutsos, A. (2015) “Moreas Motorway” in Łukasiewicz, A., Roumboutsos A., Liyanage C., Pantelias A., Mladenovic G., Brambilla M., Bernardino J. and Mitusch K. BENEFIT Database, Deliverable of WP6, BENEFIT Business Models for Enhancing Funding and Enabling Financing of Infrastructure in Transport, Horizon 2020, DG Research and Innovation

Case Studies: Moreas Motorway, Greece

2015-06-12T10:32:05Z

Pmoraiti: /* Project Outcomes */

Case Studies: Moreas Motorway, Greece

2015-06-12T10:29:55Z

Pmoraiti: /* Project Outcomes */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==Project Outcomes==
The project has achieved the key construction goal, which was to reduce travel time between Corinth or Athens and Kalamata (and in general the south of the Peloponnese). Travel time has been reduced from 6-7 hrs (from Athens) to 2hrs15.The motorway supports tourism and mobility in the Peloponnese in a region that suffered severely from under development of infrastructure.The project managed to continue construction during the economic crisis, while the other four (4) motorway concessions that were assigned in 2007/2008 stopped works in 2010 and were involved in lengthy re-negotiations for four years. The economic crisis has had, however, a severe impact on traffic and has impacted the success of the project.

The following critical success factors can be considered:

Transport success criteria
* The motorway was very needed to allow the connection of the south of the Peloponnese with the rest of the country
* The new road is safe and allows for comfortable driving in total contrast to the previous connection.

Contract success criteria
* Forecasts are updated twice a year and the state supports the difference
* The major shareholder of the concession (70%) is also the main concessionaire in the Attika tollway and, through that, project “collateral” was managed.
* The concessionaire followed a staged development giving the most important parts of the motorway providing very soon an adequate level of operation
* There are many toll stations with low tolls throughout the motorway. This allows for the motorway to be used as a better alternative for commuting between adjacent agglomerations - thus serving local transport.

Critical failure factors include:
*economic crisis, which greatly influenced traffic demand
*archeological sites
*lack of common traffic monitoring system

None of the above could be avoided by the State or the concessionaire. The contract specifically states that the concessionaire monitors traffic and toll collection and the State has direct access to this information. This has not been effected, resulting in the lack of a common assessment of the actual traffic.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:27:51Z

Pmoraiti: /* Project Outcomes */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==Project Outcomes==
The project has achieved the key construction goal, which was to reduce travel time between Corinth or Athens and Kalamata (and in general the south of the Peloponnese). Travel time has been reduced from 6-7 hrs (from Athens) to 2hrs15.The motorway supports tourism and mobility in the Peloponnese in a region that suffered severely from under development of infrastructure.The project managed to continue construction during the economic crisis, while the other four (4) motorway concessions that were assigned in 2007/2008 stopped works in 2010 and were involved in lengthy re-negotiations for four years. The economic crisis has had, however, a severe impact on traffic and has impacted the success of the project.

The following critical success factors can be considered:

Transport success criteria
* The motorway was very needed to allow the connection of the south of the Peloponnese with the rest of the country
* The new road is safe and allows for comfortable driving in total contrast to the previous connection.

Contract success criteria
* Forecasts are updated twice a year and the state supports the difference
* The major shareholder of the concession (70%) is also the main concessionaire in the Attika tollway and, through that, project “collateral” was managed.
* The concessionaire followed a staged development giving the most important parts of the motorway providing very soon an adequate level of operation
* There are many toll stations with low tolls throughout the motorway. This allows for the motorway to be used as a better alternative for commuting between adjacent agglomerations - thus serving local transport.

Critical failure factors include:
*economic crisis, which greatly influenced traffic demand
*archeological sites
*lack of common traffic monitoring system

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:27:34Z

Pmoraiti:

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==Project Outcomes==
The project has achieved the key construction goal, which was to reduce travel time between Corinth or Athens and Kalamata (and in general the south of the Peloponnese). Travel time has been reduced from 6-7 hrs (from Athens) to 2hrs15.The motorway supports tourism and mobility in the Peloponnese in a region that suffered severely from under development of infrastructure.The project managed to continue construction during the economic crisis, while the other four (4) motorway concessions that were assigned in 2007/2008 stopped works in 2010 and were involved in lengthy re-negotiations for four years. The economic crisis has had, however, a severe impact on traffic and has impacted the success of the project.

The following critical success factors can be considered:
Transport success criteria
* The motorway was very needed to allow the connection of the south of the Peloponnese with the rest of the country
* The new road is safe and allows for comfortable driving in total contrast to the previous connection.

Contract success criteria
* Forecasts are updated twice a year and the state supports the difference
* The major shareholder of the concession (70%) is also the main concessionaire in the Attika tollway and, through that, project “collateral” was managed.
* The concessionaire followed a staged development giving the most important parts of the motorway providing very soon an adequate level of operation
* There are many toll stations with low tolls throughout the motorway. This allows for the motorway to be used as a better alternative for commuting between adjacent agglomerations - thus serving local transport.

Critical failure factors include:
*economic crisis, which greatly influenced traffic demand
*archeological sites
*lack of common traffic monitoring system

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:20:48Z

Pmoraiti: /* Performance */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

According to the contract, traffic and toll collection would be diligently monitored with the State having access to the actual figures.

According to the concessionaire, traffic has dropped by 40% since 2009. At the same time, Kalamata and other end locations of the motorway are reporting a steep increase in tourism due to the use of the motorway.

In 2013, the EIB proceeded to a draw stop, as the financial model was no longer valid due to the drop in traffic.

Actual figures are not released. In 2013, the average daily traffic was 41,266 vehicles.
The concessionaire reports that losses due to reduced traffic amount to 500 million euros, while the EIB estimates 200 million.There is an on-going discussion for a loss of 250-350 million euros since 2009.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:13:17Z

Pmoraiti: /* Introduction */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced delays (2.5 years)due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:10:14Z

Pmoraiti: /* Introduction */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced significant delays due to slow financing, the economic crisis and archeological findings.

To date, 90 million euros have been approved.The EIB in 2013 (Summer) stopped payments based on the reasoning that the financial model was not valid anymore due to the drop in traffic and requested that the Greek State foresee an additional 200 million euros in capital support.Other pending claims on the part of the concessionaire amount to 100 million euros, while the Greek State is also making demands against the concessionaire.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:08:24Z

Pmoraiti: /* Performance */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced significant delays due to slow financing, the economic crisis and archeological findings.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Availability is the key performance indicator connected to the staged commissioning of parts of the motorway.

Penalties were connected to delays due to the contractor.Only the first part of the project was delivered on time. The delayed parts did not face penalties

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:07:25Z

Pmoraiti: /* Introduction */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

The project has faced significant delays due to slow financing, the economic crisis and archeological findings.

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:05:25Z

Pmoraiti: /* Risk Allocation */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

Risk allocation is described in Figure 3. More specifically, according to the concession contract the design, construction,maintenance, and financial risks are borne by the private sector. The Government retains archeological and revenue risks and is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T10:01:31Z

Pmoraiti: /* Contract Structure */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The public sector has the obligation to expropriate land,construct the side roads,and install other structures for electricity supply.

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

The concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. More specifically, according to the concession contract all risks (design, maintenance, exploitation and commercial risk) are borne by the private sector. The Government is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T09:59:33Z

Pmoraiti: /* Contract Structure */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate (maximum toll at 2007 prices is 0.04 euros/km, which may be adjusted during the day but can never be over 2 times the maximum approved).

===Risk Allocation===

The concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. More specifically, according to the concession contract all risks (design, maintenance, exploitation and commercial risk) are borne by the private sector. The Government is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T09:58:20Z

Pmoraiti: /* Contract Structure */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees, but tolls rate cannot exceed a maximum rate.

===Risk Allocation===

The concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. More specifically, according to the concession contract all risks (design, maintenance, exploitation and commercial risk) are borne by the private sector. The Government is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T09:55:11Z

Pmoraiti: /* Project Timing */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on the smooth implementation of the project. However, the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees but tolls rate cannot exceed a maximum rate.

===Risk Allocation===

The concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. More specifically, according to the concession contract all risks (design, maintenance, exploitation and commercial risk) are borne by the private sector. The Government is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T09:54:30Z

Pmoraiti: /* Key Purpose for PPP Model Selection */

{{Infobox
|header1 =
|header2 = Moreas Motorway, Greece
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract Duration:
|data3 = 30 years
|header4 =
|label4 = Budget:
|data4 = EUR 904M (initial agreement); estimated at EUR 1,000M
|title = Project Overview
|image = [[Image:Moreas1.png|300px]]
|caption = Figure 1: Photo of Moreas Motorway, Greece
Source:http://www.moreas.gr

| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Call for Tender:
| data1 = 2005
| label2= Contract Approved:
| data2 = 31 January 2007
|label3 = Ratification by the Hellenic Parliament:
| data3 = 14 April 2007
|label4 = Financial close:
|data4 = 31 January 2008

| header6 = Other important dates for the project
{{Infobox
|child=yes
| label1 = (upgraded) Section Korinthos- Tripoli is delivered:
| data1 = March 2010
| label2 = The section Tripoli-Athinaio is delivered:
| data2 = November 2010:
| label3 = Ownership of the Athineo-Lefktro section is transferred:
| data3 = November 2010
| label4 = The Lefktro-Paradeisia section is delivered:
| data4 = December 2010
|label5 = The Tsakona-Thouria section is delivered:
| data5 = July 2012
|label6 = Ownership of the partially operational Paradeisia-Tsakona section is transferred:
|data6 = December 2012
|label5 = Completion of interchanges, etc. for Kalamata
| data5 = March 2015
|label6 = Expected completion of works
|data6 = End of 2015

}}

}}

}}

== Introduction ==
The Moreas Motorway (otherwise known as the A7 motorway) provides a link between the Isthmus of Corinth (and eventually Athens) and Kalamata and Sparti in the Peloponnese. The motorway, when completed, will have a length of 205 km with two lanes in either direction separated by a central reservation. The concession includes a brownfield section of 82.6km (Corinth-Tripolis) constructed in 1992, and greenfield sections including tunnels, bridges and interchanges. It will provide safe and comfortable travel through the mountainous central Peloponnese.

Several sections have been gradually opened to traffic, improving significantly the average travelling time and safety conditions.

[[Image:Moreas2.png|500px]] 
Figure 2: Moreas Motorway

The concession was awarded in 2007 for a period of 32 years to MOREAS S.A. Remuneration is achieved through tolls. According to the concession contract, the State is restrained from building any alternative motorway connections that may affect the traffic and the toll revenues of the concessionaire. The State is also obliged to supervise the tolling of other competitive motorways.

General features
*Motorway length (once construction is completed): 205 km
*Cross section (once construction is completed): 2 lanes in either direction, with a central traffic island
*Number of interchanges (once construction is completed): 24
*Existing Korinthos - Tripoli section
*Length: 82.6 km
*Interchanges: 10 (once construction is completed)
*Tunnels
*Sterna: Length 0.9 km (twin tunnel)
*Neochori: Length 0.7 km (twin tunnel)
*Artemissio: Length 1.4 km (upgrading of existing single tunnel and construction of a second branch)
*Kalogeriko: Length 0.6 km (twin tunnel)
*Rapsomati: Length 1.3 km (twin tunnel)

== The Contracting Authority (Public Party) ==

The Greek State represented by the Ministry of Development, Competitiveness, Infrastructure, Transportation and Networks is the contracting authority. The supervising authority on behalf of the Ministry is the Special Secretariat of Public Works for Operation and Maintenance of Concession Projects (EYDE / LSEP).

The legal basis for the concession was Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) as the PPP Law 3389/2005 only concerned projects with a budget of less than EUR 200M.

The Greek Parliament was responsible for the ratification of the concession contract, as expressed in Law 3559/07 (Ratification by law of the concession contract).

== The Concessionaire (Private Party) ==

The concession for the A7 motorway was awarded in 2007 to “MOREAS S.A.” with the following shareholders:

* AKTOR Concessions S.A., 71.67%;
* J &P-Avax S.A., 15.00%;
* Intracom Holdings., 13.33%.

The construction joint venture “MOREAS” undertook the design and construction. The Moreas joint venture had the same shareholders as Moreas S.A.. Subcontractors were external engineers and advisors, while Faber Maunsell Ltd was the independent engineer.

The concessionaire contributed 70% of the project finance (equity and loans) and 30% was Greek State and EU co-financing.

EIB loans are approximately EUR 150M. Alpha, Piraeus, Agricultural, Attica, EFG, Emporiki, General, Millennium, National Bank of Greece, Bank of Ireland, Bayerische Laba, West LB, HVB Athens, BNP Paribas, and Royal Bank of Scotland provided loans of approximately EUR 683M (Greek banks EUR 365M and foreign banks EUR 318M).

== Users ==

The Moreas Motorway provides access to travelers and goods crossing the Peloponnese. The motorway provides safe and comfortable travel to destinations in the South of Peloponnese reducing the previously long journey between Athens and Kalamata to approximately two hours.

Access to the motorway is permitted to all motorised vehicles exceeding a speed of 50km/hr. Pedestrians and bicycles are not allowed on motorways according to the Road Circulation Code.

In 2013, the Average Daily Traffic was 41,266 vehicles. The financial crisis has of course reduced traffic volumes, but so far has not been excessively damaging.

== Key Purpose for PPP Model Selection ==

The Moreas Motorway belongs to the second wave of PPP transport infrastructure projects (awarded between 2007-2008) - the so-called “axis of development” motorways. This followed the successful experience of the first wave, which included Athens International Airport, the Rio-Antirio Bridge and the Athens Ring Road.

European Structural Funds supported the initiative, providing for the application of the so-called mixed or hybrid model as defined by the World Bank, which foresaw public co-financing. This used public co-financing to achieve project financing viability, whilst tapping into private sources to finance infrastructure development.

The State wanted to build/improve the motorway to:
*Reduce/diminish Travel time,(Athens- Kalamata in 2 hours) providing fast and safe transport of people and goods
*Road safety reasons
*Contribution to economic development for Peloponnese.
*Improve existing parts

As a part of the Western Road axis from the Albanian borders to Kalamata, it connects PATHE with Egnatia Road.

There was need to make the country more competitive in terms of its facilitating infrastructure base as well as giving a boost to its economy, when at the same time such a cost could be difficult to be covered as public debt was already high.

The General Government Budget deficit is very high and as a result of the deficit targets that had to be achieved, it was extremely difficult for the Greek State to finance such a construction relying on its own funds or even getting a financing from the EU. At the same time the fact that the motorway has been designed as a part of the PATHE TEN-T axis has been catalytic. The financial crisis is also catalytic for the project. The toll revenues are not as high as predicted due to less traffic and a movement of citizens that refuse to pay, when at the same time financing is really hard.

== Project Timing ==

The need to implement the project was high at the time of initial tendering, mainly due to the lack of proper road infrastructure to provide links within the Peloponnese. Macro-economic figures at the time (e.g. debt ceiling and GDP forecasts) also justified the project’s implementation.

Greece’s sovereign debt crisis has had an impact on smooth implementation of the project. However the Moreas Motorway has not suffered from stoppage of financing from banks or the State, nor suspension of construction, as in the case of sister projects in the second PPP wave. Furthermore ”non-payment-of-toll” movements have not been important on the Moreas Motorway.

== Project Locality and Market Geography ==

The Moreas Motorway crosses through the centre of the Peloponnese, providing access between two major cities in the south of the Peloponnese to Athens via its connection to PATHE (Patras-Athens-Thessaloniki) Motorway.

In this context, it has reduced congestion and travel time and supported the development of tourist destinations in the South of the Peloponnese.

== Procurement & Contractual Structure ==

=== Tendering ===

The tender was conducted under Law 3310/2005 (transparency for public procurements) and Presidential Decree 609/85 (public works contracting) and followed a two-stage procedure.

In the first stage, prospective bidders were requested to submit proposals as well as to contribute to the technical specifications, and provide a respective work plan. Three consortia responded: Hellinikes Diadromes, Moreas and Odopoiisis. All bidders were invited to take part in the second stage, but only two consortia submitted technical and financial offers. These were:

* Hellinikes Diadromes – a consortium of FCC Construction S.A., Sacyr S.A., Somague Engenharia S.A., Attikat A.T.E., and Proodeutiki A.T.E.);
* MOREAS – a consortium of Helliniki Tecnhodomiki S.A., Impregilo SpA, and Pantechniki S.A..

MOREAS was the preferred of the two bidders. The contract was awarded on 31 January 2007. Following the award, Law 3559/2007 (May 2007) corresponds to the ratification of the concession contract by the Greek Parliament.

