Case Studies: Port of Agaete
 Figure 1: Port of Agaete, Spain | |
| Port of Agaete, Spain | |
|---|---|
| Project Type: | Brownfield |
| Type of Project Financing: | Public (construction); Concession (Operation) |
| Contract duration: | 8 years (construction) |
| Budget: |
5.7 M EUR |
| Project Time Line | |
| 1981: | Initial planning project (Project I). |
| 19 May 1982: | Public tendering. |
| 16 June 1982: | Public works awarded to private construction firm (SATO). |
| 30 August 1982: | Start of public works. Public opinion against the project due to concerns on visual impact. |
| 16 June 1983: | Second planning (Modified Project II) is started. Public works are temporarily paused. |
| 1 July 1983: | Public works are definitively halted. |
| 23 October 1985: | Administration and management of local ports are transferred from the central government to the regional government (by Royal Decree 2250/1985). |
| January 1986: | Regional government updates the existing project (Modified Project III) Public works are restarted by the same building company (now, SATOCAN). |
| 1987: | Agreement between the regional government and the island government (Cabildo Insular) to update the budget and speed up the works. Modified Project IV, with technical updates. |
| 1993: | Completion of main work; Commercial use of the port is negotiated between regional government and central government. |
| December 1994: | Passenger and road traffic license is awarded to Fred Olsen, a ferry operator between Gran Canaria (Agaete) and Tenerife (Santa Cruz). Fred Olsen operates as a monopoly due to ‘lack of capacity’. Pays a fee to regional government. |
| 1999: | Additional works required adapting the port to ‘fast-ferry’ operations. Fred Olsen performs works. |
| 2014: | Large increase in passenger traffic since 2000.A second passenger license is currently being negotiated (sharing existing facilities). There is a project for further enlargement of the port of Agaete (Plan de Puertos de Canarias, 2013) to be carried out from 2015 onwards. |
| January 2015: | Passenger services opened to competition. Two private ferry operators (Fred Olsen and Líneas Armas) will share port facilities. |
Contents
Introduction
Agaete is a small village (pop. 5,600 in 2014) located in the northwest corner of the island of Gran Canaria, in the Canary Islands. Until the beginning of the 1980s, the local economy was relatively isolated and centered on agriculture, although it also had a small fishing harbour with minimal facilities for local fishermen. During the 1990s, the 30 km-road that connected Agaete with the rest of the island and the capital city, Las Palmas de Gran Canaria (pop. 650,000 in 2014, including its surrounding metropolitan area) was greatly improved, and the village became a crucial maritime link; within a transport network (promoted by the regional government) to connect Gran Canaria with Tenerife, the second main island in the archipelago.
Since the end of the 1970s, local authorities had already claimed for improvements in their small port. A first project was designed by the Spanish government in 1981 through the Ministry of Public Works in Madrid. The project was not well received by local residents because it was based on a large dock, whose huge sea-wall had a high visual impact. Despite opposing public opinion, the works were awarded in 1982 in a competitive tendering process to SATO (Sociedad Anónima de Trabajos y Obras), a Spanish construction company with solid national experience. It was the only company that participated in the tender.
However, both political and social pressure increased, and the works were finally stopped (just one year after their initiation) in search for an alternative design. Meanwhile, the construction company was re-founded as SATOCAN, with local capital. The modified project included a new dock with a special design to alleviate the impact of sea waves during bad weather conditions. This design was also heavily criticised by local authorities because it was not well connected to the village and had to be re-elaborated.
In 1985, a major administrative change occurred: the regional government (Gobierno de Canarias) assumed all the competencies for small and medium-sized ports in the Canary Islands. Additional changes were, thus, made to the project (saving the local beach, construction of a new road and reducing the visual impact), and the third design was finally accepted, with an updated budget, partially provided by the island’s government (Cabildo Insularde Gran Canaria). The works were concluded in 1993, although additional improvements to facilitate its usage as commercial port were also implemented in subsequent years.
As any other port, the Agaete project itself is a monopoly. There are small fishery harbours in nearby villages, but the only competitor for the Gran Canaria-Tenerife Ro-Ro traffic is the Port of Las Palmas, 32 km away. The commercial use of the Port of Agaete was awarded as a monopoly to a single operator (Fred Olsen) in 1994, apparently due to technical (safety) reasons. However, in 2015 (after no major changes in the infrastructure), a second license was awarded to a competitor (Líneas Armas).
Agaete has become the crucial maritime link between Gran Canaria and Tenerife. In the 1990-2000s, it was the center of an ambitious regional plan to create “a motorway” between the two main islands, with improvements in the connecting roads and access from Las Palmas de Gran Canaria through a motorway. There are regular bus services for ferry passengers from this city to Agaete, provided by Fred Olsen.
The Contracting Authority (Public Party)
The Spanish Ministry for Public Works, through the Administrative Ports Planning Group (Grupo Administrativo de Puertos) contracted the initial works. After 1986, the works and supervising competencies were transferred to the regional government (Gobierno de Canarias), firstly through the Dirección General de Puertos (an administrative body), and now (since 2012), through Puertos Canarios, a public agency.
The initial works were carried out under the Spanish legal framework for ports and public works (particularly, the Law for Public Contracts). In 1985, the RD2250/85 (government decree) transferred the management of the small and medium-sized ports to the Government of the Canary Islands (a Spanish Autonomous Community since 1982). The use of Agaete as a commercial port was negotiated in 1992 and the Regional Statute was suitably adapted in 1996 (Ley Orgánica 4/96). Today, the legislative framework is defined in the Law of Ports of the Canary Islands (Ley 14/2003).
