Merchant Port Holdings (CMPort) China will invest over US dollars 400 million in the first six months of their operations in the Hambantota Port. This is for the purchasing of equipment for the container terminal.
CMPort plans to invest further on equipment in Phase II as the development of the remaining phases.In addition CMPort will pay a maximum of US$ 1.12 billion (80% of total asset value) in separate tranches within six months as per the terms of the agreement.
An official from the Development Strategies and International Trade Ministry stressed that CMPort will not utilise additional land from the much talked 15,000 acres of land allocation for their operations.
CMPort’s agreement with the government involves only the land already within the existing port perimeter and 5km(1235 acres) of land belonging to the port.
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| Prime Minister Ranil Wickremesinghe greets Chinese Amabassador to Sri Lanka, Yi Xianliang after launching Sri Lanka China Industrial Development Project in Hambantota (Picture by Rukmal Gamage) |
This land will be used for port related services necessary for the proper operation of a world-class port facility to function to its full potential. This includes a Logistics Distribution Center which will facilitate trade, supply chain management, storage, redistribution, etc., both locally and internationally.
The Joint Venture Company will be 80% owned by CMPort and 20% by Sri Lanka Ports Authority and its first preference will be towards recruiting existing employees of the Magampura Port Management Company (MPMC) based on a professional screening process.
This was the same process followed by the investors when the QEQ berth at the Port of Colombo was privatised in 1999.
CMPort has a vision to develop and expand its footprint as a global port and terminal operator and Hambantota is a port that is covered under South Asia.
Asked why a lease period of 99 years was agreed the official said that such was needed due to the upfront payment of US Dollars one billion.
“The CMPort had indicated to us that breakeven period for a totally new port likely to be dependent more on transshipment cargo, is estimated to be over anything between 30 to 40 years.”
“A shorter land lease is not commercially feasible at all during the first few decades, for the amount of investment and development proposed.”
The present Port land will be used for port related services necessary for the proper operation of a world-class port facility to function to its full potential.
“This includes a Logistics Distribution Center which will facilitate trade, supply chain management, storage and redistribution, both locally and internationally.”
The JV company will place first preference towards recruiting existing employees of the Magampura Port Management Company (MPMC) based on a professional screening process as per CMPort’s standard global recruitment process. This was the same process followed by the investors when the QEQ berth at the Port of Colombo was privatised in 1999.
CMPort will utilize its expertise and experience as a leading global terminal operator and investor, and leverage on the success of its existing terminal (CICT) in the Colombo Port to ensure the success of Hambantota Port.
In doing so, CMPort plans to improve existing terminal facilities to world-class standards and transform Hambantota into an International Maritime Center.It will also combine the port’s strategic location with CMPort’s extensive carrier network to attract considerable traffic to and from the port.
Indirectly, areas surrounding the port will benefit from positive economic benefits such as job creation /human resource development and infrastructural development, both of which will contribute towards creating a favorable environment for potential investors and local industries. SLPA will be involved in all services that come under its authority as per the law.
National security shall be controlled by representatives of the Sri Lankan Navy and Police.
Even with an estimated 20% annual growth rate (very optimistic scenario) of operating profit, there is a considerable gap between profit and loan repayment in the next two decades.
In terms of liability, to date Hambantota Port Project has a total loan of US$1.35 billion. Out of that, US$ 0.9 billion loan is with 2% of interest rate and the balance of the loan is with an interest rate ranging from 6.3% to 7.65%.
In terms of financial performance in 2016, Hambantota Port (Phase I only) generates total revenue of US$11.81 million and incurs US$6.6 million of direct expenses and US$3.4 million of administrative expenses. All in all, Hambantota Port (Phase I only) has US$1.8 million of operating profit.
CMPort is one of the largest global terminal operators and investors in port and port-related facilities, listed on the Stock Exchange of Hong Kong with a market capitalisation of HK$53 billion.
CMPort’s ports handled a total container throughput of 83.66 million TEUs in 2015, ranking second in the world according to Containerisation International.
CMPort has an extensive network of ports 55 terminals in 28 ports in 15 countries globally. CMPort also runs CICT in the Port of Colombo.
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