===Contract Structure===

The concession contract, made public as Law 3559/2007, describes the detailed base case for the design, construction, financing, maintenance and operation of the motorway. It describes the various rights and obligations of each party along with their respective commitments. It also provides a precise procedure and the required authorisations in the case of departures from the base case.

The objective of the contract is described as follows:

* Motorway length (once construction is completed): 205 km;
* Cross section (once construction is completed): two lanes in either direction, with a central reservation;
* Number of interchanges (once construction is completed): 24;
* Existing Korinthos - Tripoli section (82.6km);
* Interchanges: 10 (once construction is completed)
* Tunnels:
** Sterna: 0.9 km (twin tunnel)
** Neochori: 0.7 km (twin tunnel)
** Artemissio: 1.4 km (upgrading of existing single tunnel and construction of a second tube)
** Kalogeriko: 0.6 km (twin tunnel)
** Rapsomati: 1.3 km (twin tunnel)
* Motorway Service Stations: four new stations at:
** Spathovouni, Korinthia District (both directions)
** Nestani, Arkadia District (direction to Athens)
** Arfara/Ag. Floros, Messinia District (both directions)
** Pellana, Lakonia District (both directions)
* Preservation of the existing service station at Artemissio (direction to Kalamata)

The end of the concession is officially set at 2038 when the motorway will be handed over to the Greek State. Return on investment is achieved through toll fees but tolls rate cannot exceed a maximum rate.

===Risk Allocation===

The concessionaire is fully responsible for the project. Risk allocation is described in Figure 3. More specifically, according to the concession contract all risks (design, maintenance, exploitation and commercial risk) are borne by the private sector. The Government is responsible for any amendments to the initial regulatory system. Finally, the force majeure risk is shared.

[[Image:Moreas3.png]]

===Performance===

Tolls are the sole source of remuneration. In 2013 the average daily traffic was 41,266 vehicles.

Since 2008, various sections of the motorway have been delivered as follows:

* March 2010: upgraded brownfield section Korinthos- Tripoli;
* November 2010: the Tripoli-Athinaio section;
* December 2010: the Lefktro-Paradeisia section;
* July 2012: the Tsakona-Thouria section;

At the end of 2013 the project was 92% complete. Its full completion is expected in 2014.

==References==
*Law 3559/2007. Moreas S.A. concession contract. Government gazette.

*http://www.moreas.gr

*Interview with Moreas S.A.

*Hellaktor Annual Financial Report 1 January to 31 December 2012

*Hellaktor Group Presentation, April 2014

*I. Dimitropoulos, A. Diakidou, A. Roumboutsos, 2014, Moreas Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

Case Studies: Moreas Motorway, Greece

2015-06-12T09:53:08Z

Pmoraiti: /* Key Purpose for PPP Model Selection */

Case Studies: Moreas Motorway, Greece

2015-06-12T09:52:43Z

Pmoraiti: /* Key Purpose for PPP Model Selection */

Case Studies: Moreas Motorway, Greece

2015-06-12T09:48:21Z

Pmoraiti: /* The Concessionaire (Private Party) */

Case Studies: Moreas Motorway, Greece

2015-06-12T09:44:56Z

Pmoraiti:

Case Studies: Moreas Motorway, Greece

2015-06-12T09:40:56Z

Pmoraiti: /* Introduction */

Case Studies: Istrian Y Toll Motorway

2015-06-10T14:06:17Z

Pmoraiti: /* Social Impact */

Case Studies: Istrian Y Toll Motorway

2015-06-10T14:03:27Z

Pmoraiti: /* Performance */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

State financial contribution has averaged EUR 17M p.a. since 2000, and is expected to remain at this level until the end of the contract period. Therefore, the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

Concessionaire's total revenues are currently around 38million euro, expected to rise to 60 million euro at the end of the concession period.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T14:01:30Z

Pmoraiti: /* Contract Structure */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

State financial contribution has averaged EUR 17M p.a. since 2000, and is expected to remain at this level until the end of the contract period. Therefore, the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:58:48Z

Pmoraiti: /* Contract Structure */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999, as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:57:37Z

Pmoraiti: /* Contract Structure */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. The details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:55:37Z

Pmoraiti: /* Project Timing */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981, the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. Details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:52:31Z

Pmoraiti:

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981 the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. Details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:52:18Z

Pmoraiti:

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Financing Plan for Phase 1B closed and Refinancing Plan for Phase 1A closed.
- Construction of Phase 1B commenced.
| data4 = 2003
| label5 = Phase 1B completed and operational.
| data5 = 2006
| label6 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data6 = 25 August 2008
| label7 = Construction of Phase 2A commences
| data7 = 2008
| label8 = End of concession
| data8 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981 the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. Details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:48:59Z

Pmoraiti:

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability
| data3 = 25 February 2003
| label4 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin
| data4 = 25 August 2008
| label5 = Construction of Phase 2A commences
| data5 = 2008
| label6 = End of concession
| data6 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981 the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. Details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Istrian Y Toll Motorway

2015-06-10T13:45:31Z

Pmoraiti: /* Introduction */

{{Infobox
|title = Project Overview
|header1 = Istrian Y Toll Motorway, Croatia
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 32 years in total (originally 32 years for toll collection, but for reconciliation with the regulations this term was shortened to 32 years from the concession award, i.e. until September 2027)
|header4 =
|label4 = Budget:
|data4 = Total project cost EUR 1,150- 1,200M (construction cost estimated at EUR 630 M)
|title = Project Overview
|image = [[Image:IstrianY1.png|300px]]
|caption = Figure 1:Overview of Istrian Y Toll Motorway

|header5 = Project Time Line
{{Infobox
|child = yes
|label1 = Project Conceived:
|data1 = 1970s
|label2 = Tender Call:
|data2 = 1994
|label3 = Contract Award:
|data3 = 25 September 1995
|label4 = Start of construction:
|data4 = 1997
|label5 = Contract ends:
|data5 = 2027

|header6 = Other Important Dates (contract revision and amendment):
{{Infobox
| child = yes
| label1 = Phased construction was agreed:
| data1 = 18 September 1997
| label2 = The grantor got back the right to determine toll policy in exchange for paying financial contributions to the concessionaire whenever toll revenues are insufficient:
| data2 = 27 August 1999
| label3 = Approval of the refinancing of the concessionaire’s existing obligations, with the grantor returning its financial contribution if the project reaches financial stability:
| data3 = 25 February 2003
| label4 = Agreement on 90 km full profile motorway construction from Umag to Pula and from Kanfanar to Pazin, construction of Phase 2A commences
| data4 = 25 August 2008
| label5 = End of concession
| data5 = 2027

}}

}}

}}

==Introduction==

The Project entails the financing, design, construction and operation of the 145km long road network – The Istrian Y Motorway Project.
At the end of 2013 the Republic of Croatia had a motorway network of 1,288 km in place with an additional 11 km to be completed in 2014. In 2013, motorways corresponded to approximately 4.8% of the total road network of 26,907 km (see Figure 2). These include 20.8km of three-lane, 1,206km of two-lane and 61.2km of single lane dual carriageways. Tunnels are a legacy of the Croatian road network: 51 tunnels with a total length of 47.3 km, the longest being 5.8 km.

The Istrian Y (Istarski Ipsilon) section is a part of Croatian motorway network, renowned as the first public-private partnership in Croatia. It is called the Istrian Y (Ipsilon) as it is shaped as the letter Y, with the three stretches all intersecting at the Kanfanar interchange (see Figure 1). The location of the Istrian Y is shown in Figure 2.

[[File:IstrianY2.png|500px]]

'''Figure 2: Istrian Y (circled) as part of the Croatian motorway network (2011)''' 
'''''Source: Croatian Association of Toll Motorways Concessionaires - HUKA'''''

The Istrian Y is 141 km long (145 km including intersections), comprising:

* a 64.21 km section of the international motorway A8 from Matulji to Kanfanar;

* a 76.79 km section of the international motorway A9 connecting Slovenia to Pula via Kanfanar.

The A8 branch has been built as a single lane limited-access road, but the part between Kanfanar and Pazin was designed as a dual carriageway and built so as to be able to be upgraded to a full-profile motorway. The A9 branch between the Croatian border with Slovenia and Kanfanar is a single lane limited-access road, while the section from Kanfanar to Pula has two lanes. The most prominent features of the Istrian Y are:

* The Učka tunnel. This is the third longest tunnel in Croatia (5.4 km), opened in 1981. It is tolled, with passenger car tolls of 28 kuna (EUR 3.70)

* The Limska Draga viaduct. This was constructed between 1988 and 1991, and is 552m long and up to 120m high.

* The Mirna bridge, constructed over the Mirna river. The bridge is 1,355m long and 40m high. It opened to traffic in 2005, and has a passenger car toll of 14 kuna (EUR 1.90).

The Istrian Y motorway connects the Istrian Peninsula to the A8 and A9 international motorways, i.e. to continental Croatia and central Europe to the north, and Slovenia and Italy to the west. A section of the Istrian Y motorway connects the ports of Rijeka (the third biggest city in Croatia) and Pula. The Istrian Y motorway is now connected to the Rijeka–Zagreb motorway and works have started to improve the connection to the A1 motorway to Split, the second largest Croatian city. The construction of the Istrian Y was very complex as there are 16 overpasses, 28 underpasses, 15 viaducts and one bridge on the A8 motorway section while there are 32 overpasses, 27 underpasses, 3 viaducts and two bridges on A9 motorway section. The largest intersection (7 km long) is in Kanfanar. Many innovative construction solutions have been installed along the motorway.

The construction was carried out in phases.
Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000
passenger cars, a full motorway profile together with the second tube of the
Učka Tunnel was to be built. Phase 2A included the construction of the dual carriage motorway on the entire Istrian Y, while Phase 2B the:
*Construction of Rogovići-Učka-Matulji dual carriage motorway with the second tube of Učka Tunnel
*Conversion of Limska Draga viaduct and Mirna Bridge single carriage motorway to two lanes in each direction

==The Contracting Authority (Public Party)==

The Government of Croatia, i.e. the Ministry of Maritime Affairs, Transport and Infrastructure, whose legal successors were the Ministry of Public Works, Reconstruction and Development, and then the Ministry of Transport announced the public tender for the award of the DBFMO contract in 1994. The Authority was responsible for the tendering process and the concession award on the basis of the 1992 Law on Concessions. The concession for the design, (re)construction, financing, operation and maintenance of the Istrian Y was awarded on September 25, 1995.

==The Concessionaire (Private Party)==

The concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA.
'''BINA-ISTRA d.d.''' is a project company established in 1995 for the financing, construction and operation of phases I and II of the Istrian Y project. Today, BINA-ISTRA is owned by: Bina-Fincom, d.d. (67%); Bouygues Travaux Publics S.A. (16%), Hrvatske autoceste d.o.o. (14.78%), and Istarska Autocesta, d.d. (2.22%), while at the contract award stage ownership was Bina-Fincom d.d. (67%), Istarska autocesta d.d. (17%) and Bouygues (16%). The shareholders' capital of BINA-ISTRA in 2003 was EUR 21.873M.

Bina-Istra upravljanje i održavanje d.o.o., (Bina Istra Operation and Maintenance Ltd.) was founded in 1997 for the operation and maintenance of the Istrian Y motorway and toll collection. It is 100%-owned by BINA-Istra d.d. with its head office at the Učka Tunnel. Bina-Istra upravljanje i održavanje took over Tunel Učka d.d. and its employees, who were previously in charge of maintenance on the Učka Tunnel.

'''Bina-Fincom d.d.''' is a holding company that was established in 1994 in Zagreb for developing, owning and operating infrastructure projects throughout Croatia. Bina-Fincom is the majority owner of BINA-ISTRA. Today, Bina-Fincom is owned by: Bouygues Travaux Publics S.A. (45%); Industrija Nafte d.d. (INA) (5%), Hrvatske autoceste d.o.o (Croatian Motorways Ltd.) (44%) and ICI Participations (6%). At contract award it was owned by Bouygues S.A. (51%) and INA (49%).

Both BINA-ISTRA and Bina-Fincom have their head offices in Croatia. The total (direct and indirect) share of French interest in BINA-ISTRA through the company Bouygues Travaux Publics S.A. is 50.17%, while the Republic of Croatia holds 47.6% through its stakes in Hrvatske autoceste d.o.o. and INA d.d.

'''Bouygues Travaux Publics S.A.''' was established in 1996 as a société anonyme under French regulation for a period of 99 years. It is a subsidiary of Bouygues S.A. which guarantees all of the concession contract obligations of Bouygues Travaux S.A.

'''INA d.d.''' is the largest oil and gas company in Croatia according to shareholder capital. When the concession was awarded, it was 100% owned by the Republic of Croatia. Now, the Hungarian oil & gas company MOL and other shareholders have joined the Republic of Croatia in owning INA. Its interest in motorway network development is due to its own logistics needs.

[[Image: IstrianY5.png]] 

'''Figure 3: Sponsors of the Istrian Y Motorway''' 
'''''Source: Author'''''

'''Hrvatske autoceste, d.o.o.''' (Croatian Motorways Ltd.) is 100% owned by the Republic of Croatia. The Croatian road operator Hrvatska uprava za ceste used to operate all public roads in Croatia, but in April 2001 the company was split into Hrvatske ceste d.o.o. (Croatian Roads Ltd.) concentrating on road construction, operation and maintenance and Hrvatske autoceste d.o.o. (Croatian Motorways Ltd.) in charge of operating motorways. The latter is in charge of design, construction, maintenance, and toll collection on public motorways in Croatia.

'''Istarska Autocesta, d.d.''' (Istrian Motorway plc) was founded in 1990 by a number of Istrian public authorities (Pula, Poreč, Pazin, Buje, Umag, Labin, and Rovinj), the Croatian chamber of commerce, the county chamber of Pula, and large Croatian companies to conduct activities primarily related to the Istrian Y project and the road network through Istria.

The concessionaire assigned most of the subcontracted work to domestic construction companies. This had a direct effect on employment and the enhancement of capabilities.

The concessioner has tax exception. When the contract was signed there was no VAT tax. Now the concessioner also “gains” as VAT tax does not apply.

The roles of all of the original sponsors of the Istrian Y project are illustrated in Figure 3.

The different phases led to different models of financing.
In-kind capital contribution (existing 56 km and tunnel Ucka with toll collection equipment).
*Phase 1A: 85%/15% debt / equity ratio
*Phase 1B: 65%/15%/20% debt / equity /public capital (combined loan and project bonds)
*Government pays a monthly Financial Contribution (approx. € 17 million/year)

==Users==

Istrian Y is the main road in the Istrian Peninsula serving passenger and freight traffic. Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626 thousand in 2012.

==Key Purpose for PPP Model Selection==

In 1995, Croatia was just coming out of the Independence war with a severe need to improve transport infrastructure and restricted availability of funds. Therefore, the only goal of the PPP model was to enable road construction across the Istrian peninsula to take place.

==Project Timing==

The need for the Istrian Y motorway dates back to 1970s when some parts of the single carriageway road were built with public funds. Between 1970 and 1981 the Matulji-Lupoglav section (24km including the Učka Tunnel) was built. The construction of the Lupoglav-Pazin and Kanfanar-Medaki sections including the Limska Draga viaduct was completed by 1990. The concession fulfilled the need to complete the motorway in several stages, as shown in Figure 4.

==Project Locality and Market Geography==

The Istrian Peninsula was initially an isolated region. The improved road links to major cities increased real estate demand, so Istria is now faced with a respective shortage. In addition, numerous archaeological sites were discovered during the works, providing for the development of tourism in the region.The Istrian Y motorway connects the Istrain peninsula with A8 and A9 international motorways, i.e. Istria with continental Croatia and central Europe to the north, and Istria to Slovenia and Italy to the west.

==Procurement and Contractual Structure==

===Tendering===

International competitive procurement was carried out in 1994. At the time, the national legal framework regarding public tenders was not fully developed and little information is available on the tendering procedure. The process to award took approximately one year and was based on the 1992 Law on Concessions.

===Contract Structure===

Following the international public tender in 1994, the concession agreement was signed between the Croatian government and the French company Bouygues on behalf of the concessionaire BINA-ISTRA. The contract signed on 25 September 1995 concerned the design, construction, finance, operation and maintenance of the full-length Istrian Y motorway. The concessionaire also took over the existing 56 km of Istrian Y motorway (the sections Matulji - Pazin including the Učka Tunnel, and Kanfanar - Medaki) on 1 December 1995.

