The government on Monday moved to terminate its agreement with Kition Ocean Holdings over the Larnaca port and marina project, leaving the future of the stalled €1.2 billion development up in the air yet again.

Transport Minister Alexis Vafeades said the government was left with no other choice after Kition repeatedly failed to pay its financial guarantee.

It submitted the letter at 8:30am and a scheduled meeting set to take place between the ministry and the company for 12pm was cancelled by Kition, following the government’s move to terminate the agreement, according to Vafeades.

Kition reacted angrily to the government’s move on Monday evening, saying they were “surprised” by what they described as “disregard for the court process” on the part of the government.

“The government’s behaviour undermines the rule of law which should exist to protect investors,” they said.

They added that such respect should be expected of a nation state, and that their own legal advisors have informed them the notice of termination is “in breach of the terms of the agreement”.

In addition, they said they are “examining our legal options”, having been in court over what they see as the government not fulfilling its side of the bargain over the same agreement when they were served with their notice of termination.

They said they have “always acted in accordance with the agreement and the law” and that they were always “willing to proceed with the project” and to solve disputes with the government “in a constructive way”.

The government’s version is markedly different. Vafeades said the consortium received four written warnings over the matter, and despite assurances to the president that the amount would be settled “to this day, it has not been paid”.

The state thus moved to request the advice of the legal service, which opined the government had every right to terminate the project.

As of now, the Larnaca port and marina will fall under the wing of the state.

In a snap press conference, the minister assured “the government is ready to operate the port without any interruption to its services.”

For the project to move forward, the government will have to call for a new tender.

Vafeades said he expects to head to Larnaca on Friday for a meeting with the mayor and local community to hear their views.

Larnaca’s mayor Andreas Vyras described the news as a “negative development” but specified that it agreed with the position voiced by the president and transport minister.

“The Larnaca port and marina project is an important project for the city and Cypriot economy,” he added.

In a statement, Vyras said the municipality had exerted every possible effort, to ensure the project went ahead, unhindered.

Friday’s meeting will be focused on how to move forward in light of the latest developments, he said.

Larnaca’s chamber of commerce will also be attending, which said it “could not help but hide its disappointment”.

The company’s “constant refusal to renew this guarantee payment led us to terminate the agreement”, Vafeades underlined.  

He explained both parties had failed to see eye to eye over how much this payment actually was.

According to Vafeades, the amount stipulated was €8 million, and not €10m which had circulated in the press.

However, Kition reverted earlier this year to say the calculations were wrong, and the sum should be at €4.2m, he said.

The government suggested moving to a procedure that would resolve their differences but was keen to see a payment by this point, after months of wrangling.

“To this day nothing has been paid,” not even the €4.2 million that Kition had suggested, Vafeades said.

On March 28, the consortium moved to request a court order freezing €4.9m that the government was due to take for construction and performance of the project.

Following a meeting with the president on April 15, the parties had agreed the guarantee would be paid, which covered operation and maintenance costs. This was the disputed sum of €4.2m.

The government has now moved to request €3.2m from the bank as payment security for the project. The request is still being processed, Vafeades explained.

It is understood that both parties will now assess how much they may claim from each other, in light of possible legal proceedings or negotiations.

Larnaca’s chamber of commerce chairman Nakis Antoniou said the developments were unfortunate but expected, in light of everything that unfolded in the past few weeks.

“We hold on to the promise of both the president and minister that the project will happen one way or another.

“It may not happen in this form, but another can be found.”