China Merchants’ Holdings (CMH), to which the Sri Lanka Ports Authority (SLPA) has sent a Letter of Intent to build the first terminal in the Colombo South Port expansion project, has agreed to up the fee it would pay SLPA for each twenty foot equivalent container unit (TEU) handled by 50% to US$ 3.40 per TEU.
Earlier CMH was prepared to pay a rate of only US$ 2.25 per TEU to the SLPA. The US$ 3.40 negotiated rate (the base rate which will be increased over time) is equivalent to the rate that the other private terminal operator in the Colombo Port, SAGT, of which equity John Keells Holdings PLC (JKH) has more than a 40% stake, currently pays SLPA, but lower than the US$ 5 offered by two earlier bidders, namely Hutch Port Hong Kong and Port of Singapore Authority (PSA), when SLPA first called for bids for this terminal.
Fifty per cent of SLPA’s fees come from container throughput and the balance from charges such as piloting.
The original tender, for which five offers were received, was subsequently annulled, due to a dispute between the authorities as to whether the award should be made to PSA or to Hutch, subsequently leading to its cancellation and the calling for fresh offers, for which only CMH submitted a bid.
The contract is for CMH to construct the first terminal on a build, operate and transfer (BOT) basis, for which they have estimated their costs at US$ 450 million and to operate it over a 35 year concessionary period.
The need for the Colombo Port expansion project arose after the existing port came closer to operating at full capacity. Colombo’s capacity, ie both SAGT and SLPA run JCT is estimated at a maximum of 4.5 million TEUs, with the Port expected to hit a figure of 4.1 million TEUs for the year, when prorating this year’s, year on year growth figures.
Last year Colombo handled 3.8 million TEU. The CMH terminal which is expected to be on stream by 2013 will have the capacity to handle 2.4 million TEUs. With two more terminals on the cards under this expansion programme, that will be sufficient for Colombo’s capacity to hold till 2025, by when all those three new terminals will be on stream.
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