East Container Terminal’s govt. stake in the balance
The Sri Lanka Ports Authority’s (SLPA) stake in the East Container Terminal (ECT) is to be reduced significantly (to 15 per cent) despite Cabinet approval being given in February for a 51 per cent stake, a top official at the authority said. The previous announcement by the Ports Ministry in a media release issued on February 16 stated that the Cabinet had approved to call for proposals for the development of the ECT with the SLPA owning a 51 per cent stake and the rest to be handed over to a port management firm or shipping line.
The Cabinet on the government website news.lk announcing this decision taken on February 10 also stated, “The second deep-water terminal in the Colombo Port Expansion Project is the East Container terminal. It has been planned to commence terminal operations as joint venture arrangement with a shipping line or a private terminal operator with 51 per cent of equity owned by the Sri Lanka Ports Authority. The proposal made by Arjuna Ranatunge, Minister of Ports and Shipping, to appoint the Asian Development Bank as the project’s Transaction Advisor and to invite Expressions of Interest and Business Proposals from interested parties, was approved by the Cabinet of Ministers.”
However, this situation has changed. A senior official at the port told the Business Times that the government had “not approved” the 51 per cent stake for the SLPA, even though there is clear evidence and documentary proof that cabinet approval was granted. “The rules are very clear. A cabinet decision is a decision that cannot be changed or altered unless another proposal (altering the earlier one) is presented to cabinet and also approved,” a political analyst said, noting that cabinet decisions cannot be changed outside cabinet, however bad the decision is. The port official said that the SLPA should “distance itself from terminal operation and that it should not hold a larger share.
This would ensure that the SLPA act as a landlord and not a port operator since its fully owned terminal the Jaya Container Terminal (JCT) increasingly losing business. The government’s Cabinet Committee on Economic Management is believed to have decided on this issue of reducing the SLPA’s stake at the ECT, which, the political analyst noted, should then be presented before Cabinet for fresh approval. The SLPA would hold a board position similar to its capacity at the South Asia Gateway Terminal (SAGT) and the Colombo International Container Terminal (CICT) with a stake that could be as low as around 15 per cent.
According to the plans worked out to decide on which option the SLPA should adhere to in this respect, it is believed that the option to construct and operate by Public Private Partnership (PPP) is being discussed by the authorities. This mechanism is said to be proven and familiar to the SLPA as it is the model of SAGT and CICT where the state has 15 per cent shares and agreed royalty payment for the number of containers operated in the terminal allowing for a very small involvement by the government entity. This model would ensure revenue calculation based on the CICT model of royalty, land lease, dividends and premiums, it was noted.
The Asian Development Bank (ADB) was selected as the consultants for the project at the ECT terminal, which has a length of 1200 metres with work already completed on 400 metres and could be used for offloading of containers, the release said adding that this contributes to an additional income for the SLPA. In the meantime, last week the authority called for Expressions of Interest (EOI) and was stated to be managed and operated as a common-user/open access terminal. However, sources close to SLPA opine this tender is meant to attract only one bidder with most international port operators including the CICT being disqualified.
While the facility has a capacity of 2.4 million TEUs the government strangely has asked for experience required only 1.2 million TEUs with the ability to handle only one terminal with no qualification to have handled transshipment containers. ECT has a 440 metre long 18 metre deep quay wall, a 20 hectare area and connected facilities developed by the SLPA. The deadline for the submission of EOIs is July 21.