China grabs deal to develop Phase II of Colombo Port ECT

Cabinet approval had been granted to develop the Eastern Container Terminal in stages as a terminal totally operated by the Sri Lanka Ports Authority.

Accordingly, international competitive bids had been invited for Phase II of the Eastern Container Terminal at the Colombo Port. The Government said that three bids had been received for this purpose.

Accordingly, the Cabinet of Ministers has approved a proposal presented by the Minister of Ports and Shipping to award the said procurement to Access Engineering Company and China Harbour Engineering Company Ltd on the recommendation of the Cabinet Appointed Procurement Committee.

India had earlier offered to develop the strategic ECT with Japan but the current Government had instead decided to offer the West Terminal to India.

Sri Lanka has decided to rope in China Harbour Engineering Company (CHEC) to construct the second phase of the Colombo Port’s East Container Terminal (ECT), which was earlier to be developed jointly by Sri Lanka, India and Japan, until Colombo reneged on a 2019 trilateral agreement.

CHEC, a subsidiary of the state-owned China Communications Construction Company, is already involved in strategic infrastructure projects in Sri Lanka, including the $1-billion Colombo Port City coming up near Galle Face — the capital’s iconic seafront — and a four-lane elevated highway connecting Colombo’s suburbs, with a near-$1-billion investment. 

The terms of the highway deal allow the state-run Chinese firm to own and run the highway for 15 years before transferring ownership to Sri Lanka.

With the ECT development project now, China’s role in Sri Lanka’s ports — China Merchants Port Holdings Company already holds majority stakes at the southern Hambantota Port as well as the Colombo International Container Terminal at the Colombo Port — has further increased.

CHEC’s role at the ECT appears limited to civil works, according to sources familiar with the tendering process. 

The Ministry of Port and Shipping, in its invitation for international bids, said only firms with a domestic majority ownership — over 51% of the state held by Sri Lankan nationals — were eligible to participate. 

The ECT’s development would require construction of an additional 700-metre-long quay wall and infrastructure around it, that was earlier estimated to cost at least $700 million tendering process, in what Colombo called “a compromise”. 

The long- delayed Colombo Port East Container Terminal (ECT) development project taken over by the Sri Lanka Ports Authority (SLPA) is now seeking more funds amounting to US $325 million from a loan facility to begin construction work and procure necessary equipment for terminal constriction work, Ports and Shipping Ministry sources divulged.

This delay in the finalisation of construction work without the commencement of terminal operations during the last five years has caused a revenue loss of around Rs 250 billion to the state, Finance Ministry provisional data showed. Even today ECT is not fully operational.

The ECT civil work is to begin within the next few months under the management of the SLPA which is compelled to take over the terminal development and operation following a hard-fought trade union struggle and protest of workers against the government’s plan of handing over it to India’s Adani Group.

In the wake of this protest campaign of port workers, civil society activists and opposition politicians along with Buddhist priests, the Government unilaterally pulled out of a 2019 memorandum of understanding (MOU) with India and Japan for developing the strategically vital ECT early this year.

A detailed plan has been submitted to develop the Eastern Jetty with SLPA funds without entering into a Public-Private Partnership as the partially completed ECT is already earning revenue from the operations which began since November last year, according to documents submitted to Finance Ministry at that time.

In this back drop SLPA is now seeking a $325 million loan (financing facility) to procure the required equipment to develop the ECT of the Colombo Port, Expression of Interest (EOI) notice published recently revealed.  

The Authority has called for EOI from prospective domestic/International banks and Financial Institutions, jointly with offshore loan syndicating partners to provide US Dollar term loan financing facility for SLPA to procure required equipment and Terminal Operating System valued at approximately $ 325 million.

SLPA has already developed 575 meter of the quay wall, adjacent yard area and connected facilities at ECT..

The remaining investment requirement for ECT will be made from SLPA funds, the document indicated. However according to original plan; the Authority had to carry out the development work by using its own internally generated funds for the development activities.

The Bids for procurement of equipment have been already received and evaluations are underway, Senior Ports Ministry official said.

The terminal’s further development undertaken by the Authority is aimed at enhance operations at an estimated cost of up to $700 million, provisional estimates revealed.

In this context it has to provide a sum of $ 375 million from its own funds as it plans to raise $ 325 million from a loan facility.

This was a deviation of the original development plan devised in accordance with an agreement reached to end the strike of port workers but the authorities are not interested in making ECT more efficient service generating revenue, several leaders of Port workers trade unions claimed.

Ports Authority built a part of the ECT adequate to accommodate one mega container ship investing more than $ 280 million and also ordered required cranes before 2015.

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