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CYnergy Program

Activity 3 Natural Gas in Road Transportation

Report Sub-Activity 3.3.

Activity 3: Natural Gas in Road Transportation

Report of Sub-Activity 3.3

Responsible Partner: Ocean Finance - OF Document Code:Version: 1.2.Date of Submission: 31/12/2018

CYnergy is co-financed by the European Union's Connecting Europe Facility.

The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein.

Cost Benefit Analysis of NG in Cyprus for Road Transportation

Document DetailsGrant Agreement Number: INEA/CEF/SYN/A2016/1336268Action Number: 2016-EU-SA-0009Project Title: CYnergy

Activity: Activity 3: NG in Road Transportation: Design, Legislation & Implementation Plan

Sub-activity: Sub-activity 3.3: Cost Analysis of NG in Road Transport

Milestone: Milestone No. 14: Cost Analysis for the introduction of NG in Road Sector

Document HistoryVersion Date Reviewed1.1. 31/12/20181.2. DEPA, DEFA, DDL

Contributing AuthorsOrganisationOFDEFADDLDEPA

Disclaimer

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The information contained in this document is confidential, privileged and only for the information of the intended recipient and may not be used, published or redistributed without the prior written consent of Ocean Finance Ltd

The opinions expressed are in good faith and while every care has been taken in preparing these documents Ocean Finance Ltd makes no representations and gives no warranties of whatever nature in respect of these documents, including but not limited to the accuracy or completeness of any information, facts and/or opinions contained therein.

Ocean Finance Ltd, its subsidiaries and affiliated companies (as per the Grant Agreement) and their directors, employees and agents cannot be held liable for the use of and reliance of the opinions, estimates, forecasts and findings in these documents

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Table of ContentsExecutive Summary....................................................................................................................3

1. Introduction.......................................................................................................................4

1.1. Scope of Cost Benefit Analysis....................................................................................5

1.2. Structure of Cost Benefit Analysis..............................................................................5

2. Description of the Context.................................................................................................6

3. Definition of Objectives......................................................................................................8

4. Project Identification..........................................................................................................9

4.1. Stakeholders Analysis................................................................................................9

4.2. Physical Elements………………………………………………………………………………………………………9

5. Technical Feasibility and Environmental Sustainability.....................................................11

5.1. Demand Analysis.....................................................................................................11

5.2. Supply Chain Means Analysis...................................................................................13

5.3. Environment and Climate Change Considerations....................................................14

6. Financial Analysis.............................................................................................................17

7. Risk Assessment...............................................................................................................32

7.1. Sensitivity Analysis...................................................................................................33

Appendix……………………………………………………………………………………………………………………………….33

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Executive Summary

The CYnergy, co-financed by the European Union’s Connecting Europe Facility, Action

provides a holistic approach towards the adoption of Natural Gas (NG) in Cyprus and the

development of a sustainable and fully functional NG market for providing clean and

affordable energy to the end user. The Action, as part of the Orient/East-Med TEN-T

Corridor, takes as a focal point the floating Liquified Natural Gas (LNG) Facility to be

developed in Cyprus and aims at building the main and supporting infrastructures for the

introduction, supply and use of NG by the sectors of transport and energy in Cyprus. As

part of this Action, Ocean Finance Ltd, evaluated the financial feasibility of the NG’s

relevant penetration to Cyprus’ market as an alternative energy source, by assessing the

potential future demand (provided by Decision Dynamics Ltd - DDL, partners of CYnergy)

for road transportation use in Cyprus (Act. 3, Sub-activity 3.3, Milestone No.14) and the

respective supply chain for this basic scenario under consideration. In the financial

analysis all the financial parameters are presented, analysed and computed at constant

prices (2018). The time horizon during which the project is evaluated and during which the

respective cash-flows for examining project sustainability are calculated, starts in 2019

and reaches 2043. The results of the financial analysis for the investment under

consideration depict briefly that the project is not viable because of its negative financial

profitability (FNPV (C) = EUR -1,916,702) and therefore it requires EU assistance. In

particular, the results of the financial analysis are presented in the table below:

Financial Analysis

Financial Net Present Value (FNPV) (C)=-1,916,702 EUR

Financial Rate of Return (FRR) = 2.4 %

Funding Rate = 26 %Funding Gap = 1,916,702 EUR

After EU Grant Net Present Value of Investment Cost = -60,916 EUR

After EU Grant Rate of Return (IRR) = 4%

Similarly, a sensitivity analysis was performed for the basic future demand scenario.

Specifically, for evaluating the elasticity of FNPV (C) and FNPV (K) indicators, the

sensitivity analysis was performed for the scenario of 5% increase on the investment cost,

5% increase on CNG fuel price and 3% increase on the NG penetration factor to the total

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new car sales (5% penetration factor to the basic future demand scenario used in this

analysis).

1. Introduction

The main objective of the activity is to perform all the relevant studies for the penetration

of NG fuel as an alternative energy source for the road transportation sector at the urban,

peri-urban, regional and national context. The abovementioned road sector’s users

dispose specific decision drivers that have to be carefully addressed, while the operational

and legal framework has to adapted accordingly. For the intensive penetration of NG fuel

in the road transportation sector, alternative penetration strategies must have been

examined and a proposed optimum positioning at the strategic level for the CNG and LNG

refuelling infrastructure must have been developed.

As for the specified sub-activity that is entailed in this report, its aim is to enact a detailed

Cost Assessment for the use of NG fuel for road transportation use, based on the

implementation strategy that will be followed and the proposed supply chain options. The

report will concentrate on the identification of the potential NG users, and on their current

energy consumption profile, that will be analysed extensively. According to our report’s

methodology, the potential NG users’ base includes all the main categories of vehicles

enabled to switch their current fuel. The estimation of the potential Natural Gas road

transportation users was provided by the partners of CYnergy, DDL – Decision Dynamics

Ltd regarding the total number of the estimated licensed vehicles in Cyprus, their mean

annual growth rate per vehicle category and their average annual vehicle mileage in

combination with the future estimation of the NG fuel penetration to each vehicle category.

More specifically, via this financial analysis it will be established whether NG can compete

with Cypriot drivers’ current fuel mix and the financial feasibility of NG’s introduction to

road sector will be depicted in order to enable a smooth switch from current fuels.

Based on the NG fuel supply chain review and the diversity of this supply chain

(CNG/LNG forms of fuel) on its merits and suitability to potential consumers, the cost

benefit analysis will focus on NG supply chains’ previous analysis’ results, that indicate

the most applicable by end users in the domain of Cyprus and in overall for the road

transportation sector. Considering the NG fuel’s potential demand’s characteristics in

Cyprus, this study will evaluate and analyse the alternative logistics chains’ operations

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and will result to the most efficient and financial attractive supply solutions that will cover

the estimated NG fuel demand in Cyprus.

1.1. Scope of Cost Benefit Analysis

The aim of this Cost Benefit Analysis (CBA) is the evaluation of the financial feasibility of

the NG penetration in the Cypriot market for road transportation use in comparison with

the current energy fuel consumption mix of this sector at the urban, peri-urban, regional

and national context.

This assessment will be based on the proposed implementation strategy and supply chain

options. In particular, after the identification of the potential NG users it will be established

whether NG, as an alternative and greener fuel could compete its competitive and current

fuels in the road transportation sector and the financial feasibility of this NG’s introduction

to road sector will be depicted to enable a switch from the current fuels.

Based on the above, this study is an obligation fulfilled as part of Activity 3 - Natural Gas

in Road Transportation: Strategy, Legislation and Implementation Plan of the CYnergy

Action.

1.2. Structure of Cost Benefit Analysis

Following Introduction, the remainder of this study is organised as follows into seven (7)

chapters:

Chapter 2 defines and describes the social, economic, political and institutional context in

which the project under consideration will be implemented. Chapter 3 defines the main

objectives of the project that should be met. Chapter 4 identifies and analyses the

stakeholders of the project. Chapter 5. identifies the needs for the investment by

assessing the impacts of the project on climate and environment Chapter 6 presents the

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financial analysis in order to compute the project’s financial performance. Finally, Chapter 7 identifies and examines the critical values of the project by assessing the project’s risk.

