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China gets controlling stake at Hambantota port
News that Sri Lanka had granted Chinese state-owned companies operating rights to four berths at the Hambantota Port once they are completed next year has caught the shipping industry unawares.
There had been no tenders or prior announcements. But Sri Lanka Ports Authority Chairman Priyath B Wickrama says the Government had agreed to such an arrangement with the Hambantota Port’s Chinese lenders as far back as 2010.
“We had an understanding with them when we took the loan,” he said in an interview with the Sunday Times. The loan agreement was signed with the Treasury.
He also revealed that, in exchange for these operating rights, the Chinese have consented to ease loan conditions. “That loan was a huge loan,” he said. “The Chinese Government (has) agreed to relax the loan conditions as well. So the terms of our Phase I loan and Phase II loan are being rearranged. Those negotiations are now ongoing with the Treasury.”
Dr. Wickrama, SLPA Chairman since 2008, said there could be concessions in repayment terms or the time granted for repayment. Phase I of Hambantota Port cost an estimated US$ 361 million with 85 per cent being met by Exim Bank of China. Phase II is priced at an estimated US$ 808 million and is a 100 per cent loan.
“The interest (levied) on the Phase II loan is only two per cent,” Dr. Wickrama said. “The Phase I loan is at 6.3 per cent interest. All these loans will be restructured.”
The ‘Agreement on Key Terms for Supply, Operate and Transfer (SOT) of Container Terminal Hambantota Port Development Project Phase II’ was entered into on September 16 in the presence of President Mahinda Rajapaksa and his Chinese counterpart Xi Jinping. Dr Wickrama signed on behalf of Sri Lanka.
Signing for China were representatives of China Merchants Holdings International (CMHI) and China Communication Construction Company Ltd. (CCCC). The former already operates the new Colombo South Container Terminal which, at 18 metres, has the deepest berth anywhere in the country. The latter is building the 233-hectare artificial island known as Colombo Port City.
The partners in the Hambantota SOT will be CMHI and China Harbour Engineering Company Ltd, an engineering contractor and subsidiary of CCCC. China Harbour did Hambantota Phase I and is now completing Phase II.
When the SOT comes into effect (a date has not been decided) this group of companies will hold operating rights in both of Sri Lanka’s main ports. Additionally, the Chinese will have effective control of 108 hectares – 20 hectares on freehold basis and 88 on a 99-year lease — in Colombo Port City.
In Hambantota, the Chinese joint venture will have the bigger stake in the project company. According to an announcement made by CMHI to the Hong Kong Stock Exchange, it will hold 64.98 per cent (just 0.02 percent short of 65) of shares while SLPA will have the remaining 35.02 per cent. The total capital investment into the SOT is US$ 601 million, of which the Chinese will invest about US$ 391 million.
http://www.sundaytimes.lk/141019/news/china-gets-controlling-stake-at-hambantota-port-123262.html
News that Sri Lanka had granted Chinese state-owned companies operating rights to four berths at the Hambantota Port once they are completed next year has caught the shipping industry unawares.
There had been no tenders or prior announcements. But Sri Lanka Ports Authority Chairman Priyath B Wickrama says the Government had agreed to such an arrangement with the Hambantota Port’s Chinese lenders as far back as 2010.
“We had an understanding with them when we took the loan,” he said in an interview with the Sunday Times. The loan agreement was signed with the Treasury.
He also revealed that, in exchange for these operating rights, the Chinese have consented to ease loan conditions. “That loan was a huge loan,” he said. “The Chinese Government (has) agreed to relax the loan conditions as well. So the terms of our Phase I loan and Phase II loan are being rearranged. Those negotiations are now ongoing with the Treasury.”
Dr. Wickrama, SLPA Chairman since 2008, said there could be concessions in repayment terms or the time granted for repayment. Phase I of Hambantota Port cost an estimated US$ 361 million with 85 per cent being met by Exim Bank of China. Phase II is priced at an estimated US$ 808 million and is a 100 per cent loan.
“The interest (levied) on the Phase II loan is only two per cent,” Dr. Wickrama said. “The Phase I loan is at 6.3 per cent interest. All these loans will be restructured.”
The ‘Agreement on Key Terms for Supply, Operate and Transfer (SOT) of Container Terminal Hambantota Port Development Project Phase II’ was entered into on September 16 in the presence of President Mahinda Rajapaksa and his Chinese counterpart Xi Jinping. Dr Wickrama signed on behalf of Sri Lanka.
Signing for China were representatives of China Merchants Holdings International (CMHI) and China Communication Construction Company Ltd. (CCCC). The former already operates the new Colombo South Container Terminal which, at 18 metres, has the deepest berth anywhere in the country. The latter is building the 233-hectare artificial island known as Colombo Port City.
The partners in the Hambantota SOT will be CMHI and China Harbour Engineering Company Ltd, an engineering contractor and subsidiary of CCCC. China Harbour did Hambantota Phase I and is now completing Phase II.
When the SOT comes into effect (a date has not been decided) this group of companies will hold operating rights in both of Sri Lanka’s main ports. Additionally, the Chinese will have effective control of 108 hectares – 20 hectares on freehold basis and 88 on a 99-year lease — in Colombo Port City.
In Hambantota, the Chinese joint venture will have the bigger stake in the project company. According to an announcement made by CMHI to the Hong Kong Stock Exchange, it will hold 64.98 per cent (just 0.02 percent short of 65) of shares while SLPA will have the remaining 35.02 per cent. The total capital investment into the SOT is US$ 601 million, of which the Chinese will invest about US$ 391 million.
http://www.sundaytimes.lk/141019/news/china-gets-controlling-stake-at-hambantota-port-123262.html