The Učka Tunnel was to be refurbished and the concessionaire was obliged to construct the remaining 85 km of the Istrian Y motorway (90 km with intersections and ramps). Staged construction was considered. Phase 1A concerned the construction of a semi-motorway profile with one lane in each direction, and in Phase 1B, after the average daily traffic exceeded 10,000 passenger cars, a full motorway profile together with the second tube of the Učka Tunnel was to be built.

Following financial close, the construction of Phase 1A began in 1997 and was completed on 3 December 1999. The second phase (1B) was divided into three sub-phases – 1B1, 1B2-1 and 1B3. The financial close for Phase 1B, including the refinancing of debt obligations related to Phase 1A, was concluded in 2003 after which the construction of phase 1B started. The entire 1B phase became operational in 2006. Construction of phase 2A began in 2008. Details of project phasing are shown in Figure 4.

{| class="wikitable" style="width=100%"
! Phase
! align="left"| Phase description
! align="left"| Date of completion
|-
| 1A ||
*operation and maintenance of eastern part of the Y from Matulji to Kanfanar with tunnel Učka
*operation and maintenance of Kanfanar-Medaki section in the western part of the Y
*construction, operation and maintenance of Vodnjan-Kanfanar-Rogovići section in the south
|| December 3, 1999
|-
| 1B1 ||
*construction, operation and maintenance of the single carriage motorway from Medaki to Nova Vas
|| Opened for traffic in 2006
|-
| 1B2-1 ||
*construction, operation and maintenance of a single carriage motorway from Buje to Umag
*reconstruction, operation and maintenance of the existing single carriage motorway from Buje to Nova Vas
|| Opened for traffic in 2006
|-
| 1B3 ||
*construction, operation and maintenance of a single carriage motorway from Vodnjan to Pula
|| Opened for traffic in 2006
|-
| 2A ||
*construction of the dual carriage motorway on the entire Istrain Y
|| Started in 2008, 75 km from Umag to Kanfanar and from Kanfanar to Pazin opened for traffic in 2011
|-
| 2B ||
*construction of Rogovići-Učka-matulji dual carriage motorway with the second tube of tunnel Učka
*conversion of viaducts Limska draga and Mirna single carriage motorway to two lanes in each direction
||
* Construction started:2013: Rogovići to Tunnel Učka 2014: Rogovići to Cerovlje Estimated Completion: 2016
* To be determined
|}

'''Figure 4: Details on the Istrian Y motorway project phases'''

The design of Phases 1B1, 1B2-1 and 1B3 had to be completed within 24, 12 and 14 months, respectively. There were no strict dates by which the necessary conditions had to be fulfilled to allow the concessionaire to start the construction of a particular phase. In addition, there are no exact dates for the conversion of the Limska Draga viaduct, Mirna bridge and the part of eastern branch of Istrian Y motorway from Pazin to Matulji (including Učka Tunnel) into a four-lane motorway.

The concessionaire reached financial close one year after obtaining the necessary construction permits for phase 1B3 and the concession contract was determined to end 28 years following this date on 25 September 2027. On this date, the concessionaire must transfer the motorway to the public authorities free of charge.

{| class="wikitable" style="width=100%"
! Key event in the concession contract
! Concession duration
|-
| Phase 1A is completed || 14 years as of December 3, 1999
|-
| Phase 1A is completed and the date for Phase 1B1 completion has been agreed || 32 years from 25 September 1995 (Originally it was 32 years from the completion of Phase I.)
|-
| Date for entire Phase II completion has to be determined although Phase II construction commencement was agreed in 2008. The construction of Phase II was dependent on traffic intensity, i.e. when the average number of passenger cars reached 10,000 per day and the average number of passenger cars in the summer season was 16,000 per day. || 28 years following December 3, 1999
|}

'''Figure 5: Concession term in relation to key events in the concession contract'''

Remuneration is effected through the collection of tolls on the motorway for 28 years, calculated from the completion of the first phase, or for 32 years including the construction period. Tolls are imposed on the Učka Tunnel and Mirna Bridge. The concessionaire has a right to charge tolls on all completed four lane sections of the Istrian Y motorway, and the State is obliged to provide financial support if toll revenues are not sufficient. The amount of this financial contribution is determined at the end of each year. Excess profits are shared 70:30 between the state and the concessionaire respectively. Following the completion of phase 2A (four lanes) the concessionaire is entitled to collect tolls over the entire Istrian Y except on the Matulji to Učka Tunnel section.

In addition, the concessionaire is exempt from income tax and any road tax until the 14th year of the concession, and is entitled to a refund on value added tax for expenditures related to the fulfilment of the concession. However, as no such tax existed when the contract was signed, the concessionaire is not obliged to pay value added tax.

The concession contract was revised and amended on 18 September 1997 and on 27 August 1999 as well as in 2003 and in 2008. Key events that influenced the concession term are shown in Figure 5.

===Risk Allocation===

A very conservative approach was followed in the development of the project. The design envisaged staged development, whereby the motorway would be upgraded depending on traffic growth. This approach facilitated financial close. Forecasts soon proved too conservative and just six years after completion of Phase 1A, Phase 1B had to be launched in order to upgrade the road to a full two-lane highway. The concessionaire took over earlier designs and development plans from the public partner that primarily relied on Phase 1A of the Istrian Y motorway design. The public partner approved project design prior to construction, while the concessionaire needed to acquire all of the necessary permits (location, construction and use).

The State was also responsible for the administration of the land acquisition process, and the transfer of land and other infrastructure required for the motorway construction as specified in the contract.

Traffic and revenue risks were largely mitigated from the start, as the Učka Tunnel and the Mirna Bridge already generated significant toll revenues. At contract award the average daily traffic was 4,000 vehicles. The initially accepted traffic growth estimates proved to be too conservative. This increased revenues, but on the other hand accelerated anticipated investment costs as well as increasing maintenance and operation costs.

[[Image: IstrianY4.png]] 
'''Figure 6: Risk allocation'''

The concessionaire was assigned responsibility for the collection of tolls. However, the Government sets tolls. If toll revenues are not sufficient to cover expenses, the State compensates for the difference.

With regard to the land acquistion risk, the Government was responsible for the land acquisition administration process and main communal infrastructure transfer from the land that was to be transferred to the concessionaire for motorway construction purpose.

The project’s risk allocation matrix is presented in Figure 6.

===Performance===

The Istrian Y motorway was declared to be the Best European Road Deal in 2003 by Infrastructure Journal and Project Finance Magazine.

According to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

As noted earlier, the traffic forecasts have proven to be conservative. The concessionaire’s total annual revenues are currently around EUR 38M (toll revenues stood at EUR 25.6M in 2013), and are expected to rise to EUR 60M by the end of concession period. However, revenues from tolls are not sufficient to cover project costs.

To date, the State of Croatia has contributed 1.3 billion kuna (approx. EUR 187M), while the concessionaire has invested approx. EUR 600M in construction and EUR 100M in maintenance. More specifically, State financial contribution has averaged EUR 17M p.a. since 2000, and is expected remain at this level until the end of the contract period. Therefore the State contribution is estimated to reach almost 3.5 billion kuna (aprox. EUR 504M) by 2027. By then, the concessionaire will have invested an additional EUR 300M in construction of the full-width motorway and EUR 150M in maintenance.

The grantor approved an income tax grace period for Bina-Istra d.d. until September 2009. In addition since there was no value added tax at the time the concession contract was awarded, the state subsequently gave up value added tax collection on tolls for the entire concession period.

The contract includes a number of clauses protecting against non-compliance by the Republic of Croatia. The contract can be cancelled if the public partner does not make its financial contribution within a period of 15+15 days on notice, or if it does not fulfil its obligations within a further three months. The concessionaire can also cancel the contract in case of severe regulatory risks.

On the other hand, penalties up to a maximum of 12.5% of the contracted construction price for each phase are applicable to the concessionaire in the case of time overruns, which are within the concessionaire’s control. The construction price is fixed, but cost overruns may be approved by the public partner.

Since 1995, the traffic density on the Istrian Y has increased from 1.5m passenger cars to around 7.2m passenger cars per year in 2013. The observed average yearly traffic growth rate is around 7%. Notably, passenger traffic was underestimated. In contrast, the number of trucks is still below estimated. According to HUKA data, the number of heavy trucks on the motorway was about 626,000 in 2012.As traffic far exceeded forecasts, phase 1B and 2 were brought forward.

==Project Outcomes==
It was a much needed project and traffic volumes supported this. However, the downside is that Phase 2 of the project was brought forward 18 years - hence in practice leading to a double cost of construction as the project was very quickly absolute. The following critical success factors can be considered:
*In-kind public capital contribution and financial support mechanism made the project financially viable
*Concessionaire successfully carried out first refinancing, thus reducing debt burden
*Concessionaire provides subscription scheme (reduced rates) to frequent users and tries to improve its public image.
*Public authorities are on the earning curve to improve their position during possible re-negotiations.

The project and pricing has also full acceptability.

Regarding project goals, according to estimates by the concessionaire, passage over the Mirna Bridge shortens the journey from 78.3 to 48.6 kilometres and the journey time for passenger cars from 97.6 to 26.4 minutes, while driving on the motorway shortens the travelling time from 121 to 55 minutes.

Critical failure factors are:
*Lack of competitive procurement prevented IFIs from participating in structuring and co-financing the project; it also caused unnecessary delays and cost increases
*Current form of government contribution provides little incentive for the concessionaire to provide services in the most cost effective manner.

===Economic Impact===
The project has contributed to the economic development of the region. The once isolated area is now facing a shortage of real estate, a fact partly attributed to the new motorway. It has also fostered the development of new industrial areas in its proximity, while companies are even relocating their businesses from the capital to Istria. Tourism and its associated activities are the principal drivers of the region’s economy. Given that the vast majority of tourists travel to Istria by car, the project has significantly boosted tourism, and a prolongation of the tourist season is also predicted.
Finally, in 2009 Bina-Istra continued to support the construction of the local utility infrastructure of towns and municipalities neighboring the Istrian Motorway. This was realised by providing the local community municipal contribution or through direct infrastructural construction projects (such as construction and renewal of local roads).

===Social Impact===
The project has a positive social impact in terms of creating new jobs, increasing level of passenger safety, inter-regional and international connectivity, and in general improving quality of life. With most of transit traffic remaining on the motorway, the Istrian Y Motorway Project has contributed to the alleviation of the negative social and environmental impacts tosmall towns and villages that have long been exposed to such externalities. The improved access to certain towns has equally helped alleviate summer traffic jams.In addition, almost 90% of the jobs within the project will be subcontracted to Croatian companies, of which 80% to Istrian small and medium sized companies. The Project employs a total of 700 people in Istria (Concessionaire + Contractor).

===Environmental Impact===
*Via directing traffic to a road with an installed drainage and wastewater treatment system, waste oils are no longer directly discharged into ground water.
*The environmental awareness of Bina-Istra is reflected in many of its actions.

==References==

*BINA-ISTRA, d.d., Prospekt – 210 milijuna eura / 8%, osigurane obveznice s dospijećem 2022. Offering Circular for EUR 210M 8% insured corporate bonds issuance.

*Various articles from the newspapers whose content was confirmed by the Prospekt.

*BINA-ISTRA – The Istrian Motorway, http://www.bina-istra.com/

*Croatian Competition Agency, 2013. Rješenje o obustavi postupka o produženju koncesijskog roka (Decision on suspension of concession term lengthening) http://www.aztn.hr/uploads/documents/odluke/DP/UPI-430-012013-02017.pdf

*http://www.huka.hr/files/docs/Huka_Nacionalno_izvjesce_2013.pdf

*Izmjena i dopuna Strategije prostornog uređenja Republike Hrvatske , http://www.mgipu.hr/doc/Prostorno/IDSPU_RH_2013.pdf

*M. Grubišić Šeba, 2014, The Istrian Y Toll Motorway, in A. Roumboutsos, S. Farrell and K. Verhoest, COST Action TU1001 – Public Private Partnerships in Transport: Trends & Theory: 2014 Discussion Series: Country Profiles & Case Studies, ISBN 978-88-6922-009-8

[[Category:Case Studies]]

Case Studies: Larnaca and Paphos International Airports

2015-06-10T13:03:43Z

Pmoraiti: /* Project Outcomes */

Case Studies: Larnaca and Paphos International Airports

2015-06-10T13:02:05Z

Pmoraiti: /* Project Outcomes */

{{Infobox
|header1 = Larnaca and Paphos (Cyprus) International Airports
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 25 Years
|header4 =
|label4 = Budget:
|data4 = EUR 640M (Development of the new Larnaca and Paphos Airports)
|title = Project Overview
|image1 = [[Image:larnaca1.jpg|300px]]
|caption1 = Figure 1: Larnaca Airport
|image2 = [[Image:paphos1.jpg|300px]]
|caption2 = Figure 2: Paphos Airport
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = 1988;
| label2= Tender:
| data2 = 2001;
| label3= Contract Award:
| data3 = May 8, 2005;
| label4= Financial Close:
| data4 = May 12, 2006;
| label5= Paphos Airport inauguration Ceremony:
| data5 = Nov. 8, 2008;
| label6= Operation of the new Paphos Airport:
| data6 = Nov. 17, 2008;
| label7= Larnaka Airport Inauguration Ceremony:
| data7 = 7 Nov. 2009;
| label8= Operation of the new Larnaka Airport:
| data8 = Nov. 17, 2009.
}}
}}

==Introduction==

The ‘‘Best Transport Project in Europe’’ in the competition for ‘‘PPP Awards 2013’’ was awarded to the Concession Agreement for the development and operation of the international airports of Larnaca and Paphos by ‘‘World Finance’’ (visit http://www.worldfinance.com/awards/ppp-awards-2013). This reflects the success of the project on various levels assessed in the competition: using best practices, innovation, bringing socio-economic benefits to the end users, and becoming a template in various aspects. In fact, the new modern airports, through the PPP contract, offer significant changes and innovative solutions in respect of passenger handling (e.g. boarding bridges), especially when these solutions are compared with the old airports.

Larnaca Airport is the largest commercial airport of Cyprus and is located in the southern part of the island, 4 km southwest from the city of Larnaca. Paphos Airport is the second largest airport of Cyprus, located in the southwestern part of the island, 6.5 km southeast from the city of Paphos.

Hermes Airports Ltd (the Concessionaire) completed the construction of the new facilities at Larnaca and Paphos in accordance with the agreed timetable at a total cost of EUR 642,7 M. According to the specifications of the International Air Transport Association (IATA), the size of the Larnaca and Paphos terminals provides levels of service B and C, respectively. Both airports can be reached by car, taxi and the public transport system.

Larnaca Airport opened in November 2009 and the first phase is capable of handling 7,5M passengers annually. The new 100.000 m2 terminal includes 16 boarding bridges, 67 check-in counters, 5 baggage carousels, VIP and business lounges, duty-free shops as well as comfortable and functional areas offering a wide range of shops and cafeterias. The new terminal was built some 500–700 m west of the old terminal, adjacent to the new control tower and it is supported by an extension in the runway, new facilities for aircraft and 2.450 car parking spaces. The runway has a total length of 3.000 m. The old terminal building is planned to be partially demolished and refurbished as a cargo centre, and is currently used as a private terminal for visiting heads of state, VIPs, and private aircraft operators. In 2012, Larnaca Airport served 5.166.224 passengers. There is the possibility of further expansion and construction of a second parallel runway when necessary and further development of the terminal in order to be able to accommodate 9M passengers per year.

The new Paphos Airport has been operational since November 2008 and the new 18.000 m2 terminal can serve 2,7M passengers annually. The new airport provides 28 check-in counters, 3 baggage carousels and 800 parking places, shops etc. The total investment for Paphos Airport reached EUR126M. The runway has a total length of 2.700 m. In 2012 Paphos Airport served 2.242.797 passengers.

The concessionaire investigated many options including the development of an entertainment, culture, tourist, leisure and commercial centre, coupled with an airport hotel, casino etc. In addition, there were proposals for the development of a huge exhibition/ transshipment center serving the promotion of Chinese products in the region of south-eastern Europe, Middle East and North Africa. To date there has been no final decision on this.

==The Contracting Authority (Public Party)==

Central government is responsible for all levels of the development, design, tendering, negotiation procedure and regulation of the contract. These procurement activities were conducted under the jurisdiction of the Ministry of Communications and Works (Public Works Department, Department of Civil Aviation) and the Ministry of Finance. However, the local authorities were, also supportive of the project.