2. Description of the Context

The study is based on the general idea of the decarbonisation of the road transportation

aligning with EU and International Regulations and Rules, ensuring the satisfaction of the

road transportation demand for more clean and effective energy at the urban, peri-urban,

regional and national context. A wide number of EU and International policies, standards,

rules and regulations on climate change and the environment relevant to the limitation of

the emission produced by road transportation sector’s activities and the deployment of

infrastructure for cleaner fuel supply chains already exists (indicative list):

Alternative Fuels Directive (Directive (EU) 2014/94 of the European Parliament

and of the Council of 22 October 2014 on the deployment of alternative fuels

infrastructure);

Sulphur Directive (Directive (EU) Directive 1999/32/EC of the European Parliament

and of the Council of 11 May 2016 relating to a reduction in the sulphur content of

certain liquid fuels). As amended by Directive 2012/33/EU and codified by

2016/802/EU);

Renewable Energy Directive (Directive 2009/28/EC of the European Parliament

and of the Council of 5 June 2009 on requiring that 20% of the energy consumed

within the European Union is renewable and reducing 20% carbon dioxide

emissions by 2020);

Fuel Quality Directive that requires a minimum 6% reduction of the greenhouse

gas intensity of fuels used in transport by 2020 from a 2010 baseline, applying to

petrol, diesel and biofuels used in road transport;

Energy Efficiency Directive (Directive 2012/27/EU of the European Parliament and

of the Council of 14 November 2012 on the energy efficiency improvements in all

stages and sectors of the supply chain);

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Clean Mobility and Power Package for Transport by EC regarding the use of CNG

along the TEN-T core network by end of 2020 as well as the use of LNG for heavy-

duty vehicles by end of 2025;

Regulation (EC) No 595/2009 on emissions from heavy duty vehicles;

Commission Regulation (EC) No 692/2008 implementing and amending

Regulation (EC) No 715/2007 of the European Parliament and of the Council on

type-approval of motor vehicles with respect to emissions from light passenger and

commercial vehicles and on access to vehicle repair and maintenance information;

The geographical scope of study focuses on the transport network of Cyprus for the

development of the NG supply chain, in particular, on the main provinces of Cyprus. This

report brings into focus the cost assessment of the proposed supply chain options for the

introduction of NG in Cyprus for the road transportation users that were identified and their

current energy consumption profile was defined in order to feature whether Natural Gas

(NG) can compete with their current energy fuel mix.

In particular, under the scope of this activity it will be demonstrated that NG (in both forms

of LNG and CNG), in environmental terms, produces fewer harmful combustion compared

to the respective combustion by oil products, as it is chemically relatively simpler

compared to them. Therefore, NG fuel has also several other advantages comparing to

other fuels, like petroleum products. Generally, it is not explosive, not toxic and not

carcinogenic. Moreover, it is considered as more energy efficient, because it is purer, has

higher methane and energy content and has a more stable composition.

This is the time to take the first step towards an alternative technology for the road

transport sector that, other than the fact of its “green” orientation, promotes the economy

and transportation and furthermore provides the diversification of the energy sources and

a potential increase to the future level of energy security of Cyprus (and therefore EU).

3. Definition of Objectives

The objectives of this report are consistent with the overall EU strategy for a more

resource-efficient Europe, in terms of development and/or utilization of energy sources in

a way that the environmental impact is minimized or completely eliminated. In addition, it

is in line with the European Energy Security Strategy, with the ultimate being the 20%

energy efficiency target achievement by 2020.

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https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32008R0692&locale=en

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32009R0595&locale=en


The general objective of the proposed investment is to implement the logistical solutions

and a sustainable and green transportation system, based on the proven, technical,

operational and financial efficiency of its solutions, promoting the availability of an

alternative, more eco-friendly and cost-effective fuel for road transportation use in Cyprus,

where it is currently not provided due to the lack of infrastructure.

The specific objectives of this sub-activity are to:

Meet the environmental EU and International rules and regulations concerning the

restriction of emissions for road transportation activities within urban and sub-

urban areas;

Provide a reliable system for supplying NG (in both forms of CNG/LNG) for road

transportation use as alternative greener fuel;

Meet the estimated demand for NG (in both forms of CNG and LNG) by road

transportation users located in Cyprus’ main provinces.

4. Identification of the Project

4.1. Stakeholders Analysis

Generally, the Road Transportation Sector in Cyprus offers a great potential for the use of

natural Gas, mainly in CNG form due to its versatility, lower storage costs, optimum safety

level and its wider utilization in road transport globally without requirements of special

training and gear, but also in LNG form in the near future with the fast paced development

of the appropriate transport and storage infrastructure, as long as the EU guidelines for

development of an adequately dense supply network are followed. Therefore, before

proceeding to calculating penetration factors in the Road Transportation Sector and the

occurring demands for natural gas (in CNG, LNG forms) it should be noted that the

majority of vehicles’ categories in Cyprus use traditional petroleum fuels such as Diesel

fuel and petrol depending on their type.

Road Transportation Users Profile

The road transportation users of Cyprus are the main beneficiaries from the potential

penetration of Natural Gas in the form of CNG, as an alternative, cleaner and more

efficient energy source for the wider road transportation sector. Natural Gas availability is

to be considered as a significant market structural improvement that can spur sustainable

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growth and benefit numerous users from the road transportation sector in Cyprus. Except

for its energy efficiency and its aforementioned environmental benefits, NG’s future road

transportation demand could be boosted by the fact that road transport users, i.e. vehicles

are obligated to meet the strict environmental emission standards set by strict EU

emission laws that require an improvement in vehicle emissions and the highly effective

reduction of air pollutants produced by vehicles’ operation.

Regarding the transport sector in Cyprus, it is clear that natural gas use by road vehicles

is still in its infancy, although natural gas-powered vehicles present an enormous

opportunity for cleaning up the emissions from this sector. Cyprus is heavily dependent on

fossil fuels, representing 92% of the total energy consumption.

4.2 Physical Elements

Based on the extrapolated future demand scenario (basic assumption provided by

Decision Dynamics Ltd in combination with the application of 5% NG penetration factor to

the estimated total new car sales in 2040, the most usual penetration level of NG markets

in countries with low population worldwide and in correlation with NGVs’ share as 1.5% of

the total vehicle population in European countries in 2016 – International Association for

Natural Gas Vehicles Statistics) with its fluctuations during the reference years 2020-2030

due to the NG degree of penetration (cause after 2030 up to 2043 we consider that

demand is constant), we performed in our report a conceptual design and choice of the

appropriate and more cost-effective supply chains’ means for covering the estimated NG

road transportation demand (in the forms of LNG and CNG respectively). The main

equipment components required for covering the assessed NG road transportation

demand, in combination with the planned construction of Vassiliko FSRU, in the main

provinces of Cyprus are the following:

LNG tanker trucks with loading capacity of 40m3 each (based on BlueHUBS

project’s estimations) and three unloads per day (including LNG trailers).

LCNG refuelling stations with loading capacity of 60m3 each (based on BlueHUBS

project’s estimations) in order to cover the future energy needs of the road

transportation users.

As for the technical specifications of the means of NG supply chains for road

transportation users, the inputs based on market data are the following:

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Figure 1: Technical inputs of LNG supply chain. Source: BlueGrid Gas and Power – Sub-activity 4.1.

5. Technical Feasibility and Environmental Sustainability

In the short-term perspective, NG will be introduced in the Cypriot market in compliance

with Cyprus energy plans, formed by the EU environmental law enforcements regarding

the limitation of GHG emissions. The NG fuel import in the island will be accomplished via

the FSRU usage (Floating Storage Regasification Unit) at the port of Lemesos Terminal 2-

Vassiliko as well as via the projected development of the East Mediterranean (East-Med)

pipeline, as an offshore/onshore natural gas pipeline, directly connecting East

Mediterranean resources to Greece via Cyprus and Crete until the end of 2020. The

implementation of Cyprus Renewable Energy Roadmap including natural gas’ import will

come true with the onset of hydrocarbon activities for the exploitation of natural resources

of energy.