As described above, national authorities initiated the project, but competencies were later transferred to the regional government. The local government (the island’s government also participated in the final financing) was involved at the beginning of the project and in 1996, to authorise the commercial usage. Since then, all the responsibility is assumed by the regional government.
Private Sector Contribution
Construction
The project’s main sponsor was the public sector (Spanish Government, Regional Government, Island’s Government). SATOCAN was the only construction company involved in the project. There were no major issues with respect to the procedure, apart from the fact that the project suffered from several changes in design after being awarded. However, the new project was not opened to new concurrence: it was directly awarded to SATOCAN, in accordance with legal provisions. The involvement of SATOCAN was limited. Its only responsibility was performing the public works.
Operation
The port following construction was concessioned to Fred Olsen (1994). In 2015, a second concession was granted to Líneas Armas.
Sources of Financing
The project was contracted in accordance with the Spanish Law for public contracts through an open procedure. It was divided in several stages, at the end of each, the builder receiving the corresponding payment (standard building contract). All the payments were made by the Spanish Government after the corresponding budget assignments.
Concessioners pay a fee to the local government.
Users
The main user of the Port of Agaete is Fred Olsen, a private-owned shipping company that provides regular ferry services between Gran Canaria and Tenerife. Fred Olsen also operates other routes in the islands and also offers additional services (cargo, tourism accommodation, etc.) Local fishermen and private recreational yachts also make occasional use of the safe dock. Today, the main usage of the port is the provision of regular passenger and Ro-Ro services.
Key Purpose Project Delivery Model Selection
Spanish legislation at the moment attributed exclusive ownership and port management rights to the State (central government). After construction, the port would remain under the control of the public sector. No private interest was evident at the initial stages of the project.
Afterwards, the private operator (Fred Olsen) contributed with minor works to improve port facilities.
Project Timing
At the beginning of the 1980s, the village of Agaete and, in general, the northwest of the island of Gran Canaria, seemed relatively isolated and relegated in terms of transport infrastructure, compared to the more touristic and sunnier southeast part of the island. Most people living in the north commuted to work to the island’s capital city or simply visited for shopping or entertainment. The port of Agaete was mainly used as a fishing harbour by local residents, while the main attractions for occasional visitors were local restaurants and the “Dedo de Dios” (God’s Finger, a peculiar rock which was destroyed by a tropical storm in 2005). The village’s economy was mainly based on agriculture and minor services, with small growth rates.
The Canary Islands’ economy was also relatively stagnated during the 1980s, after two decades of expansion based on tourism services and construction. Since 1957, the region’s GDP had multiplied by 12, reaching a share of 4% of the national figure, with a GDP per capita of approximately 10,000 euros in 1985.
At the beginning of the project, the ferry services did not seem necessary because there was a maritime connection between Gran Canaria and Tenerife from the Las Palmas de Gran Canaria Port. The main competitive advantage of the new service (from Agaete to Tenerife) was that the time on-board was reduced to one hour.
Project Locality and Market Geography
The Port of Agaete became a key link in the regional transport market. Agaete’s population and level of economic activity has benefited from the project. The number of permanent residents has increased by 27% between 1981 and 2014, but the number of seasonal residents (foreign retirees in winter and people from the rest of the island in summer) is also very important. The budget of the local council has doubled between 1980 and 2010.
In 1995, the population density was:
- In Agaete: 115 inhab. per sq.km
- In Gran Canaria: 487 inhab. per sq.km
- In the Canary Islands: 260 inhab. per sq.km
No major industrial activities were noted before and after the project. Fishing activities remained the same. Commercial activity increased after 2000, largely due to the increased number of transit passengers and tourism.
Procurement & Contractual Structure
Tendering
The port construction and refurbishment project was awarded to SATO (later re-founded as SATOCAN) after a competitive tendering that did not attract many participants. In fact, it was the only bidder.
The operation of ferry transport services was directly awarded to Fred Olsen that was the only company interested. Apparently, another company (Trasmediterranea) also expressed its initial interest, but was seemingly discouraged due to technical issues (not enough capacity at the dock to operate with safety). The duration of the project assignment procedure was three months.
Contract structure
Both the construction and operation contracts were fairly standard. They were designed by the Spanish Government and included clauses and provisions that were common in the Spanish legislation, including penalties for unjustified delays (in the construction stage).
Risk Allocation
The risk allocation is shown in Figure 2.
Figure 2: Risk allocation
Performance
In 2012, the regional government obtained €1.2 million from public funds for the usage of the dock facilities (by Fred Olsen). It also obtained 17,000 euros for renting warehouses and terminal facilities. Indicative figures of its performance:
- 2 private ferry companies (in 2015)
- 43 licensed fishermen
- Traffic in 2013: 773,509 passengers
- Estimated traffic in 2020: 900,000 passengers
Project Outcomes
The project has changed dramatically the lives and prospects of the inhabitants of the northwest corner of Gran Canaria and has created a relevant link for inter-island traffic. Beyond its economic results, the port of Agaete is now a vital entry for the island and a way to reduce the political differences among islands.
References
- De Rus, G. (1997): How Competition Delivers Positive Results in Transport-A Case Study, The World Bank Group Viewpoint Note No. 136. Washington DC.
- Puertos Canarios. http://puertoscanarios.es/EN/. Official website Canary Ports.