The procurement process for this project was based on the UK Treasury Taskforce (TTF) (1999) A Step-by-Step Guide to the PFI Procurement Process. London: HM Treasury, the EU regulations on the procurement process for such a project, and the Cyprus procurement law. The decision to use EU laws for the procurement process was due to the fact that, at the time, Cyprus was in the process of joining the EU and because it was considered that familiarity with the process would attract international companies (Solomou, 2003).

==The Concessionaire (Private Party)==

Hermes Airports Ltd, a French and Cypriot-led consortium was established. The majority of companies that created the Hermes Airports consortium are business developers mainly in the construction field (Bouygues Batiment International, Egis Projects, Iacovou Brothers, Hellenic Mining, Charilaos Apostolides) with a total share control of 64,6%. In addition the foreign companies Bouygues Batiment International and Egis Projects have extensive experience in PPPs. The consortium of project sponsors included:
*Bouygues Batiment International (French construction group- 22%);
*Egis Projects (French infrastructure group- 20%);
*Cyprus Trading Corporation (a local retail group, 11.34%);
*Hellenic Mining (11.33%, a local business developer),
*Vantage Airport Group (11%);
*Aer Rianta International (Irish airport operator, 11%);
*Iacovou Brothers (a local contractor- 5,665%);
*Charilaos Apostolides (a local contractor- 5,665%);
*Aéroport Nice Côte d' Azur Chambre de Commerce et d'Industrie (French airport operator- 2%).

Key subcontractors for construction and maintenance included:
*Main contractor: Bouygues Batiment International and subcontractors: Iacovou Brothers Ltd and Charilaos Apostolides Ltd;
*Ground handling subcontractors (aircraft servicing, luggage handling etc): Swissport and LGS;
*Retail/ Food & beverage subcontractors: Cyprus Trading Corporation (CTC) and Aer Rianta International;
*Cleaning subcontractor: Hellenic Mining.

In order to raise funding Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. Hermes Airports Ltd. then borrowed €569.7M as follows: Term Loan €449.2M; Mezzanine Loan, €60.25 M; Shareholders’ Loan Stock, €60.25M. The Term and Mezzanine Loans came from 16 international banks (Koutsoulis, 2013) .

Other subcontractors included:

Construction and Maintenance:
Main contractor: Bouygues Batiment International

Subcontractors:
* Iacovou Brothers Ltd
*Charilaos Apostolides Ltd

Ground handling (airplane servicing, luggage handling etc) subcontractors:
* Swissport
* LGS

Retail/ Food & beverage subcontractors:
* Cyprus Trading Corporation (CTC)
* Aer Rianta International

Cleaning subcontractor:
* Hellenic Mining

As a SPV (Special Purpose Vehicle), the Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. See above the list of sponsors & respective shares. The Hermes Airports Ltd borrowed €569.7 million as follows:
*Term Loan: € 449.2 mil.
*Mezzanine Loan: € 60.25 mil.
*Shareholders’ Loan Stock: € 60.25 mil.

Term and Mezzanine Loans came from 16 international banks.

==Users==

Cyprus, being an island, is isolated from Continental Europe. Larnaca and Paphos International Airports are Cyprus’ main international passenger gateways. No year- round ferry/ sea port connections with neighboring countries exist.

Larnaca Airport handles on average over 5 million passengers per year, approximately 50.000 passenger flights and over 30.000 tons of cargo. Paphos Airport, principally used by tourists, handles approximately 2 million passengers per year, over 12.000 passenger flights and some 400 tons of cargo. It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter percentage is 25% and 49% for Larnaca and Paphos, respectively (year 2011). The UK market share is 37,26% of total passenger traffic to Cyprus, followed by Greece with 15,71%, Russia with 9,45% and Germany with 5,34% (Government of Cyprus, Civil Aviation Department).

==Key Purpose for PPP Model Selection==

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It comprises the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). Base on the timetable set in a European level priority will be given to the Core Network (European financial support). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network.

Currently, the development of the transport infrastructure of Cyprus through PPP projects is considered to be unattractive, particularly for road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors for TEN-T projects because the cost of the investment is usually equivalent to that of a similar project in a central, inter-connected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the infrastructure project. This is taken into consideration when authorities investigate the possibility of developing projects in Cyprus through a Public- Private Partnership (PPP).

Value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer are the main political motivations for PPPs as a contract choice, both officially/formally and unofficially/informally in Cyprus. The decrease of governmental debt is considered to be the main reason, and the secondary one the acceleration of works.

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It is composed by the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network. It is obvious that priority will be given to the Core Network (European financial support).

==Project Timing==

After the Turkish invasion of 1974, Lefkosia (Nicosia) Airport, the only international airport in Cyprus those days, ceased its operation and the airport premises came under United Nations administration. Under these circumstances, the Republic of Cyprus decided in late 1974 to convert an abandoned RAF airport and landing strip into the new international airport of Cyprus, Larnaca Airport. Larnaca International Airport opened on 8 February 1975, with only limited infrastructure facilities and a prefabricated set of buildings comprising separate halls for departures and arrivals. Cyprus since the early 1980s was becoming a major tourism center. The Cyprus Government steadily improved the facilities of the Larnaca Airport, but the passenger terminal was unable to cope with demand. The growing tourism industry of the island led to the decision to develop a second airport in Cyprus. Paphos International Airport opened for operations in November 1983 to serve primarily the tourism industry of the region of Paphos.

The rise of tourism in Cyprus unfortunately was not matched by simultaneous development of airport infrastructure. The two airports of Cyprus were substandard and they could not match demand (especially at Larnaca Airport). Often problems arising during peak hours created a negative image for the passengers, mainly tourists. It was deemed necessary to further develop the airports. The development of the two airports was expected to assist significantly the tourist industry of Cyprus and support the viability of the economy.

The further development of Larnaca and Paphos International Airports was decided in the late 1980s. The new elected government (left wing, 1988-1993) was preparing the project having in mind the development and operation of the two airports through traditional methods. The right-central wing government (1993-2003) followed the steps of the former government. By the late 1990s, when the master plan and construction drawings were ready, the financial issue of developing the two airports arose. In those days desalination plants were being developed in Cyprus as PPP’s, introducing this as a sustainable method for project development. The right-central wing government decided to follow the PPP path. Cyprus in the early 2000s was struggling to access the European Union and decrease governmental debt. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The new central-left government (2003-2008) followed the steps of the previous government and concluded the negotiations with the preferred bidder (2005). In 2004, Cyprus entered the European Union and the new government set as a new goal access to the eurozone.

==Project Locality and Market Geography==

Currently air transport is the only mode of passenger transport to/from Cyprus because there are no ferry services (passenger ships) that connect Cyprus with the Continental Europe or other neighboring Countries. Cyprus as a tourist and insular country is highly dependent on air transport. There is a wide network of air-routes connecting Cyprus with Europe, Africa and Asia. Air transport policy objectives in Cyprus include the growing of air transport in a controlled way, the development of sufficient airport capacity, and the adoption appropriate air traffic management measures. The liberalisation of air transport, in combination with the development of the new airports, is expected to create the potential for Cyprus to become a regional transit hub between Europe and the Middle East.

The Larnaca and Paphos Airports support almost exclusively the passenger transport needs of Cyprus with the rest of the world. The two airports attract passengers from all over Cyprus. Transit movements are relatively low and the two airports cannot be considered as hubs for the area. The two airports are located in the outer urban areas of the cities of Larnaca and Paphos respectively

==Procurement & Contractual Structure==

The further development of Larnaca and Paphos Airports was decided in 1988, under a single contract. A Master Plan was prepared for the construction of new terminals in the two airports, extension of the runaways and taxiways, and other airport facilities. In May 1991, after a tendering process, the French consulting firm SOFREAVIA prepared the master plan for the airports. In those days it was expected that the two airports would have been traditionally procured and constructed. In February 1993, the French consortium AEROPORTS DE PARIS/SOFREAVIA prepared detailed designs and tender documents for the new airports. The designs for Larnaca and Paphos Airports were completed in September 1999 (Solomou, 2003).

In the late 1990s, there was a discussion of what procurement method should be used for the development of the airports. The government decided that the best method was the BOT (Build, Operate, Transfer) approach because it was believed that this would result in the easiest development of the airports without the “slow-moving” processes a State project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government in those days since the primary goal was accession to the European Union.

After the selection of a team of consultants in October 2000 there was a check on the viability of the project, and discussions on project requirements and how to make the project more attractive to international companies.

===Tendering===

In March 2001 there was an advertisement for Expressions of Interest. Sixteen consortia expressed their interest in the project and received the necessary documentation. From those sixteen only ten returned the completed documents. These bidders were evaluated and five of them were short-listed in July 2001, and invited to submit detailed proposals in October 2001. The short-list of tenderers was based on answers to the Pre-Qualification Questionnaire (PQQ) and on the criteria for the pre-qualification evaluation. From these five consortia only the following three accepted the Invitation to Tender (ITT) and submitted proposals for the project: Alterra Consortium; Hermes Airports and Cyprus Airports Group (Solomou, 2003).

The Master Plan was made available to all bidders in order to prepare their proposals. The bidders were expected to follow the basic idea of the Master Plan, but could propose small, ‘unimportant’ changes in order to make an efficient design for the airports which would help achieve the best operation of the airports and meet the standards of the output specification. The concession contract was for a period of 25 years.

After the pre-qualification stage, a detailed bid document ITT, with all the needed information for the preparation of their proposals was sent to the short-listed bidders.
The selection criteria were based on the following broad categories:
- Technical and Operational (e.g. design, innovation and technical, capacity, performance, capital spend).
- Business Plan (e.g. marketing strategy, pricing policies, organizational structure).
- Legal (e.g. assessment of amendments to draft Contract).
- Financial (i) (e.g. financial robustness, deliverability)
- Financial (ii) (e.g. bid price).

Negotiations took place with the selected preferred bidder and according to the tender rules if the two parties did not reach an agreement, negotiations with the second selected bidder were to follow. In 2003 Alterra Consortium was announced as the preferred bidder. The negotiations failed and the Cyprus Government started negotiations with the second best bidder, Hermes Airports. This had legal implications since Cyprus Airports Group could legally challenge the decision, adding further delays to a much needed project.
The negotiations with Hermes Airports were successfully completed and on 12 May 2006 the private consortium signed the BOT contract for the management and development of Larnaca and Paphos Airports. Until completion of the new terminals, the consortium took over the management of the existing facilities where minor improvements were made prior to the construction of the new facilities.

===Contract Structure===

An output specification was created that includes the way the airport is going to be operated. The Concessionaire is responsible for the Soft Facility Management (SFM) and Hard Facility Management (HFM). In the contract there is a specification of the requirements: how to manage and operate the terminals, the runway and taxiways, and car parking for staff, passengers and visitors. The Concessionaire is also responsible for the maintenance and upkeep of the airport in general, as well as for the delivery of some of the core services. It is responsible for the check-in facilities and the loading of the baggage as well as the services provided in the waiting area.
The Cyprus Government before the PPP tender procedure prepared the Master Plan and the detailed designs for the two airports. Moreover, the government is responsible for the delivery of other core services (e.g. security, air traffic control, and fire brigade services).

Based on the contract clauses the aeronautical fees are regulated. Other fees and revenues (retail, car parking etc) are not regulated.

Termination clauses are included in the contract and are divided into three categories (concessionaire default, contracting authority default and force majeure). In each case there are guarantees that the Concessionaire is compensated as follows (Government of Cyprus, 2005):

Concessionaire default- compensation based on 95% of the Concession Agreement revised debt termination amount;

Force majeure- compensation based on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs and equity.

Contracting Authority default- compensation on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs, equity and equity return.

A Liaison Committee exists, formed by three representatives of the Contracting Authority and three representatives of the Concessionaire. This committee is responsible for the day-by-day review of the Contract. The Committee also provides a forum for strategic discussions on variations in market conditions as well as the efficient operation of the two airports. The Liaison Committee can be the forum for contract renegotiation.

The private sector collects all of the revenues. The Concessionaire pays the Cyprus Government an annual fee of €3,5M as well as 33% of the annual gross revenues of the two airports. In addition, the Cyprus Government participates in a profit-sharing arrangement if the actual equity IRR exceeds 12% in real terms.

===Risk Allocation===

The risks are allocated in a balanced way between the concessionaire and the contracting authority (government). The allocation is based on the principal that the risk is allocated to whom can best deal with it (Solomou, 2003).

Design and construction risks are allocated to the private sector. If there is a problem the concessionaire will face certain penalties. The government has developed some tools to measure performance. These risks however are thought to be the most easily regulated and measured. Maintenance risks are allocated to the private sector. If problems arise the concessionaire will face certain penalties.

Operating risks are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental operations, due to government approved suppliers).
The demand risk will be shared by both parties but the risk is greater for the private sector. The concessionaire has to pay the government a “rent” for the exploitation of the government’s assets. The “rent” is divided into two parts. The first is a fixed payment and the second a percentage (33%) of the operating revenues. This percentage shows the sharing of the demand risk between the private and the public sector. If there is a significant reduction in revenues the government receives less income.

The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in the case of a decision to expand the infrastructure of the two airports.

The regulatory risks are shared between both parties. There are certain clauses that will protect the operator from negative regulatory changes enforced by the government. If, for example, tourism taxation is raised then fewer visitors will come to Cyprus, so the airports’ revenues will be reduced. In such a situation, the government should take this risk. On the other, hand if the regulation affects all Cyprus citizens, for example inflation, the concessionaire will have to bear this risk.

The force majeure risk will be shared by both parties (war, disaster, hijacking etc) but the risk is greater for the public sector, as the concessionaire is compensated by the Contracting Authority.

[[Image:Larnaca2.png|300px]]

'''Figure 3: Risk allocation'''

Another possible risk that is allocated to the public sector is the possibility of having a third airport in Cyprus, either by building a new one or in the case that a comprehensive settlement is reached in respect of the Cyprus issue, when the existing airport in the occupied area may recognized as an international airport again. The bidders prepared their proposals on the assumption that there are only two airports in Cyprus. If there is in the future a new airport in Cyprus, there will be a reduction in demand for Larnaca and Paphos Airports so the contract has certain clauses to protect the concessionaire from such risks.

===Performance===

The contract defines a performance measurement system that incentivizes the Concessionaire to perform the designated airport services to the performance standards specified in the contract, and specifies the deductions to be made when performance does not attain the relevant standards. The concession contract establishes procedures for the measurement of performance of the designated airport services. If the Concessionaire fails to achieve the performance standards, then deficiency points apply. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level (10 points) penalties apply (a percentage of the gross revenue less the concession fee). If the Concessionaire achieves or exceeds 95% performance in all the concessionaire- controlled standards, then an amount equal to 1% of the gross revenue less the concession fee for that performance review period shall be deducted from the next concession fee payment made to the Government (Government of Cyprus, 2005).

Nevertheless, the contract does not include deficiency points or penalties for non-concessionaire controlled performance standards (baggage handling and airline counter check-in process). The Concessionaire shall employ independent third parties to carry out customer satisfaction surveys of passengers and customers. No deficiency points or penalties are linked to the survey results.

The Contracting Authority may audit any aspect of the Concessionaire’s performance. If the Concessionaire achieves less than 60% for all of the concessionaire-controlled standards, the Contracting Authority may issue a Warning Notice which may lead even to termination of the contract. The performance standards may be reviewed by the Liaison Committee in good faith.

Two categories of performance indicators exist, as follows:
*Concessionaire-controlled performance indicators: Check-In Counters; Security Check Equipment; Luggage Trolleys; Immigration/ Customs; Baggage Reclaim; Flight Information Display; Lifts/ Escalators/ Moving Walkways; Cleanliness;
*Third party-controlled standards (non concessionaire-controlled performance indicators): Check-In for Scheduled Flights; Check-In for Charter Flights; Baggage Delivery of first bag to reach carousel; Baggage Delivery of last bag to reach carousel.