Taking as focal point the elaboration of the abovementioned main and supporting

infrastructure, the introduction of natural gas in the energy mix will consist a natural step

forward for Cyprus in alignment with its European peers. Based on market research and

experts’ opinion regarding the current energy fuel mix that is used for each type of road

vehicles at European level, in our report we considered that the natural gas penetration

will be held in the form of LNG for the category of heavy trucks and in the form of CNG for

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all the other vehicle categories including private cars, taxis, public and private buses, light

trucks and tractors.

5.1. Demand Analysis

Regarding the projected NG demand of our cost benefit analysis for the road

transportation users, we used as inputs the demand assumptions, calculated in vehicle

kilometers (measure of traffic flow), that were included in the CYnergy’s Sub-Activity 3.1.

provided by DDL – Decision Dynamics Ltd in combination with the application of 5%

CNG/LNG penetration factor to the estimation of the total new car sales in 2040, which

consists the most usual penetration level of NG markets in countries with low population

worldwide and in correlation with NGVs’ share as 1,5% of the total vehicle population in

European countries in 2016 (IANGV). The key assumption for the estimation of NG

demand in the road sector is the penetration of the LNG/CNG fuel in Cyprus regards with

5% of the estimated total new car sales in 2040 in dependence with the mean annual

growth of vehicles registrations in the recent years and their average annual mileage in

kilometers.

Based on the abovementioned key assumptions, we resulted to the final NG demand in

kilograms (kg) for each vehicle category. As it is depicted in the below table, we can

observe a gradual build-up of the NG demand for road transportation use in Cyprus from

2020 to 2030, reaching 15% of the total estimated demand by the previous sub-activity

3.1 in combination with the application of the 5% NG penetration factor to the total new

car sales.

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Road Transportation Demand per Vehicle Category (kg of Natural Gas)

Vehicle Category 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Private Cars 252.859 303.431 354.003 404.575 455.146 505.718 606.862 708.005 809.149 910.293 1.011.436

Taxis 6.540 7.848 9.156 10.464 11.772 13.081 15.697 18.313 20.929 23.545 26.161

Public Buses 66.503 79.803 93.104 106.404 119.705 133.005 159.606 186.208 212.809 239.410 266.011

Private Buses 20.371 24.445 28.519 32.594 36.668 40.742 48.891 57.039 65.187 73.336 81.484

Light Trucks 257.873 309.448 361.022 412.597 464.171 515.746 618.895 722.044 825.193 928.343 1.031.492

Heavy Trucks 208.545 250.254 291.964 333.673 375.382 417.091 500.509 583.927 667.345 750.763 834.182

Tractors 35.895 43.074 50.253 57.432 64.611 71.790 86.148 100.506 114.864 129.222 143.580

All Vehicle Types 848.586 1.018.304 1.188.021 1.357.738 1.527.456 1.697.173 2.036.607 2.376.042 2.715.477 3.054.911 3.394.346

Table 1: Annual energy demand per vehicle category for road transportation use.Vehicle Kilometers Travelled - Estimated Demand Per Vehicle Category (km)

Vehicle Category

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Private Cars 7.852.767 9.423.321 10.993.874

12.564.427

14.134.981

15.705.534

18.846.641

21.987.748

25.128.855

28.269.962

31.411.069

Taxis 205.669 246.803 287.937 329.071 370.204 411.338 493.606 575.873 658.141 740.409 822.676Public Buses 171.842 206.210 240.578 274.947 309.315 343.683 412.420 481.156 549.893 618.630 687.366Private Buses 57.254 68.705 80.156 91.607 103.058 114.509 137.410 160.312 183.214 206.115 229.017Light Trucks 1.570.481 1.884.577 2.198.673 2.512.769 2.826.866 3.140.962 3.769.154 4.397.347 5.025.539 5.653.731 6.281.924

Heavy Trucks 807.064 968.477 1.129.890 1.291.303 1.452.716 1.614.129 1.936.954 2.259.780 2.582.606 2.905.431 3.228.257Tractors 127.785 153.342 178.900 204.457 230.014 255.571 306.685 357.799 408.913 460.027 511.142

All Vehicle Types

10.792.863

12.951.435

15.110.008

17.268.580

19.427.153

21.585.725

25.902.870

30.220.015

34.537.160

38.854.305

43.171.451

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Table 2: Total Kilometers Travelled – Estimated Demand per Vehicle Category.

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2020

2022

2024

2026

2028

2030

0 200,000 400,000 600,000 800,000 1,000,000 1,200,000

Road Sector Estimated Demand per Vehicle Category (kg of NG)

Tractors Heavy Trucks Light Trucks Private BusesPublic Buses Taxis Private Cars

Figure 2: Road Transportation Estimated Demand per Vehicle Category

5.2. Supply Chain Means Analysis

The conceptual design and choice of the supply chain means for covering the estimated

road transportation NG demand (in both forms of LNG and CNG) was based on the

extrapolated future demand (as a result of basic assumption in the previous Sub-activity

by DDL in combination with the application of 5% NG penetration factor to the estimation

of the total new car sales in 2040, which consists the most usual penetration level of NG

markets in countries with low population worldwide and in correlation with NGVs’ share as

1,5% of the total vehicle population in European countries in 2016 - IANGV) with its

fluctuations from 2020 to 2030 due to the NG degree of penetration (cause after 2030 up

to 2043 we consider that demand is constant). The proposed supply chain for road

transportation users in order to satisfy the estimated road sector’s demand includes LNG

tanker trucks with capacity approx. 40m3 and LCNG refuelling stations sites in the main

provinces of Cyprus with predetermined capacity of 60m3 for the energy needs of each

province in dependence with its population.

More specifically, the proposed supply chain road transportation users in order to satisfy

the estimated road transportation demand entails three (3) LNG tanker trucks with

capacity approx. 40m3 and five (5) LCNG fuelling stations in 2020 that will serve the

extrapolated NG demand of the five main provinces of Cyprus (1 LCNG station in each

province in dependence with the needs of population) while in the reference year of 2030

with the build-up of the NG demand for road transportation in the island, two (2) more

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LCNG refuelling stations will be added in the largest provinces of Cyprus (i.e. one station

in Leukosia Province and one in Lemesos Province, the most populated regions with the

most increased estimated NG demand).

Regarding the operations of the LNG tanker trucks, they will perform three (3) unloads per

day between the main provinces in order to catch up the extrapolated NG future demand

for Cyprus’ road sector. The indicative driving distances from Vassiliko FSRU as point of

departure that LNG trucks will cover to reach the main provinces, where the respective

LCNG stations will be located, are presented in the below table.

Provinces Distance (Km)Ammochostos 91.56 = 2hrs

Larnaca 42.75 = 1hLemesos 31.92 = ¾ hrsLeukosia 59.29 = 1,5 hPaphos 97.1 = 2hrs

Ammochostos Province

Larnaca Province

Lemesos Province

Leukosia Province

Paphos Province

0 0.5 1 1.5 2 2.5

LCNG Stations per District

2019 2030

Figure 3: LCNG Stations per District in dependence with NG demand

5.3 Environment and Climate Change Considerations

According to a plethora of environmental studies and reports, it is mentioned that road

vehicle emissions consist an important source of both greenhouse gases and air

pollutants and therefore they lead inevitably to the acidification of the environment. Under

the scope of this CBA, nitrogen oxides (NOx), particulate matter (PM) carbon dioxide

(CO2), carbon monoxide (CO) and also hydrocarbons (HCs) are the most important air

pollutants that are linked with the abovementioned activities. These emissions from

polluting gases produced by vehicle engines during partial or complete fuel combustion

have a negative impact in the progressive degradation of soil, water and forests and the

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gradual deterioration of human health (respiratory diseases due to the formation of fine

particles in the air).

