In the wake of the Colombo South Harbour project’s Sri Lankan partner Aitken Spence (AS) opting to pull out, the Sri Lanka Ports Authority (SLPA) has expressed interest in buying its shares already offered to China Merchant Holding (CMH).
The SLPA has made its informal interest known to AS of its intention to increase its shares in the project. Currently, the SLPA holds 15% while AS has 30% and CMH owns 55%. Under the Build Operate and Transfer (BOT) Agreement, SLPA can proportionately increase its share upto 6% for which it has sought approval from the Asian Development Bank (ADB) about 10 days back, sources close to the SLPA said. The ADB is funding the government’s port expansion in Colombo while SLPA is the executing agency.
AS opted to pull out when its’ funding agency the China Development Bank (CDB) made it known that that the costs would overrun by US$125 million in the US$475 million project, the sources said. AS officials declined to comment, when contacted.
In a statement to the stock exchange, AS said it was negotiating with other shareholders on this matter. The share structure is likely to cause a stir when AS withdraws, since the SLPA would be putting more money in a project that appears to be unviable.
The CDB had found that while the project would not be viable, profits would accrue only after a lapse of seven years, the sources said.
In the wake of these developments the AS opted to pull out offering its shares to CMH following which on December 18, 2011 CMH in a letter informed the SLPA of the AS offer and its agreement to buy the shares thereby increasing its stake in the project by 85%.However, the SLPA is yet to respond to the approval for the purchase of the shares offered by AS to CMH.
SLPA Chairman Dr. Priyath Bandu Wickrama when contacted by the Business Times said that while they were not officially informed of AS pulling out, this development won’t affect the project.
On the other hand, he asserted that AS if they wished to could, pull out at any time.
Deputy Ports Minister Rohitha Bogollagama also told the paper that the government was not officially informed of AS pulling out of the project.