The contract includes deficiency points and penalties for the concessionaire- controlled performance standards/ indicators. Each indicator has five deficiency levels which lead to 1-5 deficiency points, respectively. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level, a penalty applies. The following performance indicators are mentioned in the contract:
*Check- In Counters for processing passengers
Concessionaire controlled performance indicator- Check- In Counters for processing passengers are fully functional 90% of the time.
*Security Check Equipment functionality
Concessionaire controlled performance indicator-
Security Check Equipment fully functional 90% of the time.
*Luggage Trolleys availability
Concessionaire controlled performance indicator-
Luggage Trolleys available 85% of the time in Peak Week for passengers in the check in hall and the arrival hall/ baggage reclaim area.
-Immigration/ Customs booths functionality
Concessionaire controlled performance indicator-
90% of Immigration/ Customs booths for processing passengers are fully functional.
*Baggage reclaim equipment functionality
Concessionaire controlled performance indicator-
Baggages reclaim equipment 90% of the time fully functional.
*Flight Information Display equipment functionality
Concessionaire controlled performance indicator-
Flight Information Display equipment 90% of the time fully functional.
*Lifts/ Escalators/ Moving Walkways equipment functionality
Concessionaire controlled performance indicator-
Lifts/ Escalators/ Moving Walkways equipment 90% of the time fully functional.
*Cleanliness of the project area
Concessionaire controlled performance indicator-
90% of the time cleanliness maintained according to the specifications determined by the Concessionaire.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 12 minutes of joining the Check- In queue for Scheduled Flights.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 20 minutes of joining the Check- In queue for Charter Flights.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of first bag to reach carousel Target Maximum/ Optimal: 20/15 minutes respectively after on-block time.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of last bag to reach carousel Target Maximum/ Optimal: 35/30 minutes respectively after on-block time.

The Department of Civil Aviation expects that the passenger traffic in the coming years will increase annually by 2 -3%. The development depends on competition for tourism, the international economy and other external factors such as political stability in the region. The passenger forecasts for a 2-3% annual increase have not been confirmed (at least not for every year).

It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter rate is 25% and 49% for Larnaca and Paphos respectively (year 2011). The UK market shares 37,26% of total passenger traffic to Cyprus, followed by the markets of Greece with 15,71%, Russia with 9,45% and Germany with 5,34%.

Three forecast scenarios exist in the contract (low case growth, base case growth and high case growth). None of these scenarios have been confirmed by the actual passenger traffic: Larnaca & Paphos Airports actual traffic in 2012 was 7,5M passengers versus 8,5M, 9,0M and 9,5M passengers in the 2012 Low, Base and High case scenarios, respectively.

Larnaca Airport
*Passengers
2007: 5.387.724

2008: 5.482.567

2009: 5.258.716

2010: 5.475.905

2011: 5.507.552

2012: 5.166.224

2013: 4.863.577

*Air Traffic (airplanes)
2007: 47.755

2008: 50.483

2009: 46.416

2010: 49.022

2011: 50.329

Paphos Airport
*Passengers
2007: 1.819.182

2008: 1.764.660

2009: 1.640.562

2010: 1.646.937

2011: 1.778.898

2012: 2.242.797

2013: 2.175.114

==Project Outcomes==
The key scope of the project was to deliver a modern, safe and secure National Airport for Cyprus and support tourism.Traffic has not been the anticipated. Reasons are considered to be:
* internal (there have been discussions with respect to the high rates required by Hermes Airports ltd (concessioner). At the end of 2014, the concessioner has initiated a campaign to attract new airlines. Emphasis is placed on low-cost carriers, which are used to serve the Tourism industry. Paphos is to be the cultural capital of Europe in 2017 and a rise in visitors is expected in the range of 15-25%.
*2013 was a difficult year for Cyprus with great political and economic stability. This had an impact on tourism and business travel.

The following critical success factors could be considered:
* The two new airports improved dramatically the quality of services provided. Although the two airports do not face significant competition, it is crucial for the tourist industry of Cyprus to provide long lasting- sustainable high quality services.
* Air transport as a whole should provide high health and safety standards. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation. The airline operators are significant partners too.
*Air transport as a whole should provide high security standards. Terrorism and other relevant issues have a global effect. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation.
*An investment programme will increase the revenues benefiting the Concessionaire and the Cyprus Government (Contracting Authority). The diversity of the revenues will increase the viability of the project and it may allow the decrease of other fees (e.g. aeronautical fees). The Cyprus Government should support the Concessionaire to explore possible investment choices. The fact that the contract concludes in 2031 should not be a negative factor. Other incentives should be identified.
*Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.
*Cooperation between the Concessionaire and the Contracting Authority should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should stand alone too. The liaison committee is expected to support continuous cooperation.

For an insular country the existence of a high quality , safe and secure airport(s) is of paramount importance. It is also very important for business and tourism development. The old airport was insufficient and not capable to handle with safety and security air traffic.
This is especially important following the developments in the wider geographical area.The concessionaire - to date - has not used the full potential of the airport services. Additional revenues are still rather low. The upside is that there is space for improvements on revenue.

The airports have also received (right from the start) high acceptability. The upgrading of the existing airport facilities was long required.

The following critical failure factors could be considered:
* The viability of the whole project depends on the growth of the airlines passenger traffic. The actual passenger traffic so far did not match the forecast scenarios included in the contract.
*Basically, the growth of revenues is interconnected with the passenger traffic. Both these factors are significant for the viability of the whole project. Nevertheless, the Concessionaire seeks out other forms of revenues and the Cyprus Government assists the Hermes Airport towards this direction
*Aeronautical fees are regulated by the Concession Contract. It is important to be maintain in reasonable levels. It is important for the viability of Cyprus economy and especially for tourism industry to offer competitive tourist packages. The aeronautical fees play significant role on the later. On the other if the tourism industry fails to attract tourists in Cyprus, the airports would have significant loses. In this case the chicken and egg situation exists. This show the importance of cooperation of all the tourism industry stakeholders and Hermes Airports should be a main stakeholder.
*In 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013 the Cypriot Government reached to an agreement with its lenders. The status of Cyprus economy and the sustain recession that is expected are factors that could create increase uncertainty for the project.

The rates applied by the concessionaire seem to be limiting the full potential of the airports. In 2014, new campaigns were launched to attract airlines. The mix of shareholders in the concessionaire may also be playing a pivotal role in the business development.

===Economic Impact===
It is difficult to assess the full economic impact as the operation of the new airports coincide with the economic crisis and the developments in the wider area. Definitely, access to the island-country has been significantly improved.

===Social Impact===
Apart from offering new employment opportunities, the new airport has sustained the tourism industry and therefore jobs in that sector.
It also improves the mobility of the inhabitants.

===Environmental Impact===
The construction of the new airports comes with design to protect the environment from noise and emissions (appropriate runways etc.).

==References==

*C. Christodoulou, C. Efstathiades, 2013, Larnaca and Paphos International Airports In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
*Solomou C. (2003). BOT and Economic Efficiency: The case of Larnaca Airport. Thesis for the degree of Master of Science in Built Environment for the University of London. University College London, Bartlett School of Graduate Studies.
*Government of Cyprus. 2005. Concession Agreement for the Development and Operation of International Airports at Larnaca and Pafos. Ministry of Communications and Works. Lefkosia: Government of Cyprus
*Government of Cyprus. 2012. Transport Statistics 2011, Statistical Service. Lefkosia: Government of Cyprus
*Government of Cyprus. 2009. Public Works Department: One Hundred thirty years of history and service, 1878-2008. Lefkosia: Government of Cyprus.
*Antonis Koutsoulis, Head of the Unit for regulating the Larnaca and Paphos Airport BOT Contract. 2013. Personal Interview. Lefkosia
*Government of Cyprus, Ministry of Communications and Works, Public Works Department Website: www.mcw.gov.cy/pwd
*Government of Cyprus, Ministry of Communications and Works, Civil Aviation Department Website: www.mcw.gov.cy/dca
*Hermes Airports, Larnaca and Paphos International Airports Official Website: www.hermesairports.com
*World Finance Website: http://www.worldfinance.com/awards/ppp-awards-2013
[[Category:Case Studies]]

Case Studies: Larnaca and Paphos International Airports

2015-06-10T13:01:04Z

Pmoraiti: /* Project Outcomes */

{{Infobox
|header1 = Larnaca and Paphos (Cyprus) International Airports
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 25 Years
|header4 =
|label4 = Budget:
|data4 = EUR 640M (Development of the new Larnaca and Paphos Airports)
|title = Project Overview
|image1 = [[Image:larnaca1.jpg|300px]]
|caption1 = Figure 1: Larnaca Airport
|image2 = [[Image:paphos1.jpg|300px]]
|caption2 = Figure 2: Paphos Airport
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = 1988;
| label2= Tender:
| data2 = 2001;
| label3= Contract Award:
| data3 = May 8, 2005;
| label4= Financial Close:
| data4 = May 12, 2006;
| label5= Paphos Airport inauguration Ceremony:
| data5 = Nov. 8, 2008;
| label6= Operation of the new Paphos Airport:
| data6 = Nov. 17, 2008;
| label7= Larnaka Airport Inauguration Ceremony:
| data7 = 7 Nov. 2009;
| label8= Operation of the new Larnaka Airport:
| data8 = Nov. 17, 2009.
}}
}}

==Introduction==

The ‘‘Best Transport Project in Europe’’ in the competition for ‘‘PPP Awards 2013’’ was awarded to the Concession Agreement for the development and operation of the international airports of Larnaca and Paphos by ‘‘World Finance’’ (visit http://www.worldfinance.com/awards/ppp-awards-2013). This reflects the success of the project on various levels assessed in the competition: using best practices, innovation, bringing socio-economic benefits to the end users, and becoming a template in various aspects. In fact, the new modern airports, through the PPP contract, offer significant changes and innovative solutions in respect of passenger handling (e.g. boarding bridges), especially when these solutions are compared with the old airports.

Larnaca Airport is the largest commercial airport of Cyprus and is located in the southern part of the island, 4 km southwest from the city of Larnaca. Paphos Airport is the second largest airport of Cyprus, located in the southwestern part of the island, 6.5 km southeast from the city of Paphos.

Hermes Airports Ltd (the Concessionaire) completed the construction of the new facilities at Larnaca and Paphos in accordance with the agreed timetable at a total cost of EUR 642,7 M. According to the specifications of the International Air Transport Association (IATA), the size of the Larnaca and Paphos terminals provides levels of service B and C, respectively. Both airports can be reached by car, taxi and the public transport system.

Larnaca Airport opened in November 2009 and the first phase is capable of handling 7,5M passengers annually. The new 100.000 m2 terminal includes 16 boarding bridges, 67 check-in counters, 5 baggage carousels, VIP and business lounges, duty-free shops as well as comfortable and functional areas offering a wide range of shops and cafeterias. The new terminal was built some 500–700 m west of the old terminal, adjacent to the new control tower and it is supported by an extension in the runway, new facilities for aircraft and 2.450 car parking spaces. The runway has a total length of 3.000 m. The old terminal building is planned to be partially demolished and refurbished as a cargo centre, and is currently used as a private terminal for visiting heads of state, VIPs, and private aircraft operators. In 2012, Larnaca Airport served 5.166.224 passengers. There is the possibility of further expansion and construction of a second parallel runway when necessary and further development of the terminal in order to be able to accommodate 9M passengers per year.

The new Paphos Airport has been operational since November 2008 and the new 18.000 m2 terminal can serve 2,7M passengers annually. The new airport provides 28 check-in counters, 3 baggage carousels and 800 parking places, shops etc. The total investment for Paphos Airport reached EUR126M. The runway has a total length of 2.700 m. In 2012 Paphos Airport served 2.242.797 passengers.

The concessionaire investigated many options including the development of an entertainment, culture, tourist, leisure and commercial centre, coupled with an airport hotel, casino etc. In addition, there were proposals for the development of a huge exhibition/ transshipment center serving the promotion of Chinese products in the region of south-eastern Europe, Middle East and North Africa. To date there has been no final decision on this.

==The Contracting Authority (Public Party)==

Central government is responsible for all levels of the development, design, tendering, negotiation procedure and regulation of the contract. These procurement activities were conducted under the jurisdiction of the Ministry of Communications and Works (Public Works Department, Department of Civil Aviation) and the Ministry of Finance. However, the local authorities were, also supportive of the project.

The procurement process for this project was based on the UK Treasury Taskforce (TTF) (1999) A Step-by-Step Guide to the PFI Procurement Process. London: HM Treasury, the EU regulations on the procurement process for such a project, and the Cyprus procurement law. The decision to use EU laws for the procurement process was due to the fact that, at the time, Cyprus was in the process of joining the EU and because it was considered that familiarity with the process would attract international companies (Solomou, 2003).

==The Concessionaire (Private Party)==

Hermes Airports Ltd, a French and Cypriot-led consortium was established. The majority of companies that created the Hermes Airports consortium are business developers mainly in the construction field (Bouygues Batiment International, Egis Projects, Iacovou Brothers, Hellenic Mining, Charilaos Apostolides) with a total share control of 64,6%. In addition the foreign companies Bouygues Batiment International and Egis Projects have extensive experience in PPPs. The consortium of project sponsors included:
*Bouygues Batiment International (French construction group- 22%);
*Egis Projects (French infrastructure group- 20%);
*Cyprus Trading Corporation (a local retail group, 11.34%);
*Hellenic Mining (11.33%, a local business developer),
*Vantage Airport Group (11%);
*Aer Rianta International (Irish airport operator, 11%);
*Iacovou Brothers (a local contractor- 5,665%);
*Charilaos Apostolides (a local contractor- 5,665%);
*Aéroport Nice Côte d' Azur Chambre de Commerce et d'Industrie (French airport operator- 2%).

Key subcontractors for construction and maintenance included:
*Main contractor: Bouygues Batiment International and subcontractors: Iacovou Brothers Ltd and Charilaos Apostolides Ltd;
*Ground handling subcontractors (aircraft servicing, luggage handling etc): Swissport and LGS;
*Retail/ Food & beverage subcontractors: Cyprus Trading Corporation (CTC) and Aer Rianta International;
*Cleaning subcontractor: Hellenic Mining.

In order to raise funding Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. Hermes Airports Ltd. then borrowed €569.7M as follows: Term Loan €449.2M; Mezzanine Loan, €60.25 M; Shareholders’ Loan Stock, €60.25M. The Term and Mezzanine Loans came from 16 international banks (Koutsoulis, 2013) .

Other subcontractors included:

Construction and Maintenance:
Main contractor: Bouygues Batiment International

Subcontractors:
* Iacovou Brothers Ltd
*Charilaos Apostolides Ltd

Ground handling (airplane servicing, luggage handling etc) subcontractors:
* Swissport
* LGS

Retail/ Food & beverage subcontractors:
* Cyprus Trading Corporation (CTC)
* Aer Rianta International

Cleaning subcontractor:
* Hellenic Mining

As a SPV (Special Purpose Vehicle), the Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. See above the list of sponsors & respective shares. The Hermes Airports Ltd borrowed €569.7 million as follows:
*Term Loan: € 449.2 mil.
*Mezzanine Loan: € 60.25 mil.
*Shareholders’ Loan Stock: € 60.25 mil.

Term and Mezzanine Loans came from 16 international banks.

==Users==

Cyprus, being an island, is isolated from Continental Europe. Larnaca and Paphos International Airports are Cyprus’ main international passenger gateways. No year- round ferry/ sea port connections with neighboring countries exist.

Larnaca Airport handles on average over 5 million passengers per year, approximately 50.000 passenger flights and over 30.000 tons of cargo. Paphos Airport, principally used by tourists, handles approximately 2 million passengers per year, over 12.000 passenger flights and some 400 tons of cargo. It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter percentage is 25% and 49% for Larnaca and Paphos, respectively (year 2011). The UK market share is 37,26% of total passenger traffic to Cyprus, followed by Greece with 15,71%, Russia with 9,45% and Germany with 5,34% (Government of Cyprus, Civil Aviation Department).

==Key Purpose for PPP Model Selection==

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It comprises the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). Base on the timetable set in a European level priority will be given to the Core Network (European financial support). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network.

Currently, the development of the transport infrastructure of Cyprus through PPP projects is considered to be unattractive, particularly for road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors for TEN-T projects because the cost of the investment is usually equivalent to that of a similar project in a central, inter-connected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the infrastructure project. This is taken into consideration when authorities investigate the possibility of developing projects in Cyprus through a Public- Private Partnership (PPP).

Value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer are the main political motivations for PPPs as a contract choice, both officially/formally and unofficially/informally in Cyprus. The decrease of governmental debt is considered to be the main reason, and the secondary one the acceleration of works.

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It is composed by the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network. It is obvious that priority will be given to the Core Network (European financial support).

==Project Timing==

After the Turkish invasion of 1974, Lefkosia (Nicosia) Airport, the only international airport in Cyprus those days, ceased its operation and the airport premises came under United Nations administration. Under these circumstances, the Republic of Cyprus decided in late 1974 to convert an abandoned RAF airport and landing strip into the new international airport of Cyprus, Larnaca Airport. Larnaca International Airport opened on 8 February 1975, with only limited infrastructure facilities and a prefabricated set of buildings comprising separate halls for departures and arrivals. Cyprus since the early 1980s was becoming a major tourism center. The Cyprus Government steadily improved the facilities of the Larnaca Airport, but the passenger terminal was unable to cope with demand. The growing tourism industry of the island led to the decision to develop a second airport in Cyprus. Paphos International Airport opened for operations in November 1983 to serve primarily the tourism industry of the region of Paphos.

