Deal signed to build Colombo Port Expansion project’s South Container Terminal

The agreements to construct the South Container Terminal of the Colombo Port Expansion Project were signed among Sri Lanka Ports Authority, China Merchants Holding (International) Company Limited, Aitken Spence PLC and Colombo International Container Terminals Ltd. on 9 November 2011 in Colombo.

The signing of the Built Own Transfer (BOT) Agreement for the first terminal at the Colombo South Harbour took place on Friday 12 August this year in Shenzhen, China. The construction of this terminal is one of the largest Public-Private Partnership (PPP) projects taken off the ground recently in Sri Lanka and the signing occurred coincidentally with the President’s State visit to China to attend the opening ceremony of the 26th Universiade Shenzhen 2011.

The signatories to the agreement were China Merchants Holdings (International) Co., Ltd. (CMHI), Aitken Spence PLC and the Sri Lanka Ports Authority (SLPA), holding 55%, 30% and 15% stakes respectively and the joint venture thus formed for the project was the Colombo International Container Terminal (CICT) as the operating company.

The historic signing ceremony eventuated at Shekou’s Nanhai Hotel with CMHI Managing Director Dr.Hu Jianhua, Aitken Spence Deputy Chairman and Managing Director Rajan Brito, SLPA Chairman Dr. Priyath B. Wickrama and SLPA Managing Director Capt. Nihal Keppetipola participating as signatories.

The site lease agreement, shareholders agreement, direct lenders agreement and facility agreement were signed on 9 November 2011 to complete the process. Dr. Wickrama and SLPA Vice Chairman Indika Karunajeewa signed the agreements on behalf of SLPA. Assistant President of China Merchants Group and Managing Director of China Merchants Holdings (International) Company Limited Hu Jianhua, Deputy General Manager of CMHI Yunshu, General Manager of International Division of CMHI Lu Yongxin, Aitken Spence PLC Director R.N. Asirwatham, Aitken Spence PLC Director G.C. Wickremasinghe and Aitken Spence PLC Chief Financial Officer and CICT Director N. Sivapragasam also participated as the signatories for the agreements.

SLPA Additional Managing Director Norman Weerarathne, SLPA Director (Technical) A.D.T. Gunasekara, SLPA Harbour Master Capt. R. Jayawickrama and Colombo Port Expansion Project Director Susantha Abeysiriwardana were also present at the occasion.

The construction work of the South Container Terminal will commence on 1 December 2011 and the first 600 m of the South Container Terminal will be in operation in early 2014. The container handling capacity of the South Container Terminal is estimated as 2.4 million TEUs and the entire terminal will be completed in 2016. The project cost of the SCT is estimated as US$ 500 million.

Expressing views at a recent international event over the development of the port sector implement in the country at present, Dr. Wickrama stated that as the Port of Colombo was becoming the busiest port in South Asia, the necessity to enhance its capacity had arisen. He also stated that under the Colombo Port Expansion Project, it was expected to increase the capacity of the port, making Colombo the largest container port in South Asia.

The port will be developed in three stages and each container terminal will add another 2.4 m TEUs enhancing the total capacity up to 13.0 m TEUs from the existing 4.5 m TEUs at present.

The expansion of the Port of Colombo has been identified by the Government as the flagship development endeavour in the current decade, targeted at giving Colombo a competitive edge over other regional ports.

Phase 1 of Colombo South Harbour, envisaging three terminals of over 1,200m in length each to accommodate four berths alongside depths of 18 meters with provision to deepen to 23 meters to accommodate deeper draft vessels in the future, is scheduled to be carried out in stages.

The first stage involves the development of basic infrastructure with public funds, i.e. the breakwater, which by now is over 75% completed and the second stage involves the construction of the South Container Terminal for which the agreements were signed on 9 November.

Building of East and West terminals will be undertaken in later stages. The remainder of the infrastructure building will be carried out simultaneously with the construction of the South Container Terminal.

China Merchants Holdings (International) Co. Ltd. (CMHI) provides shareholder loan facility up to US$ 350 million and the rest of the capital is to be raised by the shareholders equity. The first 600m quay length of the South Container Terminal is expected to be open for operations by early 2014 as the first phase and the entire terminal of 1200 m in length will be completed in 2016 as the second phase. At the end of the 35 years of BOT concession period, the whole terminal infrastructure will be transferred to SLPA at no additional cost.

The South Container Terminal when completed will provide a harbour basin of 18m depth, to accommodate most modern container megaships and have a handling capacity of 2.4 million Twenty Foot Equivalent Units (TEUs) and when the Phase 1 of the project becomes fully-blossomed with three such terminals each having a capacity of 2.4 million TEUs will cater for additional 7.2 million TEUs over the existing capacity of the Port of Colombo, undoubtedly making Colombo the mega hub in South Asia.