More specifically, air pollutants produced by vehicle engines’ internal combustion process

contribute to the formation of ground - level ozone and photochemical smog in the

atmosphere, that irritate in sequence human eyes, damage the lungs and aggravate

respiratory problems. Regarding the types of vehicle emissions, they are divided into

exhaust, abrasion and evaporative emissions. Exhaust emissions are produced primarily

from the combustion of different petroleum products such as petrol, diesel and liquified

petroleum gas (LPG) and the amount of their pollutants is very dependent on the type of

fuel used and engine technology. The second category of abrasion emissions are

produced from the mechanical abrasion and corrosion of vehicle parts. Particulate matter

emissions can be generated from the mechanical abrasion of the vehicles’ tires, brakes

and clutch, the road surface wear or the corrosion of the chassis, bodywork and other

vehicle components. As for the evaporative emissions, they consist the vapours resulting

from the vehicle’s fuel system.

In accordance with European Environment Agency’s guide, in road transport sector, GHG

emissions have increased in recent decades, while in all other main sectors of economy

they have fallen. Road transport GHG emissions are around 16% above the levels in

1990. Especially, as emissions from other sources have decreased, the contribution that

road transport makes to total EU emissions has increased by around half, i.e. from a 13%

share in 1990 to almost 20% share in 2013. The road transportation users in Cyprus

consume mainly gasoline and diesel fuel as their current fuel consumption mix.

Nevertheless, both gasoline and diesel fuel are responsible for air pollution, containing

high levels of asphalt, carbon, residues, sulphur and metallic compounds and have high

viscosity and low volatility properties and they also are neither cost-effective nor energy-

effective as fuels in comparison with natural gas in the form of CNG fuel. Due to these

characteristics, gasoline and diesel fuel when burned they emit substances like SO2,

NOx, PM, and CO2 which cause damage to the surroundings.

The main controlling protocol that sets limits on the vehicles’ emissions are the emission

standards, as the legal requirements governing air pollutants released into the

atmosphere. These emission standards set quantitative limits on the permissible amount

of specific air pollutants that may be released from specific sources over specific

timeframes, designed to achieve air quality standards and to protect human life. In the

European Union, new emission standards are in effect for all road vehicles, trains, barges

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and ‘nonroad mobile machinery’ such as tractors. EU Regulation No 443/2009 sets an

average CO2 emissions target for new passenger cars of 130 grams per kilometre and

the target was gradually phased in between 2012 and 2015. A new emission target of 95

grams will apply from 2021. As for light commercial vehicles, an emission target of 175

g/km applies from 2017 and 147 g/km from 2020, a reduction of 16%. In order to meet

and approach these emission requirements, alternative sources of energy such as natural

in the form of CNG for road vehicles must be penetrated vigorously in Cyprus’ vehicles

market.

In that case, CNG fuel, in environmental terms, produces fewer harmful combustion by-

products, as it is chemically relatively simpler compared to traditional petroleum products.

Compressed natural gas has also several other advantages comparing to other fuels, like

petroleum products. In automotive industry, CNG fuel is known for its low emissions and

various other eco-friendly benefits and as transportation fuel it consists a mature

technology complying up with up to date safety standards. Regarding the pricing issues of

transportation fuels, CNG fuel for road transport use, due to its quite lower price, is

considered as a more cost-effective fuel in comparison with current fuel consumption mix

in vehicles’ market. Thereby, taking advantage of CNG’s lower price, Cyprus could

minimize its dependency on foreign oil.

In particular, compressed natural gas is the cleanest burning transportation fuel in

comparison with petroleum-based products because of its lower carbon content. CNG fuel

produces 20-30% fewer greenhouse gas emissions and 95% fewer tailpipe emissions

than petroleum products, causing null evaporative emissions. Regarding CNG fuel’s

flammability, it ranges from 5 to 15 percent, which makes it less flammable and safer than

other fuels. In the event of a collision, CNG cylinders are less dangerous than gasoline

and diesel tanks because of its size, structure and location within the vehicle. Technically,

these cylinders have safety devices which are designed to release the gas if its normal

pressure or temperature is higher than the expected. Due to CNG’s ignition temperature,

which is 600 C, higher than gasoline (320 C) and diesel (285 C), it should be noted that⁰ ⁰ ⁰

vehicles using CNG as main fuel are less likely to catch fire under any circumstances. In

the event of an accidental release, CNG is lighter than air, meaning that it will dissipate

into the atmosphere, unlike gasoline or diesel which pools on the ground and serves as a

fire hazard. An appealing benefit of CNG fuel to vehicles reciprocates to their

maintenance cost, since there can be longer periods between tune-ups and oil changes.

Dedicated CNG fuel engines are superior in performance to gasoline engines because

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natural gas has an octane rating of approximately 130, whereas super and unleaded have

octane levels of 95 and 97 respectively.

CYnergy’s particular activity proposes an approach towards the decarbonization of

Cyprus’ road transportation sector by utilizing alternative greener emissions, efficient

sources of energy for their operational processes.

6. Financial Analysis

The main purpose of the financial analysis is to compute the project’s financial

performance indicators. The methodology used is the discounted cash flow analysis

(DCF). The following steps were adopted in order to carry out the analysis.

Only cash inflows and outflows were considered in the analysis. Therefore, non-

cash accounting items such as depreciation are not included.

An appropriate Financial Discount Rate (FDR) was adopted in order to calculate

the present values of the future cash flows. The financial discount rate reflects the

opportunity cost of capital.

The number of years for which forecast are provided should correspond to the

project’s time horizon.

The financial analysis aims at evaluating the financial profitability of the investment, at

determining the appropriate contribution from the funds and finally at checking the

financial sustainability. The financial profitability of the investment can be evaluated by

estimating the financial net present value (FNPV) and the financial rate of return of the

investment (FRR). More specifically, the FNPV indicator is the difference between the

present value of cash inflows and the present value of cash outflows that occur as a result

of undertaking an investment project over a period of time. A positive net present value

shows that the projected earnings generated by an investment exceeds the anticipated

costs and therefore the project is acceptable. On the other hand, if the net present value is

negative the project should be rejected.

In addition, the internal rate of return is the discount rate which equates the present value

of an investment to zero. More specifically, it is the discount rate which equates the

present value of the future cash flows of an investment with the initial investment. It should

be noted that if the FRR promised by the investment project is greater than or equal to the

minimum required rate of return, which in our case is 4% the project is considered

19


acceptable otherwise the project is rejected. However, it should be noted that the FRR is

not suitable for projects with a non-typical distribution of cash flows.

The financial analysis is performed not including VAT or taxes for a reference period of 25

years which is common for transport projects, including both implementation (one year)

and operation (twenty-four years). In addition, the financial analysis uses a 4% discount

rate in real terms which is in-line with the EU wide benchmark set by the Commission.

It should be noted that contingencies are not included in the financial analysis. In addition,

the analysis was conducted by using constant (real) prices of 2018 without inflation which

will cause prices to increase over the life of the project. Based on the fact that the

economic lifetime of the LNG tanker trucks is 15 years, within the time horizon (25 years)

of the analysis, replacements will take place, in contrast with the economic lifetime of the

LCNG stations, which is 25 years, so their replacement is not predicted in our analysis.

Investment Cost

The cost estimate for the proposed supply chain of NG fuel (in both forms of CNG/LNG) is

based on conceptual designs and cost estimations, since the works have not been

tendered yet. The cost estimate is made on constant prices of 2018 and on market inputs.

The total investment cost takes into consideration indicative load sizes of the appropriate

equipment components that will cover the estimated quantities of NG fuel according to the

future demand scenario for road transportation use, with the basic assumptions made by

DDL – Decision Dynamics Ltd and the penetration parameters that were used.

The estimates include all costs incurred during the implementation period of the project. In

particular, the investment cost of the NG demand scenario includes three (3) LNG tanker

trucks (in the reference year of 2019, while their cost estimate is based on market data by

20

Investment CostOperating Costs and

RevenuesSources of Financing

Financial Return on Investment -

FNPV(C)Financial

SustainablityFinancial Return on Capital - FNPV(K)


Blue Grid Gas and Power) and seven (7) LCNG stations during the reference period of

2019-2043 (5 LCNG stations in 2019 and other two will be added in 2030, while their cost

estimate is based on LNG Blue Corridors project which includes manufacturers’ indicative

offers).