The rise of tourism in Cyprus unfortunately was not matched by simultaneous development of airport infrastructure. The two airports of Cyprus were substandard and they could not match demand (especially at Larnaca Airport). Often problems arising during peak hours created a negative image for the passengers, mainly tourists. It was deemed necessary to further develop the airports. The development of the two airports was expected to assist significantly the tourist industry of Cyprus and support the viability of the economy.

The further development of Larnaca and Paphos International Airports was decided in the late 1980s. The new elected government (left wing, 1988-1993) was preparing the project having in mind the development and operation of the two airports through traditional methods. The right-central wing government (1993-2003) followed the steps of the former government. By the late 1990s, when the master plan and construction drawings were ready, the financial issue of developing the two airports arose. In those days desalination plants were being developed in Cyprus as PPP’s, introducing this as a sustainable method for project development. The right-central wing government decided to follow the PPP path. Cyprus in the early 2000s was struggling to access the European Union and decrease governmental debt. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The new central-left government (2003-2008) followed the steps of the previous government and concluded the negotiations with the preferred bidder (2005). In 2004, Cyprus entered the European Union and the new government set as a new goal access to the eurozone.

==Project Locality and Market Geography==

Currently air transport is the only mode of passenger transport to/from Cyprus because there are no ferry services (passenger ships) that connect Cyprus with the Continental Europe or other neighboring Countries. Cyprus as a tourist and insular country is highly dependent on air transport. There is a wide network of air-routes connecting Cyprus with Europe, Africa and Asia. Air transport policy objectives in Cyprus include the growing of air transport in a controlled way, the development of sufficient airport capacity, and the adoption appropriate air traffic management measures. The liberalisation of air transport, in combination with the development of the new airports, is expected to create the potential for Cyprus to become a regional transit hub between Europe and the Middle East.

The Larnaca and Paphos Airports support almost exclusively the passenger transport needs of Cyprus with the rest of the world. The two airports attract passengers from all over Cyprus. Transit movements are relatively low and the two airports cannot be considered as hubs for the area. The two airports are located in the outer urban areas of the cities of Larnaca and Paphos respectively

==Procurement & Contractual Structure==

The further development of Larnaca and Paphos Airports was decided in 1988, under a single contract. A Master Plan was prepared for the construction of new terminals in the two airports, extension of the runaways and taxiways, and other airport facilities. In May 1991, after a tendering process, the French consulting firm SOFREAVIA prepared the master plan for the airports. In those days it was expected that the two airports would have been traditionally procured and constructed. In February 1993, the French consortium AEROPORTS DE PARIS/SOFREAVIA prepared detailed designs and tender documents for the new airports. The designs for Larnaca and Paphos Airports were completed in September 1999 (Solomou, 2003).

In the late 1990s, there was a discussion of what procurement method should be used for the development of the airports. The government decided that the best method was the BOT (Build, Operate, Transfer) approach because it was believed that this would result in the easiest development of the airports without the “slow-moving” processes a State project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government in those days since the primary goal was accession to the European Union.

After the selection of a team of consultants in October 2000 there was a check on the viability of the project, and discussions on project requirements and how to make the project more attractive to international companies.

===Tendering===

In March 2001 there was an advertisement for Expressions of Interest. Sixteen consortia expressed their interest in the project and received the necessary documentation. From those sixteen only ten returned the completed documents. These bidders were evaluated and five of them were short-listed in July 2001, and invited to submit detailed proposals in October 2001. The short-list of tenderers was based on answers to the Pre-Qualification Questionnaire (PQQ) and on the criteria for the pre-qualification evaluation. From these five consortia only the following three accepted the Invitation to Tender (ITT) and submitted proposals for the project: Alterra Consortium; Hermes Airports and Cyprus Airports Group (Solomou, 2003).

The Master Plan was made available to all bidders in order to prepare their proposals. The bidders were expected to follow the basic idea of the Master Plan, but could propose small, ‘unimportant’ changes in order to make an efficient design for the airports which would help achieve the best operation of the airports and meet the standards of the output specification. The concession contract was for a period of 25 years.

After the pre-qualification stage, a detailed bid document ITT, with all the needed information for the preparation of their proposals was sent to the short-listed bidders.
The selection criteria were based on the following broad categories:
- Technical and Operational (e.g. design, innovation and technical, capacity, performance, capital spend).
- Business Plan (e.g. marketing strategy, pricing policies, organizational structure).
- Legal (e.g. assessment of amendments to draft Contract).
- Financial (i) (e.g. financial robustness, deliverability)
- Financial (ii) (e.g. bid price).

Negotiations took place with the selected preferred bidder and according to the tender rules if the two parties did not reach an agreement, negotiations with the second selected bidder were to follow. In 2003 Alterra Consortium was announced as the preferred bidder. The negotiations failed and the Cyprus Government started negotiations with the second best bidder, Hermes Airports. This had legal implications since Cyprus Airports Group could legally challenge the decision, adding further delays to a much needed project.
The negotiations with Hermes Airports were successfully completed and on 12 May 2006 the private consortium signed the BOT contract for the management and development of Larnaca and Paphos Airports. Until completion of the new terminals, the consortium took over the management of the existing facilities where minor improvements were made prior to the construction of the new facilities.

===Contract Structure===

An output specification was created that includes the way the airport is going to be operated. The Concessionaire is responsible for the Soft Facility Management (SFM) and Hard Facility Management (HFM). In the contract there is a specification of the requirements: how to manage and operate the terminals, the runway and taxiways, and car parking for staff, passengers and visitors. The Concessionaire is also responsible for the maintenance and upkeep of the airport in general, as well as for the delivery of some of the core services. It is responsible for the check-in facilities and the loading of the baggage as well as the services provided in the waiting area.
The Cyprus Government before the PPP tender procedure prepared the Master Plan and the detailed designs for the two airports. Moreover, the government is responsible for the delivery of other core services (e.g. security, air traffic control, and fire brigade services).

Based on the contract clauses the aeronautical fees are regulated. Other fees and revenues (retail, car parking etc) are not regulated.

Termination clauses are included in the contract and are divided into three categories (concessionaire default, contracting authority default and force majeure). In each case there are guarantees that the Concessionaire is compensated as follows (Government of Cyprus, 2005):

Concessionaire default- compensation based on 95% of the Concession Agreement revised debt termination amount;

Force majeure- compensation based on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs and equity.

Contracting Authority default- compensation on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs, equity and equity return.

A Liaison Committee exists, formed by three representatives of the Contracting Authority and three representatives of the Concessionaire. This committee is responsible for the day-by-day review of the Contract. The Committee also provides a forum for strategic discussions on variations in market conditions as well as the efficient operation of the two airports. The Liaison Committee can be the forum for contract renegotiation.

The private sector collects all of the revenues. The Concessionaire pays the Cyprus Government an annual fee of €3,5M as well as 33% of the annual gross revenues of the two airports. In addition, the Cyprus Government participates in a profit-sharing arrangement if the actual equity IRR exceeds 12% in real terms.

===Risk Allocation===

The risks are allocated in a balanced way between the concessionaire and the contracting authority (government). The allocation is based on the principal that the risk is allocated to whom can best deal with it (Solomou, 2003).

Design and construction risks are allocated to the private sector. If there is a problem the concessionaire will face certain penalties. The government has developed some tools to measure performance. These risks however are thought to be the most easily regulated and measured. Maintenance risks are allocated to the private sector. If problems arise the concessionaire will face certain penalties.

Operating risks are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental operations, due to government approved suppliers).
The demand risk will be shared by both parties but the risk is greater for the private sector. The concessionaire has to pay the government a “rent” for the exploitation of the government’s assets. The “rent” is divided into two parts. The first is a fixed payment and the second a percentage (33%) of the operating revenues. This percentage shows the sharing of the demand risk between the private and the public sector. If there is a significant reduction in revenues the government receives less income.

The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in the case of a decision to expand the infrastructure of the two airports.

The regulatory risks are shared between both parties. There are certain clauses that will protect the operator from negative regulatory changes enforced by the government. If, for example, tourism taxation is raised then fewer visitors will come to Cyprus, so the airports’ revenues will be reduced. In such a situation, the government should take this risk. On the other, hand if the regulation affects all Cyprus citizens, for example inflation, the concessionaire will have to bear this risk.

The force majeure risk will be shared by both parties (war, disaster, hijacking etc) but the risk is greater for the public sector, as the concessionaire is compensated by the Contracting Authority.

[[Image:Larnaca2.png|300px]]

'''Figure 3: Risk allocation'''

Another possible risk that is allocated to the public sector is the possibility of having a third airport in Cyprus, either by building a new one or in the case that a comprehensive settlement is reached in respect of the Cyprus issue, when the existing airport in the occupied area may recognized as an international airport again. The bidders prepared their proposals on the assumption that there are only two airports in Cyprus. If there is in the future a new airport in Cyprus, there will be a reduction in demand for Larnaca and Paphos Airports so the contract has certain clauses to protect the concessionaire from such risks.

===Performance===

The contract defines a performance measurement system that incentivizes the Concessionaire to perform the designated airport services to the performance standards specified in the contract, and specifies the deductions to be made when performance does not attain the relevant standards. The concession contract establishes procedures for the measurement of performance of the designated airport services. If the Concessionaire fails to achieve the performance standards, then deficiency points apply. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level (10 points) penalties apply (a percentage of the gross revenue less the concession fee). If the Concessionaire achieves or exceeds 95% performance in all the concessionaire- controlled standards, then an amount equal to 1% of the gross revenue less the concession fee for that performance review period shall be deducted from the next concession fee payment made to the Government (Government of Cyprus, 2005).

Nevertheless, the contract does not include deficiency points or penalties for non-concessionaire controlled performance standards (baggage handling and airline counter check-in process). The Concessionaire shall employ independent third parties to carry out customer satisfaction surveys of passengers and customers. No deficiency points or penalties are linked to the survey results.

The Contracting Authority may audit any aspect of the Concessionaire’s performance. If the Concessionaire achieves less than 60% for all of the concessionaire-controlled standards, the Contracting Authority may issue a Warning Notice which may lead even to termination of the contract. The performance standards may be reviewed by the Liaison Committee in good faith.

Two categories of performance indicators exist, as follows:
*Concessionaire-controlled performance indicators: Check-In Counters; Security Check Equipment; Luggage Trolleys; Immigration/ Customs; Baggage Reclaim; Flight Information Display; Lifts/ Escalators/ Moving Walkways; Cleanliness;
*Third party-controlled standards (non concessionaire-controlled performance indicators): Check-In for Scheduled Flights; Check-In for Charter Flights; Baggage Delivery of first bag to reach carousel; Baggage Delivery of last bag to reach carousel.

The contract includes deficiency points and penalties for the concessionaire- controlled performance standards/ indicators. Each indicator has five deficiency levels which lead to 1-5 deficiency points, respectively. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level, a penalty applies. The following performance indicators are mentioned in the contract:
*Check- In Counters for processing passengers
Concessionaire controlled performance indicator- Check- In Counters for processing passengers are fully functional 90% of the time.
*Security Check Equipment functionality
Concessionaire controlled performance indicator-
Security Check Equipment fully functional 90% of the time.
*Luggage Trolleys availability
Concessionaire controlled performance indicator-
Luggage Trolleys available 85% of the time in Peak Week for passengers in the check in hall and the arrival hall/ baggage reclaim area.
-Immigration/ Customs booths functionality
Concessionaire controlled performance indicator-
90% of Immigration/ Customs booths for processing passengers are fully functional.
*Baggage reclaim equipment functionality
Concessionaire controlled performance indicator-
Baggages reclaim equipment 90% of the time fully functional.
*Flight Information Display equipment functionality
Concessionaire controlled performance indicator-
Flight Information Display equipment 90% of the time fully functional.
*Lifts/ Escalators/ Moving Walkways equipment functionality
Concessionaire controlled performance indicator-
Lifts/ Escalators/ Moving Walkways equipment 90% of the time fully functional.
*Cleanliness of the project area
Concessionaire controlled performance indicator-
90% of the time cleanliness maintained according to the specifications determined by the Concessionaire.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 12 minutes of joining the Check- In queue for Scheduled Flights.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 20 minutes of joining the Check- In queue for Charter Flights.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of first bag to reach carousel Target Maximum/ Optimal: 20/15 minutes respectively after on-block time.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of last bag to reach carousel Target Maximum/ Optimal: 35/30 minutes respectively after on-block time.

The Department of Civil Aviation expects that the passenger traffic in the coming years will increase annually by 2 -3%. The development depends on competition for tourism, the international economy and other external factors such as political stability in the region. The passenger forecasts for a 2-3% annual increase have not been confirmed (at least not for every year).

It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter rate is 25% and 49% for Larnaca and Paphos respectively (year 2011). The UK market shares 37,26% of total passenger traffic to Cyprus, followed by the markets of Greece with 15,71%, Russia with 9,45% and Germany with 5,34%.

Three forecast scenarios exist in the contract (low case growth, base case growth and high case growth). None of these scenarios have been confirmed by the actual passenger traffic: Larnaca & Paphos Airports actual traffic in 2012 was 7,5M passengers versus 8,5M, 9,0M and 9,5M passengers in the 2012 Low, Base and High case scenarios, respectively.

Larnaca Airport
*Passengers
2007: 5.387.724

2008: 5.482.567

2009: 5.258.716

2010: 5.475.905

2011: 5.507.552

2012: 5.166.224

2013: 4.863.577

*Air Traffic (airplanes)
2007: 47.755

2008: 50.483

2009: 46.416

2010: 49.022

2011: 50.329

Paphos Airport
*Passengers
2007: 1.819.182

2008: 1.764.660

2009: 1.640.562

2010: 1.646.937

2011: 1.778.898

2012: 2.242.797

2013: 2.175.114

==Project Outcomes==
The key scope of the project was to deliver a modern, safe and secure National Airport for Cyprus and support tourism.Traffic has not been the anticipated. Reasons are considered to be:
* internal (there have been discussions with respect to the high rates required by Hermes Airports ltd (concessioner). At the end of 2014, the concessioner has initiated a campaign to attract new airlines. Emphasis is placed on low-cost carriers, which are used to serve the Tourism industry. Paphos is to be the cultural capital of Europe in 2017 and a rise in visitors is expected in the range of 15-25%.
*2013 was a difficult year for Cyprus with great political and economic stability. This had an impact on tourism and business travel.

The following critical success factors could be considered:
* The two new airports improved dramatically the quality of services provided. Although the two airports do not face significant competition, it is crucial for the tourist industry of Cyprus to provide long lasting- sustainable high quality services.
* Air transport as a whole should provide high health and safety standards. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation. The airline operators are significant partners too.
*Air transport as a whole should provide high security standards. Terrorism and other relevant issues have a global effect. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation.
*An investment programme will increase the revenues benefiting the Concessionaire and the Cyprus Government (Contracting Authority). The diversity of the revenues will increase the viability of the project and it may allow the decrease of other fees (e.g. aeronautical fees). The Cyprus Government should support the Concessionaire to explore possible investment choices. The fact that the contract concludes in 2031 should not be a negative factor. Other incentives should be identified.
*Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.
*Cooperation between the Concessionaire and the Contracting Authority should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should stand alone too. The liaison committee is expected to support continuous cooperation.

For an insular country the existence of a high quality , safe and secure airport(s) is of paramount importance. It is also very important for business and tourism development. The old airport was insufficient and not capable to handle with safety and security air traffic.
This is especially important following the developments in the wider geographical area.The concessionaire - to date - has not used the full potential of the airport services. Additional revenues are still rather low. The upside is that there is space for improvements on revenue.

The airports have also received (right from the start) high acceptability. The upgrading of the existing airport facilities was long required.

The following critical failure factors could be considered:
* The viability of the whole project depends on the growth of the airlines passenger traffic. The actual passenger traffic so far did not match the forecast scenarios included in the contract.
*Basically the growth of revenues is interconnected with the passenger traffic. Both these factors are significant for the viability of the whole project. Nevertheless, the Concessionaire seeks outs other forms of revenues and the Cyprus Government assists the Hermes Airport towards this direction
*Aeronautical fees are regulated by the Concession Contract. It is important to be maintain in reasonable levels. It is important for the viability of Cyprus economy and especially for tourism industry to offer competitive tourist packages. The aeronautical fees play significant role on the later. On the other if the tourism industry fails to attract tourists in Cyprus, the airports would have significant loses. In this case the chicken and egg situation exists. This show the importance of cooperation of all the tourism industry stakeholders and Hermes Airports should be a main stakeholder.
*In 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013 the Cypriot Government reached to an agreement with its lenders. The status of Cyprus economy and the sustain recession that is expected are factors that could create increase uncertainty for the project.

