Sri Lanka New Colombo South Port Terminal Eyes Indian Cargo for 2.4mn TEU Capacity

14th October 2010, www.lankabusinessonline.com

The increase in cargo flows from India generated by accelerating economic growth will ensure business for a new container terminal that Sri Lanka's Aitken Spence is investing in, an official said.

"Colombo will continue to be south Asia's maritime hub," said Parakrama Dissanayake, chairman of Aitken Spence Maritime, the conglomerate's shipping business unit.

"If not Aitken Spence will not invest in the Colombo South Terminal," he told a conference organised by the Chartered Institute of Logistics and Transport.

The 500 million US dollar deep-water South Terminal in Colombo port will have a quay length of 1,200 metres, four berths and 12 cranes with an annual capacity of 2.4 million TEUs.

It will be built and operated on a 35-yar lease by a joint venture consisting of China Merchant Holdings with a 55 percent stake, Aitken Spence with 30 percent and the state-run Sri Lanka ports Authority with 15 percent.

"The investment is huge," said Dissanayake. "It is the single largest foreign direct investment ever to take place in Sri Lanka."

He warned that the amount of Indian cargo transhipped through Colombo port was dropping while its existing terminals were not deep enough to handle the bigger new ships being ordered by shipping lines.

About 70 percent of the containers handled by Colombo is transhipment cargo from India.

East-bound cargo from Europe is mainly transhipped at the ports of Dubai and Salalah in Oman.

But the volume of west-bound cargo, traditionally transhipped in Colombo, is decreasing because the port's market or clients, previously Indian ports from where cargo originated, are becoming competitors.

Shipping lines were making more direct calls at ports in India which is modernising its own ports and building new ones to cater to booming trade volumes.

"Shipping lines are going direct to India, not transhipping containers," Dissanayake said. "So the competition has shifted.

Competition from regional ports mainly from India is a huge challenge we need to overcome."

Colombo port's new South Terminal will be able to cater to the bigger new vessels now being deployed on trade routes, And Indian government policy of developing a network or "necklace" of ports under its Sagar Mala policy could be complemented by Colombo's own development of deep-water terminals, Dissanayake said.

India, with a population of over a billion people, generates only 8.1 million TEUs (twenty-foot equivalent container units) compared with China's 100 million TEUs in 2008.

"India's economic growth in 2018 is expected to surpass China's," Dissanayake said. "When the economy grows they will handle more volumes."

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Sri Lanka Ports Authority to Sign South Colombo Harbour Container Terminal in April with China Merchant Holdings & Aitken Spence

15th March 2010, www.island.lk, By Devan Daniel

A top official says the deal between the Sri Lanka Ports Authority (SLPA) and China Merchant Holdings, and its local partner Aitken Spence Holdings, to design, build and operate a container terminal in the South Colombo Harbour would be finalised before May this year.

Hong Kong port operator China Merchant Holdings and Aitken Spence were the sole bidders to build, design and operate a container terminal on the Southern side of the port of Colombo after the initial bidding process was nullified by the state, and negotiations with the SLPA have dragged-on for almost a year.

At one stage, the top officials of the SLPA said the authority was considering other options to develop the container terminal without China Merchant Holdings. One option that was considered was as a private-public partnership through a share issue.

Last Friday, SLPA Managing Director Capt. Nihal Keppetipola told the Island Financial Review that negotiations were ongoing between Merchant China Holdings (and Aitken Spence Holdings) and the SLPA.

"We expect a breakthrough in negotiations within a week’s time after which the SLPA would refer the agreement to the Attorney General’s Department. If all goes well and we receive a favourable report from the Attorney General, the contract should be awarded to China Merchant Holdings and their local agents Aitken Spence sometime in April," Capt. Keppetipola said.

The delay in reaching consensus was caused by the financial bid presented by China Merchant Holdings and Aitken Spence.

Sources close to the bid on the SLPA side said Aitken Spence-China Merchant Holdings had offered about 50 percent less in its bid compared to what they had offered at the first round of bids. At the first round of bids several local and international companies had bid for the project and it was awarded. But one of the bidders disputed the deal and the government was compelled to nullify the entire process.

"Considering the global financial crisis and the slump in the global shipping industry, they have offered much less in their bid the second time around; almost 50 percent less than what they proposed earlier," a source said.

Meanwhile, sources said the SLPA had made changes of its own from the original round of bids, increasing, for example, the minimum guaranteed volume.

"In the previous round, SLPA had set this volume at two million TEUs per annum after 30 years with 1.5 million at the initial stages. This time, the minimum guaranteed volume has been set at 2.4 million TEUs per annum after 20 years, with two million TEUs after 10 years," a source said. The minimum guaranteed volume is a royalty payment that would be paid to the SLPA irrespective of whether or not the volume is met.