The estimated useful economic life for the LCNG stations has been set to 25 years, while

for the LNG trucks to 15 years. Considering that the time horizon of the financial analysis

is 25 years, it is expected that there will be no replacement cost of the LCNG stations in

contrast with LNG trucks during the implementation period of the project. Based on the

above, the investment cost of the specific demand scenario is given in the tables below:

Capex for LCNG Stations – Road Transportation DemandLCNG Stations 2019 2030

Ammochostos Province 1.116.000 € 0 €Larnaca Province 1.116.000 € 0 €Lemesos Province 1.116.000 € 1.116.000 €Leukosia Province 1.116.000 € 1.116.000 €Paphos Province 1.116.000 € 0 €

Total Capex Cyprus 5.580.000 € 2.232.000 €

Table 3: Total Investment Cost for LCNG Stations for Road Transportation Use. Source: LNG Blue Corridors Project’s cost estimate (EUR).

Capex for LNG Tanker Trucks – Road Transportation DemandLNG Trucks 2019

Total Capex Cyprus 630.000 € (210.000 € per truck)

Table 4: Total Investment Cost for LNG Tanker Trucks for Road Transportation Use. Source: BlueGrid Gas and Power Sub-activity 4.1 (EUR).

Operating Costs and Revenues

The operating costs include all the costs related to the operation and maintenance of the

proposed supply chain, adapted to our demand scenario. The operating costs are divided

into fixed and variable costs. As part of this analysis they have been estimated for each

component of the proposed supply chain their operating costs. It should be noted that, the

operating costs of the proposed supply chain are estimates that have been provided by

FCN Energy Logistics Ltd, based on market data.

The operational costs for the LNG tanker trucks include the following expenses:

21


- Driver’s cost: one person was assumed with gross wages of 3,800 euros per

month.

- Maintenance cost: 4,5% of the LNG tanker truck investment cost due to their

frequent unloads.

- Insurance cost: 4,5% of the LNG tanker truck investment cost due to their

potential increased corrosion.

- Fuel consumption: the fuel consumption takes into consideration the fuel

consumption of the LNG tanker trucks (0.3 l/km for Diesel Fuel), the distance that

should be covered to reach the respective industrial area (section 5.2) and the

fuel price (1,58 € average price for Diesel fuel in Cyprus).

- Other operating costs including general management.

The operational costs for the LCNG stations include the following expenses:

- Insurance cost: 4,5% of the LCNG station investment cost (based on BlueHUBS

project’s cost estimate).

- Maintenance cost: 4,5% of the LCNG station investment cost. (based on

BlueHUBS project’s cost estimate).

- Other costs including general management.

- Electricity cost, that is based on the cost estimate used in BlueHUBS project and

provided by Blue Grid Gas & Power for a LCNG Station with power consumption of

70kW.

Regarding the revenues are cash in-flows directly paid by the road transportation users for

the services provided by the proposed supply chain for our specific demand scenario.

More specifically, the use of NG (in both forms of LNG and CNG) creates future benefits

in cash flows (cost savings for the road transportation users) in terms of fuel cost.

Therefore, the calculation of the benefits for our scenario derived from the estimated

demand (as resulted from the future demand assumptions and the penetration factor of

5% in Cyprus to the new car sales in 2040) for road transportation users and the CNG

price (approx. 0,889 €/kg based on Greek market data 2018 provided by DEPA) within

100 driving kilometres, resulted from the average CNG fuel consumption per vehicle

category.

In particular, for assessing the final benefits for each vehicle category, we used as input

their average fuel consumption in 100 driving kilometers (Diesel or Gasoline in

dependence with the vehicle category) and converted them to the respective average NG

fuel consumption as it is shown in the following table.

22


AVERAGE FUEL CONSUMPTION (lt/100 klm) LNG/CNG SWITC

HFUEL VEHICLE TYPE PER TYPICAL

VEHICLE€/

100klm€/klm kg /

100klmkg / klm

CNG Gasoline Private Cars (AVG) 5,9 lt/100 km 6,76 0,068 3,22 0,0322CNG Diesel Taxis 5,1 lt/100 km 6,29 0,063 3,18 0,0318CNG Diesel Public Buses 62 lt/100 km 76,51 0,765 38,7 0,387CNG Diesel Private Buses 55 lt/100 km 67,87 0,679 35,58 0,3558CNG Gasoline Light Trucks 30 lt/100 km 34,35 0,344 16,42 0,1642LNG Diesel Heavy Trucks 38 lt/100 km 46,89 0,469 25,84 0,2584CNG Diesel Tractors 45 lt/100 km 55,53 0,555 28,09 0,2809

CNG/LNG Average price (EUR/kg)

Average consumption (kg/100km)

Cost (EUR/100km) Savings

Private Cars 0,889 3,22 2,86258 58%Taxis 0,889 3,18 2,82702 55%Public Buses 0,889 38,70 34,4043 55%Private Buses 0,889 35,58 31,63062 53%Light Trucks 0,889 16,42 14,59738 58%Heavy Trucks 0,889 25,84 22,97176 51%Tractors 0,889 28,09 24,97201 55%

In the following table, CNG/LNG savings regarding the cost of fuel in 100 driving

kilometers in comparison with vehicles’ current fuel (Diesel or Gasoline and their

respective average sale prices of 2018 in Cyprus) are presented.

In general, the aforementioned cost estimate for CNG/LNG fuel in 100 driving kilometers

for each vehicle type should consist the indicative maximum delivered price range of NG

fuel in the road transportation sector in order to compete its competitive and current fuels

to enable a smooth switch from them, without factoring into the total NG transportation

and regasification/decompress cost in this analysis.

Below, total revenues and operating costs for road transportation sector as well as the

discounted net revenues of the project are presented in detail.

23


24


Operating Revenues and Costs (EUR)

Years 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Total 1 2 3 4 5 6 7 8 9 10 11Private Cars 0 224.792 269.750 314.708 359.667 404.625 449.583 539.500 629.417 719.334 809.250Light Trucks 0 229.249 275.099 320.949 366.799 412.648 458.498 550.198 641.897 733.597 825.297Total Revenues of CNG/Gasoline (€/km)

34.961.142 0 454.041 544.849 635.657 726.465 817.273 908.082 1.089.698 1.271.314 1.452.931 1.634.547

Taxis 0 5.814 6.977 8.140 9.303 10.466 11.629 13.954 16.280 18.606 20.932Public Buses 0 59.121 70.945 82.769 94.593 106.418 118.242 141.890 165.538 189.187 212.835Private Buses 0 18.110 21.732 25.354 28.976 32.598 36.220 43.464 50.708 57.952 65.196Tractors 0 31.911 38.293 44.675 51.057 57.439 63.821 76.585 89.350 102.114 114.878Total Revenues of CNG/Diesel (€/km)

8.851.585 0 114.956 137.947 160.938 183.929 206.920 229.911 275.894 321.876 367.858 413.840

Heavy Trucks 0 185.397 222.476 259.556 296.635 333.714 370.794 444.952 519.111 593.270 667.429Total Revenues of LNG/Diesel (€/km)

14.275.558 0 185.397 222.476 259.556 296.635 333.714 370.794 444.952 519.111 593.270 667.429

Total Revenues 58.088.285 0 754.393 905.272 1.056.151 1.207.029 1.357.908 1.508.787 1.810.544 2.112.301 2.414.059 2.715.816Drivers Cost 0 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600Maintenance Cost 0 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350Insurance Cost 0 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350Fuel Consumption

0 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348

Other Costs 0 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000Total Operating Costs for LNG Tanker Trucks

20.247.561 0 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648


0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Larnaca Province 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540Lemesos Province

0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Leukosia Province

0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Paphos Province 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540Total Operating

25


Costs for LCNG Stations

20.104.800 0 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700

Total Operating Costs

40.352.361 0 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348

Net Revenues 17.735.924 0 (926.955) (776.076) (625.198) (474.319) (323.440) (172.562) 129.196 430.953 732.710 1.034.468Operating

Revenues and Costs (EUR)

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2043

12 13 14 15 16 17 18 19 20 21 22-25Private Cars 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 3.596.668