The rates applied by the concessionaire seem to be limiting the full potential of the airports. In 2014, new campaigns were launched to attract airlines. The mix of shareholders in the concessionaire may also be playing a pivotal role in the business development.

===Economic Impact===
It is difficult to assess the full economic impact as the operation of the new airports coincide with the economic crisis and the developments in the wider area. Definitely, access to the island-country has been significantly improved.

===Social Impact===
Apart from offering new employment opportunities, the new airport has sustained the tourism industry and therefore jobs in that sector.
It also improves the mobility of the inhabitants.

===Environmental Impact===
The construction of the new airports comes with design to protect the environment from noise and emissions (appropriate runways etc.).

==References==

*C. Christodoulou, C. Efstathiades, 2013, Larnaca and Paphos International Airports In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
*Solomou C. (2003). BOT and Economic Efficiency: The case of Larnaca Airport. Thesis for the degree of Master of Science in Built Environment for the University of London. University College London, Bartlett School of Graduate Studies.
*Government of Cyprus. 2005. Concession Agreement for the Development and Operation of International Airports at Larnaca and Pafos. Ministry of Communications and Works. Lefkosia: Government of Cyprus
*Government of Cyprus. 2012. Transport Statistics 2011, Statistical Service. Lefkosia: Government of Cyprus
*Government of Cyprus. 2009. Public Works Department: One Hundred thirty years of history and service, 1878-2008. Lefkosia: Government of Cyprus.
*Antonis Koutsoulis, Head of the Unit for regulating the Larnaca and Paphos Airport BOT Contract. 2013. Personal Interview. Lefkosia
*Government of Cyprus, Ministry of Communications and Works, Public Works Department Website: www.mcw.gov.cy/pwd
*Government of Cyprus, Ministry of Communications and Works, Civil Aviation Department Website: www.mcw.gov.cy/dca
*Hermes Airports, Larnaca and Paphos International Airports Official Website: www.hermesairports.com
*World Finance Website: http://www.worldfinance.com/awards/ppp-awards-2013
[[Category:Case Studies]]

Case Studies: Larnaca and Paphos International Airports

2015-06-10T12:59:19Z

Pmoraiti: /* Performance */

{{Infobox
|header1 = Larnaca and Paphos (Cyprus) International Airports
|header2 =
|label2 = Project Type:
|data2 = Both
|header3 =
|label3 = Contract duration:
|data3 = 25 Years
|header4 =
|label4 = Budget:
|data4 = EUR 640M (Development of the new Larnaca and Paphos Airports)
|title = Project Overview
|image1 = [[Image:larnaca1.jpg|300px]]
|caption1 = Figure 1: Larnaca Airport
|image2 = [[Image:paphos1.jpg|300px]]
|caption2 = Figure 2: Paphos Airport
| header5 = Project Time Line
{{Infobox
| child = yes
| label1= Project conceived:
| data1 = 1988;
| label2= Tender:
| data2 = 2001;
| label3= Contract Award:
| data3 = May 8, 2005;
| label4= Financial Close:
| data4 = May 12, 2006;
| label5= Paphos Airport inauguration Ceremony:
| data5 = Nov. 8, 2008;
| label6= Operation of the new Paphos Airport:
| data6 = Nov. 17, 2008;
| label7= Larnaka Airport Inauguration Ceremony:
| data7 = 7 Nov. 2009;
| label8= Operation of the new Larnaka Airport:
| data8 = Nov. 17, 2009.
}}
}}

==Introduction==

The ‘‘Best Transport Project in Europe’’ in the competition for ‘‘PPP Awards 2013’’ was awarded to the Concession Agreement for the development and operation of the international airports of Larnaca and Paphos by ‘‘World Finance’’ (visit http://www.worldfinance.com/awards/ppp-awards-2013). This reflects the success of the project on various levels assessed in the competition: using best practices, innovation, bringing socio-economic benefits to the end users, and becoming a template in various aspects. In fact, the new modern airports, through the PPP contract, offer significant changes and innovative solutions in respect of passenger handling (e.g. boarding bridges), especially when these solutions are compared with the old airports.

Larnaca Airport is the largest commercial airport of Cyprus and is located in the southern part of the island, 4 km southwest from the city of Larnaca. Paphos Airport is the second largest airport of Cyprus, located in the southwestern part of the island, 6.5 km southeast from the city of Paphos.

Hermes Airports Ltd (the Concessionaire) completed the construction of the new facilities at Larnaca and Paphos in accordance with the agreed timetable at a total cost of EUR 642,7 M. According to the specifications of the International Air Transport Association (IATA), the size of the Larnaca and Paphos terminals provides levels of service B and C, respectively. Both airports can be reached by car, taxi and the public transport system.

Larnaca Airport opened in November 2009 and the first phase is capable of handling 7,5M passengers annually. The new 100.000 m2 terminal includes 16 boarding bridges, 67 check-in counters, 5 baggage carousels, VIP and business lounges, duty-free shops as well as comfortable and functional areas offering a wide range of shops and cafeterias. The new terminal was built some 500–700 m west of the old terminal, adjacent to the new control tower and it is supported by an extension in the runway, new facilities for aircraft and 2.450 car parking spaces. The runway has a total length of 3.000 m. The old terminal building is planned to be partially demolished and refurbished as a cargo centre, and is currently used as a private terminal for visiting heads of state, VIPs, and private aircraft operators. In 2012, Larnaca Airport served 5.166.224 passengers. There is the possibility of further expansion and construction of a second parallel runway when necessary and further development of the terminal in order to be able to accommodate 9M passengers per year.

The new Paphos Airport has been operational since November 2008 and the new 18.000 m2 terminal can serve 2,7M passengers annually. The new airport provides 28 check-in counters, 3 baggage carousels and 800 parking places, shops etc. The total investment for Paphos Airport reached EUR126M. The runway has a total length of 2.700 m. In 2012 Paphos Airport served 2.242.797 passengers.

The concessionaire investigated many options including the development of an entertainment, culture, tourist, leisure and commercial centre, coupled with an airport hotel, casino etc. In addition, there were proposals for the development of a huge exhibition/ transshipment center serving the promotion of Chinese products in the region of south-eastern Europe, Middle East and North Africa. To date there has been no final decision on this.

==The Contracting Authority (Public Party)==

Central government is responsible for all levels of the development, design, tendering, negotiation procedure and regulation of the contract. These procurement activities were conducted under the jurisdiction of the Ministry of Communications and Works (Public Works Department, Department of Civil Aviation) and the Ministry of Finance. However, the local authorities were, also supportive of the project.

The procurement process for this project was based on the UK Treasury Taskforce (TTF) (1999) A Step-by-Step Guide to the PFI Procurement Process. London: HM Treasury, the EU regulations on the procurement process for such a project, and the Cyprus procurement law. The decision to use EU laws for the procurement process was due to the fact that, at the time, Cyprus was in the process of joining the EU and because it was considered that familiarity with the process would attract international companies (Solomou, 2003).

==The Concessionaire (Private Party)==

Hermes Airports Ltd, a French and Cypriot-led consortium was established. The majority of companies that created the Hermes Airports consortium are business developers mainly in the construction field (Bouygues Batiment International, Egis Projects, Iacovou Brothers, Hellenic Mining, Charilaos Apostolides) with a total share control of 64,6%. In addition the foreign companies Bouygues Batiment International and Egis Projects have extensive experience in PPPs. The consortium of project sponsors included:
*Bouygues Batiment International (French construction group- 22%);
*Egis Projects (French infrastructure group- 20%);
*Cyprus Trading Corporation (a local retail group, 11.34%);
*Hellenic Mining (11.33%, a local business developer),
*Vantage Airport Group (11%);
*Aer Rianta International (Irish airport operator, 11%);
*Iacovou Brothers (a local contractor- 5,665%);
*Charilaos Apostolides (a local contractor- 5,665%);
*Aéroport Nice Côte d' Azur Chambre de Commerce et d'Industrie (French airport operator- 2%).

Key subcontractors for construction and maintenance included:
*Main contractor: Bouygues Batiment International and subcontractors: Iacovou Brothers Ltd and Charilaos Apostolides Ltd;
*Ground handling subcontractors (aircraft servicing, luggage handling etc): Swissport and LGS;
*Retail/ Food & beverage subcontractors: Cyprus Trading Corporation (CTC) and Aer Rianta International;
*Cleaning subcontractor: Hellenic Mining.

In order to raise funding Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. Hermes Airports Ltd. then borrowed €569.7M as follows: Term Loan €449.2M; Mezzanine Loan, €60.25 M; Shareholders’ Loan Stock, €60.25M. The Term and Mezzanine Loans came from 16 international banks (Koutsoulis, 2013) .

Other subcontractors included:

Construction and Maintenance:
Main contractor: Bouygues Batiment International

Subcontractors:
* Iacovou Brothers Ltd
*Charilaos Apostolides Ltd

Ground handling (airplane servicing, luggage handling etc) subcontractors:
* Swissport
* LGS

Retail/ Food & beverage subcontractors:
* Cyprus Trading Corporation (CTC)
* Aer Rianta International

Cleaning subcontractor:
* Hellenic Mining

As a SPV (Special Purpose Vehicle), the Hermes Airports Ltd issued 10.000 shares (€1,71 per share) reflecting the share capital of the company. See above the list of sponsors & respective shares. The Hermes Airports Ltd borrowed €569.7 million as follows:
*Term Loan: € 449.2 mil.
*Mezzanine Loan: € 60.25 mil.
*Shareholders’ Loan Stock: € 60.25 mil.

Term and Mezzanine Loans came from 16 international banks.

==Users==

Cyprus, being an island, is isolated from Continental Europe. Larnaca and Paphos International Airports are Cyprus’ main international passenger gateways. No year- round ferry/ sea port connections with neighboring countries exist.

Larnaca Airport handles on average over 5 million passengers per year, approximately 50.000 passenger flights and over 30.000 tons of cargo. Paphos Airport, principally used by tourists, handles approximately 2 million passengers per year, over 12.000 passenger flights and some 400 tons of cargo. It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter percentage is 25% and 49% for Larnaca and Paphos, respectively (year 2011). The UK market share is 37,26% of total passenger traffic to Cyprus, followed by Greece with 15,71%, Russia with 9,45% and Germany with 5,34% (Government of Cyprus, Civil Aviation Department).

==Key Purpose for PPP Model Selection==

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It comprises the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). Base on the timetable set in a European level priority will be given to the Core Network (European financial support). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network.

Currently, the development of the transport infrastructure of Cyprus through PPP projects is considered to be unattractive, particularly for road infrastructure. Small peripheral EU Member States have difficulties in attracting private investors for TEN-T projects because the cost of the investment is usually equivalent to that of a similar project in a central, inter-connected Member State, while the rate of return for the investment is significantly reduced due to the lower usage of the infrastructure project. This is taken into consideration when authorities investigate the possibility of developing projects in Cyprus through a Public- Private Partnership (PPP).

Value for money, technical efficiency, postponing costs, acceleration of works, short-term decrease of governmental debt and risk transfer are the main political motivations for PPPs as a contract choice, both officially/formally and unofficially/informally in Cyprus. The decrease of governmental debt is considered to be the main reason, and the secondary one the acceleration of works.

The revised TEN-T Guidelines Regulation sets out a more binding planning framework in a dual layer format for the European transport network. It is composed by the Comprehensive Network (to be completed by 2050) and the Core Network (to be completed by 2030). The Larnaca Airport belongs to the Core TEN-T Network and the Paphos Airport belongs to the Comprehensive TEN-T Network. It is obvious that priority will be given to the Core Network (European financial support).

==Project Timing==

After the Turkish invasion of 1974, Lefkosia (Nicosia) Airport, the only international airport in Cyprus those days, ceased its operation and the airport premises came under United Nations administration. Under these circumstances, the Republic of Cyprus decided in late 1974 to convert an abandoned RAF airport and landing strip into the new international airport of Cyprus, Larnaca Airport. Larnaca International Airport opened on 8 February 1975, with only limited infrastructure facilities and a prefabricated set of buildings comprising separate halls for departures and arrivals. Cyprus since the early 1980s was becoming a major tourism center. The Cyprus Government steadily improved the facilities of the Larnaca Airport, but the passenger terminal was unable to cope with demand. The growing tourism industry of the island led to the decision to develop a second airport in Cyprus. Paphos International Airport opened for operations in November 1983 to serve primarily the tourism industry of the region of Paphos.

The rise of tourism in Cyprus unfortunately was not matched by simultaneous development of airport infrastructure. The two airports of Cyprus were substandard and they could not match demand (especially at Larnaca Airport). Often problems arising during peak hours created a negative image for the passengers, mainly tourists. It was deemed necessary to further develop the airports. The development of the two airports was expected to assist significantly the tourist industry of Cyprus and support the viability of the economy.

The further development of Larnaca and Paphos International Airports was decided in the late 1980s. The new elected government (left wing, 1988-1993) was preparing the project having in mind the development and operation of the two airports through traditional methods. The right-central wing government (1993-2003) followed the steps of the former government. By the late 1990s, when the master plan and construction drawings were ready, the financial issue of developing the two airports arose. In those days desalination plants were being developed in Cyprus as PPP’s, introducing this as a sustainable method for project development. The right-central wing government decided to follow the PPP path. Cyprus in the early 2000s was struggling to access the European Union and decrease governmental debt. The decrease of governmental debt and the acceleration of works were the main reasoning for the PPP choice. The new central-left government (2003-2008) followed the steps of the previous government and concluded the negotiations with the preferred bidder (2005). In 2004, Cyprus entered the European Union and the new government set as a new goal access to the eurozone.

==Project Locality and Market Geography==

Currently air transport is the only mode of passenger transport to/from Cyprus because there are no ferry services (passenger ships) that connect Cyprus with the Continental Europe or other neighboring Countries. Cyprus as a tourist and insular country is highly dependent on air transport. There is a wide network of air-routes connecting Cyprus with Europe, Africa and Asia. Air transport policy objectives in Cyprus include the growing of air transport in a controlled way, the development of sufficient airport capacity, and the adoption appropriate air traffic management measures. The liberalisation of air transport, in combination with the development of the new airports, is expected to create the potential for Cyprus to become a regional transit hub between Europe and the Middle East.

The Larnaca and Paphos Airports support almost exclusively the passenger transport needs of Cyprus with the rest of the world. The two airports attract passengers from all over Cyprus. Transit movements are relatively low and the two airports cannot be considered as hubs for the area. The two airports are located in the outer urban areas of the cities of Larnaca and Paphos respectively

==Procurement & Contractual Structure==

The further development of Larnaca and Paphos Airports was decided in 1988, under a single contract. A Master Plan was prepared for the construction of new terminals in the two airports, extension of the runaways and taxiways, and other airport facilities. In May 1991, after a tendering process, the French consulting firm SOFREAVIA prepared the master plan for the airports. In those days it was expected that the two airports would have been traditionally procured and constructed. In February 1993, the French consortium AEROPORTS DE PARIS/SOFREAVIA prepared detailed designs and tender documents for the new airports. The designs for Larnaca and Paphos Airports were completed in September 1999 (Solomou, 2003).

In the late 1990s, there was a discussion of what procurement method should be used for the development of the airports. The government decided that the best method was the BOT (Build, Operate, Transfer) approach because it was believed that this would result in the easiest development of the airports without the “slow-moving” processes a State project has to face. In addition, burdening the national budget with a huge investment was not an option for the Government in those days since the primary goal was accession to the European Union.

After the selection of a team of consultants in October 2000 there was a check on the viability of the project, and discussions on project requirements and how to make the project more attractive to international companies.

===Tendering===

In March 2001 there was an advertisement for Expressions of Interest. Sixteen consortia expressed their interest in the project and received the necessary documentation. From those sixteen only ten returned the completed documents. These bidders were evaluated and five of them were short-listed in July 2001, and invited to submit detailed proposals in October 2001. The short-list of tenderers was based on answers to the Pre-Qualification Questionnaire (PQQ) and on the criteria for the pre-qualification evaluation. From these five consortia only the following three accepted the Invitation to Tender (ITT) and submitted proposals for the project: Alterra Consortium; Hermes Airports and Cyprus Airports Group (Solomou, 2003).

