The sole bidder for the development of the South Container Terminal, China Merchant Holdings International (CHMI) with Aitken Spence (AS), is expected to submit a fresh financial proposal to the Sri Lanka Ports Authority (SLPA) within two weeks after theSLPA asked CHMI/AS to increase their net present value (NPV).
Chairman of SLPA P.B. Wickrema told the Sunday Times FT this week that the technical evaluation committee (TEC) and the cabinet appointed negotiating committee (CANC) began negotiations with CHMI/AS on September 16 and have had several discussions with the consortium to convey other concerns expressed by the SLPA. Dr. Wickrema said he could not further comment on those discussions until the revised financial bid is received.
The NPV, which CHMI/AS has been asked to revise and increase, is defined as the total present value of a time series of cash flows and is a standard method for using the time value of money to appraise long-term projects. It is also used for capital budgeting and measures the excess of shortfall of cash flows, in present value terms, once financing charges are met. Dr. Wickrema said the actual figure may be five or six times greater than the NPV.
An informed industry source said the financial proposal submitted by CHMI/AS was around 150% more than what the SLPA is getting from South Asia Gateway Terminal (SAGT) which would place the new consortium in an uncompetitive position.
The source said this comes at a time when the government should look at creating a level field instead of placing CHMI/AS in a disadvantageous position. If the consortium is asked to pay a huge amount, the source said CHMI/AS would not only become uncompetitive against SAGT but also against other regional players in Malaysia and Dubai and the new ports coming up on the southern tip of India.
A shipping expert said the Vallarpadam port in southern India which will be commissioned by the end of this year is going to pose a huge threat to the Colombo Port as the Colombo Port cannot accommodate large vessels. Within the next three years, the expert said brand new ships with a ship board capacity of 2.4 million twenty-foot equivalent units (TEU’s) will not be able to call on the Colombo Port. The expert added that the South Terminal in Colombo should have been developed years ago. (NG) |
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