Light Trucks 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 3.667.985Total Revenues of CNG/Gasoline (€/km)

1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 7.264.653

Taxis 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 93.029

Public Buses 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 945.934

Private Buses 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 289.758

Tractors 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 510.569

Total Revenues of CNG/Diesel (€/km)

459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 1.839.290

Heavy Trucks 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 2.966.350Total Revenues of LNG/Diesel (€/km)

741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 2.966.350

Total Revenues 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 12.070.293Drivers Cost 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 638.400Maintenance Cost 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 113.400Insurance Cost 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 113.400Fuel Consumption 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 2.009.394Other Costs 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 500.000Total Operating Costs for LNG Tanker Trucks

843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 3.374.594


167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160

Larnaca Province 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160Lemesos Province 167.540 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 1.340.320Leukosia Province 167.540 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 1.340.320

26


Paphos Province 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160Total Operating Costs for LCNG Stations

837.700 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 3.350.800

Total Operating Costs

1.681.348 2.016.428 2.016.428 2.016.428 2.646.428 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428 6.725.394

Net Revenues 1.336.225 1.001.145 1.001.145 1.001.145 371.145 1.001.145 1.001.145 1.001.145 1.001.145 1.001.145 5.344.900

Table 5: Total Revenues and Operating Costs for Road Transportation.

27


Investment Costs and Revenues (Eur)

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Discounted Investment Cost (DIC)

NPV 4% Construction

Period

Operation

LCNG Stations 6.759.485 5.580.000 0 0 0 0 0 0 0 0 0 0

LNG Tanker Trucks 605.769 630.000 0 0 0 0 0 0 0 0 0 0

Discounted Investment Cost 7.365.254 6.210.000 0 0 0 0 0 0 0 0 0 0

Discounted Net Revenues (DNR)A. Benefits of CNG/Gasoline (€/km)

Private Cars 9.691.485 0 224.792 269.750 314.708 359.667 404.625 449.583 539.500 629.417 719.334 809.250

Light Trucks 9.883.654 0 229.249 275.099 320.949 366.799 412.648 458.498 550.198 641.897 733.597 825.297

Total Benefits from Gasoline 19.575.139 0 454.041 544.849 635.657 726.465 817.273 908.082 1.089.698

1.271.314

1.452.931 1.634.547

B. Benefits Of CNG/Diesel (€/km)

Taxis 250.673 0 5.814 6.977 8.140 9.303 10.466 11.629 13.954 16.280 18.606 20.932

Public Buses 2.548.889 0 59.121 70.945 82.769 94.593 106.418 118.242 141.890 165.538 189.187 212.835

Private Buses 780.774 0 18.110 21.732 25.354 28.976 32.598 36.220 43.464 50.708 57.952 65.196

Tractors 1.375.766 0 31.911 38.293 44.675 51.057 57.439 63.821 76.585 89.350 102.114 114.878

Total Benefits from Diesel 4.956.102 0 114.956 137.947 160.938 183.929 206.920 229.911 275.894 321.876 367.858 413.840

C. Benefits of LNG/Diesel (€/km)

Heavy Trucks 7.993.047 0 185.397 222.476 259.556 296.635 333.714 370.794 444.952 519.111 593.270 667.429

Total Benefits from Diesel 7.993.047 0 185.397 222.476 259.556 296.635 333.714 370.794 444.952 519.111 593.270 667.429

Total Revenues 32.524.289 0 754.393 905.272 1.056.151 1.207.029

1.357.908

1.508.787 1.810.544

2.112.301

2.414.059 2.715.816

A. Operating Costs for LNG Tanker Trucks

Drivers Cost 2.339.822 0 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600

Maintenance Cost 415.626 0 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350

Insurance Cost 415.626 0 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350

28


Fuel Consumption 7.364.699 0 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348

Other Costs 1.832.568 0 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000

Replacement Cost 336.362 0 0 0 0 0 0 0 0 0 0 0

Total Discounted Operating Costs for LNG Tanker

Trucks12.704.704 0 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648 843.648

B. Operating Costs for LCNG Stations

Ammochostos Province 2.456.227 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Larnaca Province 2.456.227 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Lemesos Province 3.501.175 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Leukosia Province 3.501.175 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Paphos Province 2.456.227 0 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540

Total Discounted Operating Costs for LCNG Stations

14.371.032 0 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700 837.700

Total Discounted Cash Outflows

27.075.736 0 1.681.348 1.681.348 1.681.348 1.681.348

1.681.348

1.681.348 1.681.348

1.681.348

1.681.348 1.681.348

Discounted Net Revenues 5.448.553 0 (926.955) (776.076) (625.198) (474.319) (323.440) (172.562) 129.196 430.953 732.710 1.034.468

Investment Costs and Revenues (Eur)

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2043

Discounted Investment Cost (DIC) Operation

LCNG Stations 2.232.000

0 0 0 0 0 0 0 0 0 0

LNG Tanker Trucks 0 0 0 0 0 0 0 0 0 0 0

Discounted Investment Cost 2.232.000

0 0 0 0 0 0 0 0 0 0

Discounted Net Revenues (DNV)A. Benefits of CNG/Gasoline (€/Km)

Private Cars 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 899.167 3.596.668

29


Light Trucks 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 916.996 3.667.985

Total Benefits from Gasoline 1.816.163

1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163 1.816.163

7.264.653

B. Benefits of CNG/Diesel (€/Km)

Taxis 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 23.257 93.029

Public Buses 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 236.484 945.934

Private Buses 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 72.439 289.758

Tractors 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 127.642 510.569

Total Benefits from Diesel 459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 459.823 1.839.290

C. Benefits of LNG/Diesel (€/Km)

Heavy Trucks 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 2.966.350

Total Benefits from Diesel 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 741.587 2.966.350

Total Revenues 3.017.573

3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573

12.070.293

A. Operating Costs for LNG Tanker Trucks

Drivers Cost 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 159.600 638.400

Maintenance Cost 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 113.400

Insurance Cost 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 28.350 113.400

Fuel Consumption 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 502.348 2.009.394

Other Costs 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 125.000 500.000

Replacement Cost 0 0 0 0 630.000 0 0 0 0 0 0

Total Discounted Operating Costs for LNG Tanker Trucks

843.648 843.648 843.648 843.648 1.473.648 843.648 843.648 843.648 843.648 843.648 3.374.594

B. Operating Costs for LCNG Stations

30


Ammochostos Province 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160

Larnaca Province 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160

Lemesos Province 167.540 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 1.340.320

Leukosia Province 167.540 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 335.080 1.340.320

Paphos Province 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 167.540 670.160

Total Discounted Operating Costs for LCNG Stations

837.700 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780 1.172.780

4.691.120

Total Discounted Cash Outflows 1.681.348

2.016.428 2.016.428 2.016.428 2.646.428 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428

8.065.714

Discounted Net Revenues 1.336.225

1.001.145 1.001.145 1.001.145 371.145 1.001.145 1.001.145 1.001.145 1.001.145 1.001.145

4.004.580

Table 6: Calculation of Discounted Net Revenues for Road Transportation.

31


Sources of Financing

Based on the above and on the fact the that the project is a net revenue generating

operation in the meaning of the Article 61 of Regulation (EU) 1303/2013, the contribution

of the EU Regular Fund to the project has been determined using the method based on

the calculation of the discounted net revenue.

The construction of the LCNG stations and the procurement of the LNG tanker trucks will

be considered for submission under the Cohesion Fund of the Connecting Europe Facility

(CEF) which supports trans-European networks and infrastructures in the sector of

transport) with a co-financing rate of the relevant priority axis is 30%. The resulting pro-

rata application of discounted net revenues resulted in 26%. This multiplied with the

eligible cost (8.442.000 EUR) and the co-financing rate of the relevant priority results an

EU grant of 2.196.909 EUR. The remainder of the investment, it is assumed that will be

provided by private contribution (54%) and private loan (20%).

Table 7: Sources of Financing (EUR).

Based on the above, the cash-flows for the financial analysis that have been shown in the

previous tables including the calculation of the relevant financial performance indicators of

the project.

