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Despite rejection of mega projects with foreign loans, UK firm to get CEP contract
View(s):Despite publicly rejecting costly mega projects funded through foreign loans, the Government will award the 58km section of the Central Expressway Project (CEP) from Kurunegala to Dambulla to a company named M/s Roughton International Ltd which is seeking to borrow about 691.5mn Euros (Rs 162bn) from UK Export Finance (UKEF).
The Cabinet last year cleared the Finance Ministry to negotiate with Roughton International to secure 100 percent foreign financing for the civil works contract cost, documents seen by the Sunday Times reveal.
“At a time when the Government of Sri Lanka is struggling to service its foreign debt and recovering from the pandemic, the UK Government is offering a UKEF facility of approximately Euro 691.5 million with a UKEF support fee of 13.64% of the loan, which makes it a very commercial and expensive loan, even in the best of times,” an authoritative source told the Sunday Times.
The company’s efforts have officially been backed by the Ministry of Finance. Treasury Secretary S.R. Attygalle wrote to the Chief Executive of UKEF in May confirming that the CEP is “a key investment of the Government” and that it has been decided to award the fourth section of the road to Roughton, which it calls a “UK based investor”, for a contract price equivalent to US$ 868.8mn (Rs 173bn).
“M/s Roughton International Ltd has submitted a financing proposal through Standard Chartered Bank (SCB), being the Structuring Bank, and UKEF coordinator of the facility to finance up to 85% of the commercial contract value of the Section 4 of CEP,” Mr Attygalle states, in a letter to Louis Taylor. The letter was seen by the Sunday Times.
The letter reveals the tenure of the loan to be 14 years with a grace period of four years. “Having examined the terms of the financing, the GOSL [Government of Sri Lanka] is of the view that the terms provided is [sic] acceptable under both the UKEF direct loan facility as well as the UKEF guaranteed facility,” Mr Attygalle conveys.
“However, given that we have been made to understand that the finalization of the documents including the financing document is expected to take a while, government [sic] wishes to assure itself that the financing facility for the said project will be available at the terms provided,” he says, requesting an early response from UKEF.