Chinese companies get controlling stake at Hambantota port

Dalian: Chinese state-owned companies will operate four new berths at Sri Lanka’s Hambantota Port once they are completed next year.

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. It is not yet known when the SOT agreement will come into effect.

The total capital investment into the SOT is $601m, of which the Chinese will invest about $391m.

Signing for China were representatives of China Merchants Holdings International (CMHI) and China Communication Construction Company (CCCC).

The partners in the Hambantota SOT will be CMHI and China Harbour Engineering, an engineering contractor and subsidiary of CCCC. China Harbour worked on Phase I of Hambantota’s development and is now completing Phase II.

Dr Priyath B Wickrama, Chairman of Sri Lanka Ports Authority, signed on behalf of Sri Lanka.

The Sri Lankan government had agreed to such an arrangement with the Hambantota Port’s Chinese lenders as far back as 2010, Dr Wickrama told local press.

In exchange for berth operating rights, Wickrama said the Chinese consented to ease loan conditions, which could possibly comprise concessions in repayment terms or the time granted for repayment. Negotiations are now ongoing with the Treasury, Wickrama said.

Phase I of development at Hambantota Port cost an estimated $361m, with 85% being met by Exim Bank of China. Phase II is priced at an estimated $808m and is a 100% loan.

When the SOT comes into effect, this group of companies will hold operating rights in both of Sri Lanka’s main ports. China Merchants Holdings International (CMHI) already operates the new Colombo South Container Terminal.

Additionally, Chinese interests will have effective control of 108 hectares in Colombo Port City. [20/10/14]

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