32

26% EU Grant

54% Equity

20% Loan

100%

Investment Cost

Sources of Financing (EUR)

Total Total 2019 2030Financing Sources M Eur % Share 1 2Eu Grant 2.196.90

926% 1.616.013 580.846

Private Contribution 4.556.691

54% 3.351.937 1.204.754

Private Loan 1.688.400

20% 1.242.000 446.400

Total Funding 8.442.000

100% 6.210.000 2.232.000


Following the calculation of the EU Grant is eligible to acquire based on its financial inputs

and the relevant priority axis, the financial analysis continues for our road transportation

demand scenario. The financial profitability of the investment (as indicated by FNPV (C)

and FNPV (K) (Tables 8 and 9) for our basic demand scenario is negative before the EU

Grant, as expected for a project with significant investment cost. The negative financial

net present value of the investment (FNPV (C) = EUR -1,916,702) shows that the project

requires EU assistance but is not viable only with the contribution of an EU grant. For

covering part of the total investment, a loan is assumed with an amortisation period of 15

years and a fixed interest rate in real terms. Therefore, it should be mentioned that either

the project’s investment cost should be reduced or several incentives should be provided

by the implementation plan of Activity 4, which will include alternative penetration

strategies for increasing the NG demand in the road transportation sector of Cyprus.

For the programming period 2014-2020 the European Commission recommends that the

financial discount rate 4% is used for major projects. The tables that follow show the

results of the financial analysis.

Finally, the analysis of the financial sustainability at project level (Table 10) aims to assess

whether the project is able to balance out its positive and negative cash flows during the

reference period (25 years). The analysis shows that the project implementation costs are

covered by means of the EU grant, a loan and private equity. Newly established

technologies, are expected to produce negative cash flows during project operations. In

order for the project to be sustainable, the balance between inflows and outflows must be

reached by means of increased compensation by the project beneficiary, both in terms of

losses and in terms of loan repayment. The financial sustainability illustrates that the

project beneficiary is committed to increase compensation to the extent that it covers the

operating losses, in order to provide evidence that the financial sustainability of the project

can be ensured.

As it was aforementioned, the analysis has illustrated a project that is not acceptable and

financially viable only with the contribution of an EU grant, although its net present value is

marginally negative (FNPV (K) = EUR -60,916) and the FRR (4%) of our investment after

EU Grant is equal to the minimum required rate of return, which in our case is 4% and

equates the present value of the investment to zero. As for the investment cost during

33


implementation, it is covered by different financing sources and its cumulated net cash

flow during operations is positive mostly in the second half of the evaluation period.

34


Financial Return on Investment (EUR)

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 NPV 4% CONSTRUCTION

PERIODOPERATION

PERIOD

Revenues 32.524.289

0 754.393 905.272 1.056.151

1.207.029

1.357.908

1.508.787

1.810.544

2.112.301

2.414.059

2.715.816

Total Discounted Revenues

32.524.289

0 754.393 905.272 1.056.151

1.207.029

1.357.908

1.508.787

1.810.544

2.112.301

2.414.059

2.715.816

LNG tanker Trucks 6.759.485 5.580.000 0 0 0 0 0 0 0 0 0 0LcNG Stations 605.769 630.000 0 0 0 0 0 0 0 0 0 0Total Investment Costs 7.365.254 6.210.000 0 0 0 0 0 0 0 0 0 0Discounted Operating Costs (Incl. Replacement Cost)

27.075.736

0 1.681.348 1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

Total Cash Outflows 27.075.736

0 1.681.348 1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

FNPV (C) / Net Cash-Flow (1.916.702)

(6.210.000) (926.955) (776.076) (625.198) (474.319) (323.440) (172.562) 129.196 430.953 732.710 1.034.468

FRR (C) 2.4%

Financial Return on Investment (EUR)

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2043

NPV 4%

Revenues 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573

3.017.573 3.017.573 3.017.573 3.017.573 3.017.573

12.070.293

Total Discounted Revenues 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573

3.017.573 3.017.573 3.017.573 3.017.573 3.017.573

12.070.293

LNG TANKER Trucks 2.232.000 0 0 0 0 0 0 0 0 0 0

LcNG Stations 0 0 0 0 0 0 0 0 0 0 0

Total Investment Costs 2.232.000 0 0 0 0 0 0 0 0 0 0Discounted Operating Costs (Incl. Replacement Cost)

1.681.348 2.016.428 2.016.428 2.016.428 2.646.428

2.016.428 2.016.428 2.016.428 2.016.428 2.016.428

8.065.714

Total Cash Outflows 1.681.348 2.016.428 2.016.428 2.016.428 2.646.428

2.016.428 2.016.428 2.016.428 2.016.428 2.016.428

8.065.714

FNPV (C) / Net Cash-Flow (Before EU Grant)

(895.775) 1.001.145 1.001.145 1.001.145 371.145 1.001.145 1.001.145 1.001.145 1.001.145 1.001.145

4.004.580

35


Table 8: Financial Return on Investment (EUR)

36


Financial Return on Capital (EUR)

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

NPV 4% CONSTRUCTION PERIOD

OPERATION PERIOD

Net Revenues 32.524.289

0 754.393 905.272 1.056.151 1.207.029

1.357.908

1.508.787

1.810.544

2.112.301

2.414.059

2.715.816

Total Discounted Revenues

32.524.289

0 754.393 905.272 1.056.151 1.207.029

1.357.908

1.508.787

1.810.544

2.112.301

2.414.059

2.715.816

Private Equity 3.975.502 3.351.937 0 0 0 0 0 0 0 0 0 0

Total Contribution 3.975.502 3.351.937 0 0 0 0 0 0 0 0 0 0

Loan Repayments 1.533.967 0 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485

Operating Costs (incl. Replacement Cost)

27.075.736

0 1.681.348 1.681.348

1.681.348 1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

1.681.348

Total Cash Outflows 28.609.703

0 1.824.834 1.824.834

1.824.834 1.824.834

1.824.834

1.824.834

1.824.834

1.824.834

1.824.834

1.824.834

FNPV (K)/ Net Cash-Flow (After EU Grant)

(60.916) (3.351.937) (1.070.440) (919.562) (768.683) (617.804) (466.926) (316.047) (14.290) 287.468 589.225 890.982

FRR (K) 4%

Financial Return on Capital (EUR)

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2043

NPV 4%

Net Revenues 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 12.070.293

Total Discounted Net Revenues

3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 12.070.293

Private Equity 1.204.754 0 0 0 0 0 0 0 0 0 0

Total Contribution 1.204.754 0 0 0 0 0 0 0 0 0 0

Loan Repayments 143.485 143.485 143.485 143.485 143.485 0 0 0 0 0 0

Operating Costs (incl. Replacement)

1.681.348 2.016.428 2.016.428 2.016.428 2.646.428 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428 8.065.714

37


Total Cash Outflows 1.824.834 2.159.914 2.159.914 2.159.914 2.789.914 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428 8.065.714

FNPV (K) / NetCash-Flow (After EU Grant)

(12.015) 857.660 857.660 857.660 227.660 1.001.145 1.001.145 1.001.145 1.001.145 1.001.145 4.004.580

Financial Sustainability (EUR)

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

CONSTRUCTION PERIOD

OPERATION

Eu Grant 1.616.063 0 0 0 0 0 0 0 0 0

Promoter's Contribution 3.351.937 0 0 0 0 0 0 0 0 0

Private Loan 1.242.000 0 0 0 0 0 0 0 0 0

Revenues 0 754.393 905.272 1.056.151 1.207.029 1.357.908 1.508.787 1.810.544 2.112.301 2.414.059 2.715.816

Total Inflows 6.210.000 754.393 905.272 1.056.151 1.207.029 1.357.908 1.508.787 1.810.544 2.112.301 2.414.059 2.715.816

Investment Cost 6.210.000 0 0 0 0 0 0 0 0 0

Loan Repayments 0 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485 143.485

Operating Costs (incl. Replacement Cost)

0 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348 1.681.348

Total Outflows 6.210.000 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834 1.824.834

Cash Flows Before Tax 0 (1.070.440) (919.562) (768.683) (617.804) (466.926) (316.047) (14.290) 287.468 589.225 890.982

Cumulative Net Cash Flows 0 (1.070.440) (1.990.002) (2.758.685)

(3.376.490) (3.843.415)

(4.159.462) (4.173.752)

(3.886.285) (3.297.060)

(2.406.077)

Table 9: Financial Return on Capital (EUR).

