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Cabinet green lights Hambantota Port PPP


Comments / 2044 Views / Thursday, 8 December 2016 00:27


  • China Merchants Port Holdings to get 80% of H’tota Port $ 1.4 b
  • Full investment in one year 
  • Sri Lanka Ports Authority will retain 20% ownership 
  • Agreement to be signed today, project to be launched on 7 January 

By Chathuri Dissanayake

The Cabinet yesterday approved the move for the revival of the strategic Hambantota port with $ 1.4 billion Chinese equity investment with the deal to be signed today and kicked off on 7 January.

Based on a joint proposal made by ministers Malik Samarawickrama and Sarath Amungama the Cabinet agreed to enter into a Framework Agreement (FA) with China Merchants Port Holdings Company Ltd. (CMPort) to manage the Hambantota Port. 

The Cabinet paper sought the approval of the Cabinet to “restructure the Hambantota Port on a PPP basis with a CMPort-led consortium on the basis of the terms in the Framework Agreement, based on final decisions made by the CCEM (Cabinet Committee on Economic Management).”

The CCEM has decided to enter into a Framework Agreement for the Hambantota Port and Special Economic Zone, where the Chinese counterpart, with a share split of 80% to CMPort and 20% to the Sri Lankan Government. The CCEM notes that “the Chinese side has consented to acquire 80% of the equity of the JV, subject to a transaction value not exceeding $ 1.4 billion.” 

The fund transfer will happen on a staggered basis with CMPort agreeing to pay “$ 5 million upon signing of the FA and 10% in one month and 30% in three months and 60% in six months,” the CCEM noted. 

The FA for the PPP will be signed today as decided by the CCEM, and the project is planned to be launched on 7 January next year, to coincide with the second commemoration of the assumption of office of President Maithripala Sirisena, the Cabinet paper further stated. 

The Cabinet paper also said that an agreement signed with another Supply, Operate and Transfer (SOT) in 2014 with different Chinese investors was cancelled. The Secretary of the Ports and Shipping Ministry will be instructed to inform the two investors, China Habour Engineering Company Ltd. and China Merchants Holdings (international) Co. Ltd., that the agreement signed on key terms of SOT of Container Terminal, Hambantota Port Development Project Phrase II, has been cancelled. 

The ministers who sought the Attorney General’s advice on possible legal complications arising from the cancellation have been told that the said agreement “becomes ineffective as the conditions of precedent have not been fulfilled,” the Cabinet paper stated. 

A new condition put forward by the Chinese side to impose restrictions on the development of “Ports such as Galle, Oluvil which are within the radius of 200 km which did not contain in the Project Proposal” has been refused by the CCEM. The committee recommends negotiations to reach an agreement with “CMPort on suitable time and performance-based arrangement which does not impact their operations while development of Galle and other fishery harbours, on-competing areas are not compromised.” No restrictions have been discussed on the ports of Colombo, Trincomalee and Kankesanthurai, the CCEM stressed. 

 


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