The Master Plan was made available to all bidders in order to prepare their proposals. The bidders were expected to follow the basic idea of the Master Plan, but could propose small, ‘unimportant’ changes in order to make an efficient design for the airports which would help achieve the best operation of the airports and meet the standards of the output specification. The concession contract was for a period of 25 years.

After the pre-qualification stage, a detailed bid document ITT, with all the needed information for the preparation of their proposals was sent to the short-listed bidders.
The selection criteria were based on the following broad categories:
- Technical and Operational (e.g. design, innovation and technical, capacity, performance, capital spend).
- Business Plan (e.g. marketing strategy, pricing policies, organizational structure).
- Legal (e.g. assessment of amendments to draft Contract).
- Financial (i) (e.g. financial robustness, deliverability)
- Financial (ii) (e.g. bid price).

Negotiations took place with the selected preferred bidder and according to the tender rules if the two parties did not reach an agreement, negotiations with the second selected bidder were to follow. In 2003 Alterra Consortium was announced as the preferred bidder. The negotiations failed and the Cyprus Government started negotiations with the second best bidder, Hermes Airports. This had legal implications since Cyprus Airports Group could legally challenge the decision, adding further delays to a much needed project.
The negotiations with Hermes Airports were successfully completed and on 12 May 2006 the private consortium signed the BOT contract for the management and development of Larnaca and Paphos Airports. Until completion of the new terminals, the consortium took over the management of the existing facilities where minor improvements were made prior to the construction of the new facilities.

===Contract Structure===

An output specification was created that includes the way the airport is going to be operated. The Concessionaire is responsible for the Soft Facility Management (SFM) and Hard Facility Management (HFM). In the contract there is a specification of the requirements: how to manage and operate the terminals, the runway and taxiways, and car parking for staff, passengers and visitors. The Concessionaire is also responsible for the maintenance and upkeep of the airport in general, as well as for the delivery of some of the core services. It is responsible for the check-in facilities and the loading of the baggage as well as the services provided in the waiting area.
The Cyprus Government before the PPP tender procedure prepared the Master Plan and the detailed designs for the two airports. Moreover, the government is responsible for the delivery of other core services (e.g. security, air traffic control, and fire brigade services).

Based on the contract clauses the aeronautical fees are regulated. Other fees and revenues (retail, car parking etc) are not regulated.

Termination clauses are included in the contract and are divided into three categories (concessionaire default, contracting authority default and force majeure). In each case there are guarantees that the Concessionaire is compensated as follows (Government of Cyprus, 2005):

Concessionaire default- compensation based on 95% of the Concession Agreement revised debt termination amount;

Force majeure- compensation based on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs and equity.

Contracting Authority default- compensation on the Concession Agreement base debt termination amount, redundancy costs, subcontractor break-of-contract costs, equity and equity return.

A Liaison Committee exists, formed by three representatives of the Contracting Authority and three representatives of the Concessionaire. This committee is responsible for the day-by-day review of the Contract. The Committee also provides a forum for strategic discussions on variations in market conditions as well as the efficient operation of the two airports. The Liaison Committee can be the forum for contract renegotiation.

The private sector collects all of the revenues. The Concessionaire pays the Cyprus Government an annual fee of €3,5M as well as 33% of the annual gross revenues of the two airports. In addition, the Cyprus Government participates in a profit-sharing arrangement if the actual equity IRR exceeds 12% in real terms.

===Risk Allocation===

The risks are allocated in a balanced way between the concessionaire and the contracting authority (government). The allocation is based on the principal that the risk is allocated to whom can best deal with it (Solomou, 2003).

Design and construction risks are allocated to the private sector. If there is a problem the concessionaire will face certain penalties. The government has developed some tools to measure performance. These risks however are thought to be the most easily regulated and measured. Maintenance risks are allocated to the private sector. If problems arise the concessionaire will face certain penalties.

Operating risks are allocated mostly to the private sector (poor operating performance, increase of operating/ maintenance costs etc). Some risks are allocated to the public sector (failure of governmental operations, due to government approved suppliers).
The demand risk will be shared by both parties but the risk is greater for the private sector. The concessionaire has to pay the government a “rent” for the exploitation of the government’s assets. The “rent” is divided into two parts. The first is a fixed payment and the second a percentage (33%) of the operating revenues. This percentage shows the sharing of the demand risk between the private and the public sector. If there is a significant reduction in revenues the government receives less income.

The financial risks during construction and operation are allocated mostly to the private sector. Some risks are allocated to the public sector in the case of a decision to expand the infrastructure of the two airports.

The regulatory risks are shared between both parties. There are certain clauses that will protect the operator from negative regulatory changes enforced by the government. If, for example, tourism taxation is raised then fewer visitors will come to Cyprus, so the airports’ revenues will be reduced. In such a situation, the government should take this risk. On the other, hand if the regulation affects all Cyprus citizens, for example inflation, the concessionaire will have to bear this risk.

The force majeure risk will be shared by both parties (war, disaster, hijacking etc) but the risk is greater for the public sector, as the concessionaire is compensated by the Contracting Authority.

[[Image:Larnaca2.png|300px]]

'''Figure 3: Risk allocation'''

Another possible risk that is allocated to the public sector is the possibility of having a third airport in Cyprus, either by building a new one or in the case that a comprehensive settlement is reached in respect of the Cyprus issue, when the existing airport in the occupied area may recognized as an international airport again. The bidders prepared their proposals on the assumption that there are only two airports in Cyprus. If there is in the future a new airport in Cyprus, there will be a reduction in demand for Larnaca and Paphos Airports so the contract has certain clauses to protect the concessionaire from such risks.

===Performance===

The contract defines a performance measurement system that incentivizes the Concessionaire to perform the designated airport services to the performance standards specified in the contract, and specifies the deductions to be made when performance does not attain the relevant standards. The concession contract establishes procedures for the measurement of performance of the designated airport services. If the Concessionaire fails to achieve the performance standards, then deficiency points apply. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level (10 points) penalties apply (a percentage of the gross revenue less the concession fee). If the Concessionaire achieves or exceeds 95% performance in all the concessionaire- controlled standards, then an amount equal to 1% of the gross revenue less the concession fee for that performance review period shall be deducted from the next concession fee payment made to the Government (Government of Cyprus, 2005).

Nevertheless, the contract does not include deficiency points or penalties for non-concessionaire controlled performance standards (baggage handling and airline counter check-in process). The Concessionaire shall employ independent third parties to carry out customer satisfaction surveys of passengers and customers. No deficiency points or penalties are linked to the survey results.

The Contracting Authority may audit any aspect of the Concessionaire’s performance. If the Concessionaire achieves less than 60% for all of the concessionaire-controlled standards, the Contracting Authority may issue a Warning Notice which may lead even to termination of the contract. The performance standards may be reviewed by the Liaison Committee in good faith.

Two categories of performance indicators exist, as follows:
*Concessionaire-controlled performance indicators: Check-In Counters; Security Check Equipment; Luggage Trolleys; Immigration/ Customs; Baggage Reclaim; Flight Information Display; Lifts/ Escalators/ Moving Walkways; Cleanliness;
*Third party-controlled standards (non concessionaire-controlled performance indicators): Check-In for Scheduled Flights; Check-In for Charter Flights; Baggage Delivery of first bag to reach carousel; Baggage Delivery of last bag to reach carousel.

The contract includes deficiency points and penalties for the concessionaire- controlled performance standards/ indicators. Each indicator has five deficiency levels which lead to 1-5 deficiency points, respectively. The deficiency points are aggregated for a certain performance review period and if they exceed a certain level, a penalty applies. The following performance indicators are mentioned in the contract:
*Check- In Counters for processing passengers
Concessionaire controlled performance indicator- Check- In Counters for processing passengers are fully functional 90% of the time.
*Security Check Equipment functionality
Concessionaire controlled performance indicator-
Security Check Equipment fully functional 90% of the time.
*Luggage Trolleys availability
Concessionaire controlled performance indicator-
Luggage Trolleys available 85% of the time in Peak Week for passengers in the check in hall and the arrival hall/ baggage reclaim area.
-Immigration/ Customs booths functionality
Concessionaire controlled performance indicator-
90% of Immigration/ Customs booths for processing passengers are fully functional.
*Baggage reclaim equipment functionality
Concessionaire controlled performance indicator-
Baggages reclaim equipment 90% of the time fully functional.
*Flight Information Display equipment functionality
Concessionaire controlled performance indicator-
Flight Information Display equipment 90% of the time fully functional.
*Lifts/ Escalators/ Moving Walkways equipment functionality
Concessionaire controlled performance indicator-
Lifts/ Escalators/ Moving Walkways equipment 90% of the time fully functional.
*Cleanliness of the project area
Concessionaire controlled performance indicator-
90% of the time cleanliness maintained according to the specifications determined by the Concessionaire.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 12 minutes of joining the Check- In queue for Scheduled Flights.
*Target Maximum/ Optimal processing time
Third party controlled standards-
Target Maximum/ Optimal: 50%/80% respectively passengers served within 20 minutes of joining the Check- In queue for Charter Flights.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of first bag to reach carousel Target Maximum/ Optimal: 20/15 minutes respectively after on-block time.
*Target Maximum/ Optimal delivery time
Third party controlled standards-
Baggage Delivery of last bag to reach carousel Target Maximum/ Optimal: 35/30 minutes respectively after on-block time.

The Department of Civil Aviation expects that the passenger traffic in the coming years will increase annually by 2 -3%. The development depends on competition for tourism, the international economy and other external factors such as political stability in the region. The passenger forecasts for a 2-3% annual increase have not been confirmed (at least not for every year).

It is noteworthy that in 2011, 77% of air traffic at Larnaca Airport came from the European Union, while this figure is 85% for Paphos Airport. The charter rate is 25% and 49% for Larnaca and Paphos respectively (year 2011). The UK market shares 37,26% of total passenger traffic to Cyprus, followed by the markets of Greece with 15,71%, Russia with 9,45% and Germany with 5,34%.

Three forecast scenarios exist in the contract (low case growth, base case growth and high case growth). None of these scenarios have been confirmed by the actual passenger traffic: Larnaca & Paphos Airports actual traffic in 2012 was 7,5M passengers versus 8,5M, 9,0M and 9,5M passengers in the 2012 Low, Base and High case scenarios, respectively.

Larnaca Airport
*Passengers
2007: 5.387.724

2008: 5.482.567

2009: 5.258.716

2010: 5.475.905

2011: 5.507.552

2012: 5.166.224

2013: 4.863.577

*Air Traffic (airplanes)
2007: 47.755

2008: 50.483

2009: 46.416

2010: 49.022

2011: 50.329

Paphos Airport
*Passengers
2007: 1.819.182

2008: 1.764.660

2009: 1.640.562

2010: 1.646.937

2011: 1.778.898

2012: 2.242.797

2013: 2.175.114

==Project Outcomes==
The key scope of the project was to deliver a modern, safe and secure National Airport for Cyprus and support tourism.Traffic has not been the anticipated. Reasons are considered to be:
* internal (there have been discussions with respect to the high rates required by Hermes Airports ltd (concessioner). At the end of 2014, the concessioner has initiated a campaign to attract new airlines. Emphasis is placed on low-cost carriers, which use to serve the Tourism industry. Paphos is to be the cultural capital of Europe in 2017 and a rise in visitors is expected in the range of 15-25%.
*2013 was a difficult year for Cyprus with great political and economic stability. This had an impact on tourism and business travel.

The following critical success factors could be considered:
* The two new airports improved dramatically the quality of services provided. Although the two airports do not face significant competition, it is crucial for the tourist industry of Cyprus to provide long lasting- sustainable high quality services.
* Air transport as a whole should provide high health and safety standards. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation. The airline operators are significant partners too.
*Air transport as a whole should provide high security standards. Terrorism and other relevant issues have a global effect. Even small events can ruin the good image of an airport. It is important that the Concessionaire, the Cyprus Government with the relevant Agencies and the Contracting Authority maintain excellent cooperation.
*An investment programme will increase the revenues benefiting the Concessionaire and the Cyprus Government (Contracting Authority). The diversity of the revenues will increase the viability of the project and it may allow the decrease of other fees (e.g. aeronautical fees). The Cyprus Government should support the Concessionaire to explore possible investment choices. The fact that the contract concludes in 2031 should not be a negative factor. Other incentives should be identified.
*Maintenance needs will increase by the time and the Concessionaire should dedicate sufficient resources. The maintenance should be kept in high levels in order to provide the predefined performance standards.
*Cooperation between the Concessionaire and the Contracting Authority should be in the highest possible level. PPPs succeed when the partnership becomes a reality. The cooperation was identified in other factors too, but it should stand alone too. The liaison committee is expected to support continuous cooperation.

For an insular country the existence of a high quality , safe and secure airport(s) is of paramount importance. It is also very important for business and tourism development. The old airport was insufficient and not capable to handle with safety and security air traffic.
This is especially important following the developments in the wider geographical area.The concessionaire - to date - has not used the full potential of the airport services. Additional revenues are still rather low. The upside is that there is space for improvements on revenue.

The airports have also received (right from the start) high acceptability. The upgrading of the existing airport facilities was long required.

The following critical failure factors could be considered:
* The viability of the whole project depends on the growth of the airlines passenger traffic. The actual passenger traffic so far did not match the forecast scenarios included in the contract.
*Basically the growth of revenues is interconnected with the passenger traffic. Both these factors are significant for the viability of the whole project. Nevertheless, the Concessionaire seeks outs other forms of revenues and the Cyprus Government assists the Hermes Airport towards this direction
*Aeronautical fees are regulated by the Concession Contract. It is important to be maintain in reasonable levels. It is important for the viability of Cyprus economy and especially for tourism industry to offer competitive tourist packages. The aeronautical fees play significant role on the later. On the other if the tourism industry fails to attract tourists in Cyprus, the airports would have significant loses. In this case the chicken and egg situation exists. This show the importance of cooperation of all the tourism industry stakeholders and Hermes Airports should be a main stakeholder.
*In 2012, Cyprus was affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot Government applied for economic assistance (bail out) from the European Union and the International Monetary Fund (IMF). In April 2013 the Cypriot Government reached to an agreement with its lenders. The status of Cyprus economy and the sustain recession that is expected are factors that could create increase uncertainty for the project.

The rates applied by the concessionaire seem to be limiting the full potential of the airports. In 2014, new campaigns were launched to attract airlines. The mix of shareholders in the concessionaire may also be playing a pivotal role in the business development.

===Economic Impact===
It is difficult to assess the full economic impact as the operation of the new airports coincide with the economic crisis and the developments in the wider area. Definitely, access to the island-country has been significantly improved.

===Social Impact===
Apart from offering new employment opportunities, the new airport has sustained the tourism industry and therefore jobs in that sector.
It also improves the mobility of the inhabitants.

===Environmental Impact===
The construction of the new airports comes with design to protect the environment from noise and emissions (appropriate runways etc.).

==References==

*C. Christodoulou, C. Efstathiades, 2013, Larnaca and Paphos International Airports In Roumboutsos, A., Farrell, S., Liyanage, C. L. and Macário, R, COST Action TU1001 Public Private Partnerships in Transport: Trends & Theory P3T3, 2013 Discussion Papers Part II Case Studies, ΙSBN 978-88-97781-61-5, COST Office, Brussels available at http://www.ppptransport.eu
*Solomou C. (2003). BOT and Economic Efficiency: The case of Larnaca Airport. Thesis for the degree of Master of Science in Built Environment for the University of London. University College London, Bartlett School of Graduate Studies.
*Government of Cyprus. 2005. Concession Agreement for the Development and Operation of International Airports at Larnaca and Pafos. Ministry of Communications and Works. Lefkosia: Government of Cyprus
*Government of Cyprus. 2012. Transport Statistics 2011, Statistical Service. Lefkosia: Government of Cyprus
*Government of Cyprus. 2009. Public Works Department: One Hundred thirty years of history and service, 1878-2008. Lefkosia: Government of Cyprus.
*Antonis Koutsoulis, Head of the Unit for regulating the Larnaca and Paphos Airport BOT Contract. 2013. Personal Interview. Lefkosia
*Government of Cyprus, Ministry of Communications and Works, Public Works Department Website: www.mcw.gov.cy/pwd
*Government of Cyprus, Ministry of Communications and Works, Civil Aviation Department Website: www.mcw.gov.cy/dca
*Hermes Airports, Larnaca and Paphos International Airports Official Website: www.hermesairports.com
*World Finance Website: http://www.worldfinance.com/awards/ppp-awards-2013
[[Category:Case Studies]]