38


39


Financial Sustainability (EUR)

2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2043

Eu Grant 580.846 0 0 0 0 0 0 0 0 0 0

Promoter's Contribution 1.204.754 0 0 0 0 0 0 0 0 0 0

Private Loan 446.400 0 0 0 0 0 0 0 0 0 0

Revenues 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 12.070.293

Total Inflows 5.249.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 3.017.573 12.070.293

Investment Cost 2.232.000 0 0 0 0 0 0 0 0 0 0

Loan Repayments 143.485 143.485 143.485 143.485 143.485 0 0 0 0 0 0

Operating Costs (Incl. Replacement Cost)

1.681.348 2.016.428 2.016.428 2.016.428 2.646.428 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428 8.065.714

Total Outflows 4.056.834 2.159.914 2.159.914 2.159.914 2.789.914 2.016.428 2.016.428 2.016.428 2.016.428 2.016.428 8.065.714

Cash Flows Before Tax 1.192.740 857.660 857.660 857.660 227.660 1.001.145 1.001.145 1.001.145 1.001.145 1.001.145 4.004.580

Cumulative Net Cash Flows (1.213.338) (355.678) 501.981 1.359.641 1.587.300 2.588.445 3.589.590 4.590.735 5.591.880 6.593.025 36.383.549

Table 10: Financial Sustainability (EUR).

40


The below figures summarize the expected revenues per year, vehicle type and other fuels.

2020 2025 2030

754,393.32 €

1,975,421.68 €

3,950,843.35 €

Expected revenues

Figure 4: Expected Revenues per years – Road Transportation Demand

Private Cars Light Trucks Taxis Public Buses Private Buses Tractors Heavy Trucks

17,308,964.15 €

17,652,178.27 €

447,701.61 €

4,552,308.27 €

1,394,460.32 €

2,457,114.40 €

14,275,558.42 €

Expected Revenues per Vehicle Type

Figure 5: Expected Revenues per Vehicle Type – Road Transportation Demand

41


2020 2025 2030

615,913 €

1,231,826 €

2,463,652 €

139,278 €278,556 €

557,113 €

193,052 €386,103 €

772,207 €

Total Benefits of CNG/LNG from substitute fuels

Benefits CNG/Gasoline Benefits CNG/Diesel Benefits LNG/Diesel

Figure 6: Total Benefits of CNG/LNG from Substitute Fuels – Road Transportation Demand

The below figures depict the Cashflows and the EBITDA and Net cashflows of the project.

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

-2500%

-2000%

-1500%

-1000%

-500%

0%

500%

Cash Flows before Tax

Cash Flows before Tax y-o-y change (%)

Figure 7: Cashflows before Tax – Road Transportation Demand

42


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

(€1,500,000.00)

(€1,000,000.00)

(€500,000.00)

€0.00

€500,000.00

€1,000,000.00

€1,500,000.00

-200%

-150%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

EBITDA

Discounted Net Revenues y-o-y change (%)

Figure 8: EBITDA – Road Transportation Demand

20192020

20212022

20232024

20252026

20272028

20292030

20312032

20332034

20352036

20372038

20392040

20412042

2043

-30,000,000

-25,000,000

-20,000,000

-15,000,000

-10,000,000

-5,000,000

0

5,000,000

10,000,000

Net Cash-Flow

Figure 9: Net Cash-flow – Road Transportation Demand

43


7. Risk Assessment

Sensitivity analysis in the context of investment appraisal enables the identification and

examination of the critical variables of the project. Such variables are those whose

variations, either positive or negative, have the greatest impact on the financial

performance of the project. Variables should be varied one at a time, while keeping the

other parameters constant. In general, those variables for which 1% variation, positive or

negative, gives rise to a corresponding variation of 5% in the FNPV’s base value

considered as critical. Different criteria, however, can also be adopted. On the other hand,

risk analysis assesses the impact of variations on the project’s performance indicators,

without indicating anything about the probability by which this change may occur.

7.1. Sensitivity Analysis

The main purpose of sensitivity analysis is not to quantify the risk but to ascertain the

responsiveness of FNPV (C) and FNPV (K). More specifically, it was performed by

calculating the percentage change of the FNPV (C) and FNPV (K) indicators as a

consequence of 5% increase on the investment cost, namely the capital expenditure of

LCNG stations and LNG tanker trucks, as a consequence of 5% on the price fuel of CNG

as it is fluctuating heavily, as well as a consequence of an application of 8% (i.e. 3%

increase on the 5% penetration factor used in this analysis) NG penetration factor in

Cyprus to the estimated total new car sales in 2040. The sensitivity analysis was

performed for our basic demand scenario for the road transportation sector.

FNPV (C) Base Scenario FNPV (C) Percentage Change (%)

-1.916.701,53 € -2.301.782,36 € 20%

FNPV (K) Base Scenario FNPV (K) Percentage Change (%)

-60.915,92 € -63.961,65 € 5%

The sensitivity analysis revealed that the FNPV (C) indicator regarding the road

transportation sector with the basic demand scenario under examination is more sensitive

to changes in an increase on investment cost by only 5%, while the FNPV (K) is less

sensitive to changes in an increase of the investment cost by 5%. The results of the

responsiveness of the financial indicators are given in the below tables.

44


Similarly, the sensitivity analysis revealed that the FNPV (C) indicator regarding the road

transportation sector with the basic demand scenario under examination is even more

sensitive to changes in an increase on the NG penetration factor to the estimated total

new car sales by only 3% (i.e. 8% penetration factor), while FNPV (K) indicator is stable.

The results of the responsiveness of the financial indicators are given in the below tables:


-1.916.701,53 € 17.597.871,70 € -1018%


-60.915,92 € -60.915,92 € 0%

Ultimately, the sensitivity analysis revealed that the FNPV (C) indicator regarding the road

transportation sector with the basic demand scenario under examination is even more

sensitive to changes in an increase on the fuel price of CNG by only 5% higher than the

price used in the analysis, while FNPV (K) indicator is stable. The results of the

responsiveness of the financial indicators are given in the below tables:


-1.916.701,53 € -290.487,10 € -85%


-60.915,92 € -60.915,92 € 0%

45


Appendix

The following prices were used for the calculation of the NG price differentials from the

current fuel mix (Diesel and Gasoline) in vehicles in Cyprus as the average prices of 2018:

Average Price per Fuel of VehiclesUnleaded 95 (Cyprus 2018) 1,15 €Unleaded 98 (Cyprus 2018) 1,21 €

Diesel (Cyprus 2018) 1,23 €CNG (Greece 2018) 0,89 €

Additionally, the following table depicts the average consumption of the vehicles’

categories in Cyprus with the current fuel mix of Diesel and Gasoline in dependence with

their category and their respective cost in the driving distance of the 100 kilometres:

Gasoline / DieselVehicle

CategoryAverage price

(EUR/lt)Average consumption (lt/100km) Cost

(EUR/100km)Private Cars 1,145 5,9 6,7555

Taxis 1,234 5,1 6,2934Public Buses 1,234 62 76,508Private Buses 1,234 55 67,87Light Trucks 1,145 30 34,35

Heavy Trucks 1,234 38 46,892Tractors 1,234 45 55,53

An indicative list of driving kilometres between Cyprus’ Major Cities, that was used for the

assess of the road transportation sector’s demand in kilometres in the Sub-activity 3.1 Is

also presented:

Distance Between Major Cities of Cyprus (klm)City Leukosia Lemesos Larnaca Paphos Ammochostos

Leukosia - 85 55 154 89Lemesos 85 - 71 67 115Larnaca 55 71 - 134 52Paphos 154 67 134 - 181

Ammochostos 89 115 52 181 -

46

· web viewas it was aforementioned, the analysis has illustrated a project that is not acceptable...

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